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How to value a domain if sold on a commission basis?
Seller wants a % of sales, or a flat price per unit sold
MichaelBluejay




msg:4062296
 4:56 am on Jan 17, 2010 (gmt 0)

I want to buy a certain domain to support a book I'm writing, but the seller doesn't want to sell the normal way, for a flat fee. Instead, he wants a (small) percentage of profit or a flat price per copy of my book that's sold.

I'm not really in much position to argue, as he holds the keys, and I also kind of admire the fact that his idea both avoids selling himself short as well as ties our success or failure together.

The question is, how much piece of the action for him is reasonable? 10%? More? Less?

I've estimated the domain to be worth $590. So I'm thinking of offering him 10% of net sales, but $600 minimum no matter what. So even if my book is a complete and total flop, he still gets a fair market price.

It's hard to estimate profit on books, but a successful self-published book might sell 1000 copies and net me $2 per copy, while a successful traditionally-published book might sell 2000 copies and net me $2 per copy, so either way, my profit would be $2000. The 10% would be only $200, so the seller would get the $600 minimum.

Last year Obama's The Audacity of Hope and William Shatner's bio sold only a little more than 100,000 copies, so the sky is certainly not the limit. If I were wildly successful with 40,000 copies @ $1/copy royalty, then I'd be looking at paying $4000 for this domain. That seems appropriate for a site that would be supporting a New York Times bestseller.

What do you think?

 

callivert




msg:4062361
 10:35 am on Jan 17, 2010 (gmt 0)

You're crazy. You told this guy way too much about your plans for the domain. Pay $590, or walk away and buy a different domain.
Incidentally I needed to buy two domains for exactly the same reason (a book). I walked away; the owner dropped them about a month later, and I picked them up for less than a quarter of the original asking price. keep in mind, there are probably not hundreds of people beating down the door to buy this domain. You may be the only potential buyer, which gives you leverage.

MichaelBluejay




msg:4062370
 11:17 am on Jan 17, 2010 (gmt 0)

I hate it when I ask for help with how to do something and then people tell me I should do something completely different instead. If you wouldn't do it that way, fine. I'm not you. And I'm not crazy, thank you very much.

I considered pre-empting this exact kind of unhelpful response by explaining more of the details of the situation, but man, I really shouldn't have to. It's just a waste of time, if people would simply trust me. But that didn't work, so here are the details, not that anyone really needs them.

I don't want a similar domain. I want *this* *exact* *domain*. Period. No others. This one, or I probably don't even write the book. It's that essential to me.

The seller is likely a multimillionaire, and has zero need to sell, and just as little motivation to do so. The seller has held this domain, along with hundreds of others, since circa 1995, I think. If I don't buy this domain he absolutely would not lose any sleep over it. (He didn't advertise it for sale; I found out that he owned it and I went to him.) So I have *no* leverage.

He could actually afford to *give* me the domain, but I'm not a charity case, and I respect that he wants a fair deal. And from my position, I could actually afford a lot more than I'm offering. So in reality, we have a rich person selling something of trivial monetary value to another rich person. But it has other-than-monetary value to him, because it's part of his collection that he doesn't sell from that often, and it has other-than-monetary value to me, because I want it. The amount of money is not really the issue, who gets the better end of the bargain is not really the issue, the issue is, as I stated, what percentage piece of the action is reasonable in a situation where the seller requires a piece of the action?

I'll also mention that I believe the seller is willing to work with me because he's an eccentric iconoclast and we discovered that we coincidentally share many of the same, fairly rare values. My impression is that most would-be domain buyers don't even get a response. (In my case, it took me several months just to get to talk to him. I dealt exclusively with secretaries before that who couldn't tell me anything, besides that they relayed my message to him.) And I didn't tell him "way too much", because had I *not* told him my plans, there is *absolutely* *no* *way* he would have even agreed to meet with me, much less to sell.

