For the domain investor, how important are domain sales?

[James]

As touched on in the other thread, people who own quality generic domains are unlikely to sell, perhaps. From what I have seen in the UK market, people are more likely to hold on to generic domains, generate parking income and wait for an offer too good to be true. Perhaps they even turn down some very big offers for domains... as I have done myself in the past.

However, in the US I see more people buying and selling great generic domains. There seems to be a quicker turnover there. People buy to sell.

My question is, how important are domain sales to the savvy domain investor?

 

[EdwinEdwin is verified member.]

Let's put the numbers into perspective...

If you have 1,000 .co.uk domains you need to find 3,000 pounds a year in renewal fees approx. (assuming the renewal dates distribute evenly since each renewal is for 2 years)

Of course, you could very well cover that amount from parking income alone, if at least some of the domains get "useful" amounts of traffic.

But it would also only take one sale a year at 3,000 pounds (a very achievable amount for many domains when you look at the domain sales charts) or 10 sales at 300 pounds each to also cover the renewal fees. In other words, for an annual turnover of just 0.1% to 1% of the total portfolio - assuming the names aren't complete junk - you can cover your renewal fees in full. After that, all the income from parking or further sales is gravy.

Under such relatively "easy maintenance" conditions, why should larger domain portfolio holders be tempted to sell for anything less than end-user level offers?

Another difference between the .com and .co.uk markets is the relative ease of closing a transaction. In .com, the entire transaction could be done electronically in under 5 minutes (and at zero additional cost) if both parties are on the ball (Paypal payment, push to purchaser's registrar account) but with Nominet's paper forms the process can take weeks, and it isn't free either.

As such, people may be willing to flip .com names all day for a few tens or hundreds of pounds profit per 5 minutes of effort expended, but .co.uk names require MUCH more effort and hand-holding.

One more consideration is the very different levels of type-in traffic between .com and .co.uk generics, while at the same time the sale-side metrics for .com are very firmly established. A domain like logo.com might get many thousands of typein visitors per day, whereas my logo.co.uk gets somewhere in the region of 70-100 daily visitors. As such, if you can pick up a generic .com "bargain" (e.g. a true commercial, generic name with useful traffic at 3x annual income) you can immediately resell it for 5x-8x annual income or more (sometimes much more) as there are hundreds of eager waiting buyers.

The .co.uk market by contrast moves at a more sedate pace. You don't see the likes of a BuyDomains, a MarchEx or a Name Admin rolling up hundreds of thousands of .co.uk generics into a massive portfolio... nor are there buyers lined up, competing to buy generics at decent revenue multiples.

Finally, from participating in the .co.uk and .com markets for many years now, I've seen a much higher level of "outrage" in .co.uk against paying end-user prices. While the .com world is finally - albeit slowly - shaking off the "domain resellers are cybersquatters" image, there are still regular articles in the .co.uk press that make absolutely no distinction between people running a legitimate business selling generic.co.uk and blatant cybersquatters selling trademark.co.uk.

This combines with a more general reluctance in the UK to help somebody else "profit" and means that many people shopping in .co.uk don't even BEGIN to understand why a seller wouldn't be happy with a 1,000% profit for a strong generic ("hey, it only cost you 6 pounds so 100 pounds is a fantastic return. How DARE you ask for 10,000 pounds for topgeneric.co.uk - cough, splutter, %&&$((# you dirty cybersquatter, you")

The above might be summed up as "In .com, many companies have a good idea of the approximate value of a decent .com domain. In .co.uk, most companies still live in cloud cookoo land when it comes to actual domain values."

 

[NigelNigel is verified member.]

We've found that a mixture of domain sales and ppc income provides a steady income. Generally we don't have any of our premium domains up for sale but feel that if a buyer is really interested they will find you. But have we taken our eye off the ball when we could have spent our time developing just a couple of premium domains.

So the question I have is - are some of us getting bogged down regging nice domains and managing such a large portfolio instead of developing? It seems that the real money is made from taking a good generic and developing. I read today that laterooms.com is about to purchased for over £100m. Last week I read about value click buying shopping .net (inc some other shopping sites) for over $13m - see link

http://www.valueclick.co.uk/news/press_releases/061206_vclk.pdf

Wheras a large parked domain portfolio may sell for just 2-5 years revenue although sometimes up to 8 times revenue (latest Sedo newsletter), but when you look at your portfolio there are many gems sitting there i.e. some place names that must be worth 200 times their annual revenue i.e. some prestigious london areas that may not earn £10 a year in ppc yet you wouldn't sell for under £2000. So it doesn't seem good value to sell a domain portfolio at these multiples when no account is taken of future individual domain sales at multiples far in excess of 8 times revenue. It seems to me that it is better to be patient, hold your portfolio, earning from ppc, and cash in on the nice domain sales that present themselves from time to time. And in the meantime develop a few domains!

