I’ve been a part-time domainer for several years, buying, selling and monetizing premium domains. I entered the industry in a somewhat unconventional way. Most enter it seeking to earn a profit. I simply suspected a quasi-conspiracy to inflate the prices for people like me and wanted to know how the industry worked, so I could buy domains for my projects at reasonable prices.
What I learned is that I was 100% correct. There is a vast quasi-conspiracy to inflate the prices for people who don’t know the system. However the good news is the only thing standing between you and being on the correct side of that system is knowing a few things about how the business works. Once you know them, you can buy domains like a domainer does and pay 90%+ less than you would have had to before.
The goal of this post is to teach you that system.
Reseller vs End User prices
The most important thing you need to know and understand is that there are two classes of prices in the industry. “Reseller” prices and “End User” prices. The former are the prices domainers sell domains for to each other. The latter are the prices we charge to businesses, entrepreneurs, bloggers etc. anybody who wants the domain we own for their own personal use.
As you probably guessed, the end users are the suckers, and they are charged way more simply because of the fact that it is assumed they are ignorant of what domains are actually worth.
How are End User prices determined?
The short answer is that the maximum amount a domainer thinks they can get for the domain is what is demanded for it, regardless of what it is actually worth or even what it is worth to them. Generally speaking this price is 10-50x higher than what they’d sell the same domain for to a reseller. Yes, that is a 1,000-5,000% markup.
Some domainers have a rule of never quoting below a certain amount for any domain they get an inquiry on. This is usually in the $1-3k range. If you inquire about a two or three word domain that doesn’t seem to you like is should be worth many tens of thousands of dollars or more, and are quoted something like $2,488, this is what is going on. That same domain, in all likelihood, would go for less than $100 on the reseller market, or at auction.
Why do End Users get charged so much more?
There are a lot of uninformed people out there and this works often enough to make it profitable. Have a look at DNJournal: In the last week they have the following verified sales:
Channel.com $125,000 (reseller value: $20-50k)
CheapVacations.ca $47,000 (reseller value: less than $1,000)
PlatformGames.com $36,000 (reseller: $2k-10k)
Sportbekleidung.de $33,000 (reseller: less than $1k)
Instant.ly $32,000 (reseller: $1-2k)
OnTime.com $25,000 (reseller: $500-2k)
Others.com $23,000 (reseller: $500-2k)
OnlinePoker.co $22,000 (reseller: $500-2k)
Hopster.com $20,000 (reseller: $100-300)
MIA.com.au $17,400 (reseller: less than $100)
Pricing domains is as much art as science so not every domainer would agree with the ranges I’ve given for the reseller prices, however it gives you some idea of how much some people overpay for their domains - and why domainers keep quoting other people absurd prices.
How are Reseller prices determined?
Where End User prices are determined by the maximum amount a seller thinks somebody might be willing to pay, Reseller prices are determined by the maximum amount other resellers are actually willing to pay. Thats a subtle difference but it results in massive differences in End User vs Reseller prices.
A better way to describe the difference would be that End User prices are prices domainers dream about one day getting for their domains and reseller prices are the prices they could actually get right now from other domainers.
The reseller market is much more efficient and more accurately represents the true value of a domain. Supply and demand dictates the prices. The easiest class of domains to illustrate this are three letter .com’s. Domainers refer to them as LLL.com’s (L=letter).
At present minimum reseller value for LLL.com’s is roughly $4k. That means no matter how terrible the letter combination (think JXQ) if an LLL is offered up for sale for $2-3k its going to be sold to the first domainer who sees it or one of that domainers friends if they don’t have the money.
Try that with Hopster.com (that sold for $20k last week) for $2k and its going to sit there for a very long time in all likelihood. However if you put Hopster.com up for $40 somebody would snag it just as quick as the LLL for $2k, because that $40 is less than the reseller value.
Ok, so how do I buy domains for reseller prices?
It is important to note that not every domain can be had for reseller prices. The best thing you can do is simply realize when you’re being given an inflated price and dismiss it and move on to a place where you can get a comparable domain for a fair price.
The best way to buy domains for reseller price is to shop for them in the correct places.
-Drop auctions. When domains expire they are auctioned off to the highest bidder. Unless you get into a bidding war it is pretty unlikely you will pay much more than the reseller price for any name you get at a drop auction and you may end up with a very good deal. Thousands of domainers go through these everyday looking for deals and they don’t often pay more than reseller prices for the names they buy.
GoDaddy, NameJet, SnapNames and Dynadot are the places I have had the most luck. FreshDrop is a neat little tool that pools all of the data from these places together, however it was built for domainers so you may not understand all of the terminology.
-Domain forums. Domainers gather to discuss domaining and sell domains to each other on two main forums: NamePros and DNForum. NamePros is free to post on, DNF is not. You can view sales threads on both without being a member. Unlike the drop auctions you can’t be sure that what you are getting here is going to be an accurate reflection of reseller value, however the prices are generally going to be a lot lower than if they were targeted to end users. You’ll want to bargain hard, say no a lot and try to do your homework before buying.
-WHOIS Email. If there is a specific domain you want, look it up on who.is or whois.sc or a similar site and get the email address of the owner and send them a short email asking if they are interested in selling the domain. It is important to know that if they are a domainer they are going to Google you and try to determine the maximum amount you will pay. So if Googling you will tell them you’d pay a lot, have somebody else contact them for you. It’s unfortunate that this is necessary, but it really is. To use an extreme example, if Google emails a domainer inquiring about a domain, they are going to aim for the moon. However if a broke college student emails about that same domain, they’re going to price it much lower.
The key with this method is to come across like you know what you’re doing. When domainers contact each other this way the email is short and to the point. They don’t include a big story, nobody cares. They don’t describe what they want the domain for, thats a dead giveaway they are an End User and jacks up the price. They just say some variation of ‘hey i want this domain how much? thanks’. Thats it. The less you say the better.
If you get quoted a big number most of the time the best move is just to walk away, find a different domain. No matter how much you had your heart set on that domain in 99% of cases its just a matter of more digging to find one that you like even better, that you can get at a reasonable price.