Also, the idea that he likes my project, and the idea of partnering with me, where our success in the project is linked, is more interesting to him than a one-time sale. When you have enough money, money alone becomes uninteresting. That's why he's looking to essentially become a partner in this project, and it's why I'm writing a book from which I don't need any income.

The *only* reason I'm able to buy this domain is because I told the seller my plans and because I agreed to a percentage/partnership deal. Take either of those out of the picture, and I don't get to buy the domain. It's that simple. So this is the road I'm going down, regardless of whether others understand it or not.

So again, what I'm looking for is advice about what percentage piece of the action is reasonable in a situation where the seller requires a piece of the action? If you can help answer this question, thank you. If instead you prefer to criticize me for entering into this type of arrangement, or are eager to tell me why the seller shouldn't be acting the way he is, or want to say something else equally unhelpful, feel free to move along instead.

callivert




msg:4062383
 12:17 pm on Jan 17, 2010 (gmt 0)

um, I wasn't telling you to do something different. The situation as I read it was:
* there's a domain you want;
* you're in negotiation to try to secure the domain;
* you wanted feedback about the deal you are thinking of entering.
I think the deal is a bad idea. Sorry if that's not the answer you were hoping for.

(and by the way, when I said "you're crazy" it was just a way of expressing my reaction to the deal; it wasn't meant to be taken literally, but I think you know that already)

robho




msg:4062698
 8:48 am on Jan 18, 2010 (gmt 0)

So I'm thinking of offering him 10% of net sales ... and net me $2 per copy

Be careful that you each understand how "net sales" is defined. He might (correctly) consider it to be a percentage of the cover price of each book (after discounts), not a percentage of your profit.

Maybe offer a fixed amount "for each book sold"? Consider whether that should be different for electronic versions (which you might want to sell cheaper).

From his side, I'd want to know what would would happen if you decided instead to give the book away (perhaps to promote other books or a consultancy). Your minimum should take care of that, but when do you pay it? How often would you make extra payments?

Perhaps look at a standard royalty agreement for ideas.

HuskyPup




msg:4062839
 2:44 pm on Jan 18, 2010 (gmt 0)

The question is, how much piece of the action for him is reasonable? 10%? More? Less?

Realistically before the .com boom 10% commission of the selling price was a standard rate however things have changed massively this past 15 years and if I get 5% of the selling price I reckon I'm doing well with 2-3% very common.

It sounds as though you have a good rapport with the domain owner however surely this domain name is going to be forever, or at least quite a long time, related to your projected book therefore I would have thought that

a flat price per copy of my book that's sold

would be the logical thing to do.

MichaelBluejay




msg:4063370
 6:47 am on Jan 19, 2010 (gmt 0)

Thank you for the comments.

The problem with a flat price per book sold is that the amount I get per book is hard to estimate accurately, and can change over time, due to the vagaries of the publishing business. (My estimated profit per book is $1.41 to $4.71, which is quite a range.) Unless I set the commission per book exactly right, which is nearly impossible, then one side or the other is getting a bad deal -- either I'm not cutting him in on enough of the profits, or I'm paying out too much. So going with a percentage of net seems the fairest way to do it. And yes, net will be clearly defined (if traditionally-published, it'll be the amount I get from the publisher with nothing deducted; if self-published, then the amount I get from the distributor less printing and shipping only, with possibly some budget for marketing).

But anyway, it looks like my idea of 10% isn't too far off the mark. That's what I wanted to check out. I'll suggest the 10% with $600 minimum deal and see what he says.

HuskyPup




msg:4063493
 12:33 pm on Jan 19, 2010 (gmt 0)

So going with a percentage of net seems the fairest way to do it.

Yep, I agree, I hadn't realised the huge difference in profit margins.

HarleyGuy




msg:4071408
 11:02 am on Jan 31, 2010 (gmt 0)

Don't offer a min.
Just offer your percentage.
I think 10% is reasonable.

If your guy is rich, powerful, and interested in the same topic as your book.
You may develop a relationship that could be far more valuable than a % here or there.

Good luck

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