- Aftermarket
domains are a niche market and not a mass market.
Buyers are rare and need to be targeted with deep
narrow spectrum marketing techniques.
-
All
representatives in the value chain need to realize
that there is a diverse set of requirements that may
be fundamentally needed by various parties in the
process. An open market system does not
require that all parties agree on every potential
transaction. It does require that every party
has a choice to select which types of transactions
they participate in. A technology platform
needs to be established to enable selective
participation.
-
Centralized
distribution of domain names for sale in the
aftermarket is the most efficient way to establish
continuity, maximize distribution, and avoid legal
disputes.
-
Marketing
is drastically under-funded. The commission
structures in place are not high enough to push the
current market beyond reactive sales to proactive
market development.
-
The
lion’s share of the marketing commission needs to
be attributed to the lead generator. Lead
generators are the major contributor of growth to
the value chain.
-
Revenue
distribution needs to be managed so that proactive
marketing is strongly encouraged whereas reactive
services should be paid a commission in accordance
with the lesser value that they represent.
-
Affiliate
marketing for aftermarket domains is almost
non-existent. The amount of commission revenue
that has been available to encourage affiliate
participation is sub-standard to the common CPA
environment. The risks and efforts comparative
to the rewards are untenable.
-
Support
services need to be recognized and valued. The
most important purpose of support services (stock
control, distributors, and clearance houses) are in
maintaining stability and creating new avenues for
penetrating distribution.
-
Growth
companies are not great threshold technology
providers. These companies need to focus on
growth, whereas threshold technology companies need
to concentrate on efficiency.
-
Most
people do not need a domain name. Only a select few
of those who do need one can afford one of broad
appeal and substantial cost. Domain owners
tend to mirror their belief in domains on to
consumers. Unlike domain portfolio owners,
only buyers who have been qualified and are primed
to buy are real consumers. Most domain sales
are not window shopping – the buyers have an
established purpose for the domain when they buy.
-
Many
domain owners do not understand the nature of
aftermarket domain sales and draw too close a
comparison to the real estate market. The vast
majority of domains are priced for sale at less than
$5,000. Selling domains is more like selling
high value electronics in a retail environment than
selling real estate.
-
Commission
rates on domains need to be established on an
individual domain basis. Domain level
commissions offer domain owners a means to clear
less valuable stock and give the lead generators an
incentive to sell selective domains more
aggressively.
-
Establishing
ownership of domains prior to sale is a fundamental
requirement of the process.
-
When
a domain name is sold the owner needs immediate
access and ownership. Instant transfer of
domain ownership and control is paramount to
aftermarket growth. Anything that stands in
the way of instant and efficient transfer needs to
be marginalized or eliminated.
Retail
Buyers
Most
retail buyers have a specific purpose in mind when they
buy an aftermarket domain. They have started a new
business, want to upgrade their current domain to a
better one, or have a personal interest.
Generally, retail buyers want to develop a domain into a
website with a unique look and feel and original web
content. They are not typically holding the domain
as an investment; rather they are using it as “land”
for a website.
These
buyers, unlike many others, have little interest in the
volume or revenue of traffic from their domains of
interest. When sales agencies offer traffic and
revenue statistics to potential retail buyers they
severely compromise the retail buying process.
Effectively they influence the buyer perception towards
a wholesale buyer’s mentality. Retail buyers have
their own esoteric value of the domain brand.
These
buyers are willing to pay any price that is below their
own perceived value of the domain. Usually they
are prepared to purchase these domains without any
external valuation or advice as they are fulfilling a
business or personal need.
(Editor's
Note: It is important to know who your
potential buyer is. Warner also discusses Auction
Buyers, Wholesale Buyers and Portfolios Buyers in the
complete article).
Selling
Domains
It is
instructive to understand why people sell domain names
in the first place. Domain owners sell domain
names for a full range of reasons and at differing
levels of sale aggressiveness. At one extreme end
some domain owners almost never sell a domain. The
only domains they sell are when a buyer aggressively
pursues them and offers what the domain owner feels is
far above market price for the domain. The other
extreme is when domain owners sell their entire domain
portfolio to wholesale buyers at one time – leaving
them with no remaining domain assets.
The
most common method is that of selling domains at a
moderate rate creating incremental revenue.
Domains sold using this method realize a substantial
amount of income compared to the traffic revenue the
domain name would normally produce. These
opportunistic sales unusually command prices that are 50
- 500 years of the current traffic revenue. This
asset liquidation revenue is added to the traffic
revenue generated by the owner’s other domains
allowing them to take money off the table or reinvest in
other domain assets.
Selling
domains is often viewed by domain owners as liquidation
and not true revenue. This in its most simplistic
form is true. The associated argument is that when
you sell a domain asset you loose the traffic revenue
from that asset. Although it is true that domain
owners loose a marginal amount of revenue the asset
realization is typically of such a high revenue
multiples that the benefit is substantial. “Rate of
Sale” also diminishes the importance of these
incremental sales. The rate of sale for most
portfolios that are actively sold is only 0.5%-2.0% per
annum. At this rate the volume of traffic revenue
lost is inconsequential and sustainable.
Editor's
Note: The brief excerpts above should whet
your appetite for the full domain aftermarket banquet
that Warner has laid out in his article. The complete
piece can be read here
(this is a .pdf document):
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