Note: This is a very long post, scroll down to the Top 10 Reasons People Overprice Domains section below if you want to skip the backstory.
A week ago, in my Grasping Opportunities: Making Money out of Nothing post, I showcased my successful brokering of a very premium domain. Immediately following the post I started receiving quite a few e-mails from people asking me to sell their domains.
Even though I specifically disclaimed people to only contact me if they had a truely premium domain…
If anyone out there has a premium domain and are interested in having me broker it for you, you can e-mail me at email@example.com. I’m not a domain broker or anything special, but I do have the ability to find a buyer for you. Please only contact me if you’re selling a true premium domain… one that you think can fetch at least $50,000+
… I inevitably received the expected e-mails from people who completely overvalue and overprice their domains. I won’t name names here or give out specific examples to protect the guilty. This happens all the time… people all too often overvalue domains.
To illustrate this point, I’m going to go search right now for some random domains for sale. I’ll give myself 5-minutes. Be right back…
… okay back. That actually took more like 10-15 minutes. Obviously, ‘domainers’, or people who regularly or professional buy and sell domains, have a much better grasp of pricing domains, and so finding overpriced domains is much easier on sites such as eBay, and a bit harder on domain forums such as DNForum.com, but people still do it. (Actually, what I find more often on domain forums is that people waste their time with domains worth $10-20 instead of investing in the more valuable domains; so their pricing isn’t too bad, but they are limiting themselves to poor quality domains).
Anyhow, here is what I came up with for my example:
Starting bid: US $10,000,000.00 (Domain Sale Link)
BIN: US $1,777,777.00 (Domain Sale Link)
BIN $200,000 (Domain Sale Link)
Fixed Price: $200 (Domain Sale Link)
Fixed Price: $100 (Domain Sale Link)
Fixed Price: $100 (Domain Sale Link)
Why does this happen? Why do people overvalue their domains? Here’s a “Top 10″ list I’ve conjured up for you to ponder.
I’ve never, if I can recall, ever written a single “Top 10″ list in my one-and-a-half years of running this blog. However, I’ve heard that it’s good linking material and link bait for decent authority sites (Aaron Wall). And so, I thought this was a good opportunity to try out my first “Top 10″ list.
Top 10 Reasons People Overprice Domains
1. People use a domain appraisal site or service
This one really bugs me. Domain appraisal sites or even worse, appraisal services. There’s no shortgage of them, do a Google search. The automatic ones usually use a pathetic form of valuation which uses backlinks, Alexa, pagerank, etc. to factor the price. Some attempt to also factor in keywords and syllables but do an extremely poor job. You just simply can’t program a computer to value a domain, this is something I think humans will always have to do themselves.
Domain appraisal sites are completely worthless and mean absolutely nothing. They’ll devalue actual premium domain’s worth, and then state that domains such as “MakeMoney-withmy-ebusiness-ebook.name” are worth hundreds of thousands of dollars.
Even worse, are domain appraisal services. These are so-called companies that will, for a fee (usually around $100-200), tell you how much your domain is worth. And more often than not, to please their customers and hope for repeat business, they’ll value your “DogFood-reallyreallycheap.info” at $35,000 – $40,000 claming good keywords or markability. They’ll then present you with an “official appraisal” gold sticker which you can proudly show to all your friends.
Online domain appraisal sites and services are completely worthless. If you want to know the value of your domain and have no idea what it’s worth, ask around on a few domain forums, or put it up for sale asking for offers. That will give you a good idea as to it’s worth.
2. Monkey see, monkey do
People will read or hear about a domain that sold for a lot and then, having no experience in domaining, decide that they, too, can sell a domain for a million dollars. After all, they have a good idea for a domain name.
They then register their “online-stocktrading123.net” and ask for only $495,000. That’s 50% off!
3. Needle in the haystack
I think a lot of people’s mentality is that “hey, I know I’m asking for a lot, but somebody may buy it”. And that does make a little bit of sense. It could be a horrible domain, and they could have horrible odds of anyone buying it, but if somebody does, they’re 1 million dollars richer.