 

[robrob is verified member.]

So the question I have is - are some of us getting bogged down regging nice domains and managing such a large portfolio instead of developing? It seems that the real money is made from taking a good generic and developing.

I would agree with this view and it is something I will be trying to kick on with for sure

.com has always been ahead of .co.uk usually by a couple of years some indicators of this have been comparable traffic prices, three letter prices and events.

eg. here is the upcoming Domain Channel event - one of the first proper domain events in the UK whereas .com has a couple of established ones ongoing for a few years.

One problem for .uk I have noticed is the value of high sales that are currently unreported, as a buyer/seller/broker it can be handy as it does mean we dont have to compete with USA based deep pockets.

 

[lesurf]

Domain Channel looks like a great event! Should start to kickstart the market a bit, maybe a live auction next year like the US events do ;-)

 

[robrob is verified member.]

Domain Channel looks like a great event! Should start to kickstart the market a bit, maybe a live auction next year like the US events do ;-)

October 2004 was the first TRAFFIC event in USA - so end of 2006 fits well for the 2 years

So 2008 who will have the first £1,000,000 .uk sale?!

 

[EdwinEdwin is verified member.]

So 2008 who will have the first £1,000,000 .uk sale?!

Hard to think of ANY undeveloped .co.uk domain being worth that much even in a few years' time (of course, if a domain is already developed i.e. a business is being sold along with the name, it might be worth a lot more than that...)

On the other hand, I certainly HOPE you're right!

 

[robrob is verified member.]

Hard to think of ANY undeveloped .co.uk domain being worth that much even in a few years' time (of course, if a domain is already developed i.e. a business is being sold along with the name, it might be worth a lot more than that...)

On the other hand, I certainly HOPE you're right!

Agreed - bear in mind the first TRAFFIC had bankers.com sold for $40,000 which would not be hard in .uk today.

Bearing in mind the recent TRAFFIC sale had cameras.com for $1.5mill which would be £750k in proper money (!) which if you adjust for the .com / .uk reach would bring prices into a more doable region.

Something further to note is many high .com sales are internal between domainers / investors which indicates they are banking on the future - but also as there is a seller shows that they are happy to cash in

 

[NigelNigel is verified member.]

Hard to think of ANY undeveloped .co.uk domain being worth that much even in a few years' time (of course, if a domain is already developed i.e. a business is being sold along with the name, it might be worth a lot more than that...)

On the other hand, I certainly HOPE you're right!

I think current DRS procedures and unpredictable way in which Nominet experts decide is suppressing .co.uk prices. No-one is going to invest a small fortune in a domain name if there is the faintest chance of losing it in a DRS. Pure generic domains have been taken away from respondents this year and it must put off large US corporations from investing in .uk and perhaps snapping up large .uk portfolios. Let's hope the DRS is sorted out in 2007 so it is more in line with .com decisions.

 

[yesterday]

Yes, the DRS is very scary.

Not even a jury of 12 for a decision good and true.

Downsides to .co.uk
Nominet management changes/opinion changes on further extensions to .uk tld and sld's
Nominet DRS errors
Courts yet to establish clear guidelines either
Renewal prices
Nominet potential bad management
Competition from better managed tld e.g. .de for european domination
Renewal price increases


Upsides to .co.uk
Excellent brand - "trustworthy", "clean living"
Good management so far
Quite secure and not as subject to hijacking as many others
Nominet DRS has had some successes.
End prices seems to keep going up and up and are priced in £'s
Increasing market size
Can only be classed as an expense as they are not officially assets!

I'm sure there are some domains edging close to the $1 million at least.

And probably owned by people here.

As for that "how dare you ask for £" incredible really, even happens on these boards.

Someone telling that a domain is worthless is valuable honesty if they think it's worthless, but to continually harp on about it even after they guy may have had several offers for it, is just denigrating and does noone any good.

yesterday

 

[EdwinEdwin is verified member.]

The DRS issue is the standout on the list above. As you say, it makes the whole .co.uk industry that much less stable. Nominet need to come to understand this.

Perhaps there should be a special process for dealing with TMs that are also generic i.e. in the dictionary (a made up expression formed from two dictionary words - e.g. myspace from "my" "space" - isn't what I'm talking about here; only STRICT generics). For instance, one solution might be to only use a 3-expert panel in such cases, and to require unanimity from all 3 experts in order to order the transfer of the domain name.

One other thing that would improve the whole .co.uk industry would be for Nominet to take a less hostile position on domain investment, resale, parking etc. They are more flexible than they were (i.e. things are definitely moving in the right direction) but some of their public comments still tend towards the "large portfolio owners = cybersquatters" school of thought. There is a need to recognise that investment in GENERIC domains is as valid an investment as putting money in property, commodities, unit trusts, stocks and shares etc.