But I have a problem with this logic. I think the odds of winning the lottery are better than trying to sell your worthless domain for a million dollars. And a lottery ticket will cost you a one-time price of $1-5, whereas you’re paying $10 a year for your domain. Not to mention wasting your time trying to sell it.
Also, there are other implications you have to factor in such as legalities. I can see the scenario where somebody actually does pay the million dollars for the domain, only then to later sue, claiming they were tricked into the true value of the domain and that they were taken advantage of, etc.
So, the needle in the haystack method does not fly with me.
4. Good Keywords, Bad Idea
I think a lot of people will come up with a domain that sounds good in theory, taking two related keywords for example and putting them together. But I think they miss the point that somebody will be buying the domain in order to develop it into a business plan.
For example, I have a friend online who seems to register the strangest names. I wish I could remember them all now, but I believe one of them was something like “GrandmaForums.com” (what’s scarier is that he actually developed it into a forum and had pictures of… grandma’s in the header images and such.. and the colour scheme? Why, grayscale of course).
So, using that example, both “Grandma” and “Forums” are great keywords, and the .com is obviously a plus, but combining them makes no sense. Firstly, very few “grandma’s” use the internet. And for those that do and are active participants online, how many of them will be searching for and looking for other grandma’s to talk to online? I mean, it makes a little bit of logic, but you’re going to find it extremely difficult to sell this domain. Registering it for yourself to develop is one thing, but registering the domain with the idea of reselling it is another.
The point? Many people don’t consider the realistic potential of the domain for an actual business plan. The domain has to make sense in the market and have a decent demographic.
5. But… his domain is worth a lot!
Many people will see a site such as… Google, del.icio.us, or YouTube.com and think “Ahh, those sites are huge and have interesting domains. I think I’ll make a similar domain and sell it!”. They’re missing the point that it wasn’t the domains that made the sites popular but the actual site itself.
Thus, registering similar domains such as “Gooogalle.net, h.umungo.us, or WeVideos.com” doesn’t mean they’re automatically worth more than crap.
6. But.. it’s in the news!
Anna Nicole Smith’s death is a good example. While I’ll certainly admit that registering domains in relation to something that was just announced in the news or media can most certainly be wise and profitable, you have to be selective in how you do it, and you have to claim only valuable domains.
7. They don’t pay attention to extensions
Personally, I think anything other than .com, .net, and .org is pretty much worthless. And I’m not exagerrating. I’d say everything else to be worth roughly around 1% the amount of the .com. So, if CLOTHES.com is worth $500,000, then CLOTHES.US or CLOTHES.INFO world be worth more like $5,000… and that’s still being extremely generous!
My point? Don’t waste your time getting anything other than .com, .net, or .org. Any other extention sucks.
8. Overestimate the potential
Many people will simply overestimate the potential of a domain. They’ll have a decent domain such as “JumpRope.com” and want $1,000,000. Sure, JumpRope.com is a great domain, but is it worth a million dollars? Think of all the other quality domains you could get for that price. There’s potential in the domain by making it into a jumprope store or community, but one million dollars? Don’t overestimate the potential! Potential will only increase the domain’s value so much…
9. They paid a fair bit for it and want to make their money back or a profit
I think a lot of people are stubborn and don’t want to admit they made a stupid mistake by obtaining a crap domain. They then spend their time trying to pawn it off on another poor soul, oftentimes for a profit (talk about being greedy).
10. Completely and utterly devoid of any rational thought
My last suggestion why people overprice domains is that they are just simply moronic. I have no other explanaiton for it… can you think of one? Does the person who is selling ST8S.com on eBay for $10,000,000 really think his domain is worth that much? If so, he has some serious problems and should check himself into the nearest clinic.
Anyhow, that’s my list. I’m sorry if it kind of fell apart at the end, but this post is epicly long and I’m exhausted now. If you enjoyed this post or found it helpful, please take the time and Digg it by clicking the Digg button below, thanks!
Good luck and good earnings!