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Domain Names Forum

This 35 message thread spans 2 pages: 35 ( [1] 2 > >     
How To Tell If Your Interested Buyer Is A Strawman For A Bigger Player?
If you're the master of your domain or website does the buyer's identity even matter?
Webwork




msg:4065691
 2:38 pm on Jan 22, 2010 (gmt 0)

From time to time I receive inquiries about a domain or offers to purchase from what I'll call "strawmen purchasers", someone playing a role - say the poor student or the newly launched business - while that person is actually acting on behalf of a larger, well-funded entity.

Now, some people will argue that it's important to always know the true identity of the inquirer before doing business. Their rationale for this is often economic, i.e., deeper pockets should lead you to ask for or expect more $$$$.

I'm of the school of thought that who the purchaser is is only relevant to the issue of certainty (not guarantee) of payment. The value of a domain - what you might/will accept in exchange for the domain - is a thing independent of the buyer's status. In other words, I'm no more willing to discount a domain (with rare exception) because the buyer lacks means than I am prepared/willing to jack up my expectations/demands because the buyer is well-funded.

So, there's 2 issues at play here.

1. Should you always insist on knowing the true identity of your interested party AND HOW do you ever know . . for sure.

and

2. Is the value of a domain a function of the buyer's ability to pay or does that type of thinking just screw up potential deals?

How do I know the "true identity" of any buyer? I'll ask, when I care to know. I'll ask for a business address and land line, for starters. I'll go so far as to ask if they are acting on behalf of another entity in some cases, where I'm just not in the mood for BS. ;)

And, honestly, I feel it's a bit like admitting like I don't know my own business to think that pricing is a function of anything other than the intrinsic qualities of a domain, which is exactly why, in most cases, I picked up the domain in the first place.

So, do you always insist on knowing the identity of your "interested party" BEFORE discussing price, negotiating, etc.

Do you set a price without regard to the purchaser's identity or do you employ some sort of sliding scale? How has that approach worked?

 

KenB




msg:4065730
 3:15 pm on Jan 22, 2010 (gmt 0)

Good points. I agree that the intrinsic value of a domain is the domain itself, not the depth of the pockets of who is buying the domain. In the end, the real value comes from how the domain is developed and marketed. Would chemistry[dot]com be as valuable/profitable as a chemistry website rather than a dating website? Probably not.

Personally, when selling a domain, I don't care who you are in regards to domain pricing. I only care about who you are in so much that I get paid the agreed upon price.

Demaestro




msg:4065739
 3:33 pm on Jan 22, 2010 (gmt 0)

Now, some people will argue that it's important to always know the true identity of the inquirer before doing business. Their rationale for this is often economic, i.e., deeper pockets should lead you to ask for or expect more $$$$.

I see this often as well, what I find funny is when I make a legitmate offer to a domain and when I ask the person what they are asking the reply "What is your budget?" My answer is always $50.

This just shows the subjective nature of the pricing model in domain names.

2 years ago I tried to buy a domain and offered $500, they said no and then lectured me on the climate of the domain name market and was told he wanted more like $8000, I declined and picked up the .net and the .ca... fast forward to 4 months ago, I get an email from a different company telling me that they see I have the .ca and .net would I like the .com only $500... I declined... then last month upon renewing the .ca and .net I see the .com is available... I got it for $15.

I know this story is off point but it speaks to the subjective nature of trying to sell names.

I have always been of the opinion that to sell a domain name for a marked up price, you have to add value to it. Achieve some decent rankings for related keywords or something.... but putting ads on them and parking them does nothing but hurt the domain's credibility.

I think these "strawmen" have caught on that people are looking to turn a quick buck, so these companies with money have to disguise themselves as poor students to avoid being asked for stupid amounts for a domain name.

HuskyPup




msg:4065790
 4:24 pm on Jan 22, 2010 (gmt 0)

I eluded to these "strawmen purchasers" in another thread and I have had several approaches recently from their extremely well-known financiers. It's strange that when they get caught out they go extremely quiet for some reason.

As long as I get what I consider my fair price I am not too worried about who's in the background, just don't try "student" naivety on me, it doesn't work, if you get a big price for one of my domains and I was happy to sell it to you, no problem for me...I don't have your overheads and costs for such an auction.

Durham_e




msg:4068368
 8:07 pm on Jan 26, 2010 (gmt 0)

Recently there was a reason a domain I have is very likely to have appreciated in value. I was expecting some action and sure enough in comes a hotmail email. "we are starting a business ..... and would like your domain"
Now I had put this enquiry down to some domainer putting 2 and 2 together and seeing whether he could buy and on sell the domain - Action - No reply from me or is there likely to be. However ....
I think these "strawmen" have caught on that people are looking to turn a quick buck, so these companies with money have to disguise themselves as poor students to avoid being asked for stupid amounts for a domain name

So, this thread has now made me think that this could be a disquised approach from the real business likely to be interested .
Is there a way to tell?
Should I now acknowledge the email and say what?
All views appreciated

Demaestro




msg:4068378
 8:15 pm on Jan 26, 2010 (gmt 0)

The real question Durham is, is your domain name worth different amounts depending on who is buying it?

If you are serious about selling your domain decide what it is worth then give out the price.

Don't play this game where you try to figure out how much you can get based on who it is, obviously price is negotiable but have a price in mind and then ask for that.

There is nothing worse then asking someone if they want to sell their domain and they ask you to make an offer. All that says to me, a buyer, is that you have no idea what it is worth which makes me think it is worth $50.

If you have something for sale, put a price on it then try to sell it, don't concern yourself with who is buying it to come up with this price.

A start up company may have more money than an established one if they have a good business model. In fact a student may have a rich dad so don't dismiss them, just tell them your price and if they can afford it then you probibly have a sale.

Durham_e




msg:4069448
 12:22 am on Jan 28, 2010 (gmt 0)

Thanks for your advice Demaestro.

I will treat the email as if it is an end user enquiry and see what happens.

Webwork




msg:4069473
 1:09 am on Jan 28, 2010 (gmt 0)

I wonder if we can draw in folks who have faced the same issue with inquiries about buying their website?

Time to shake the trees and see what falls out. ;P

physics




msg:4069997
 8:12 pm on Jan 28, 2010 (gmt 0)

Taking an example from another industry, look what happened to Seattle Computer Products who made the mistake of selling QDOS to Bill Gates for $50k who then turned around and licensed it to IBM ... and the rest is history.
What would have happened if Seattle Computer Products had been more business savvy and found out it was really IBM who would use their DOS? You think they could have gotten more than $50k for it?

physics




msg:4070007
 8:23 pm on Jan 28, 2010 (gmt 0)

By the way, if i recall, Bill made sure that it was part of the agreement that who he would license it to was secret. This should maybe have tipped off the Seattle guys. If you think you're dealing with a 'strawman', I bet you can get a lawyer to come up with a contract that requires the buyer to disclose to you if they are purchasing the domain for, or intend to sell or license the domain to someone else, etc.

BillyS




msg:4070019
 8:48 pm on Jan 28, 2010 (gmt 0)

I get about six of these requests each year. Generally, I completely ignore the email if the address is from a free email service. I take the time to respond to those I receive from an email address for a business that purchases websites.

In short, I try to do a bit of research up front. I'll even do some research on social or business networks in an attempt to further validate the request.

We only have one website, and as it continues to grow it is beginning to attracts pretty serious buyers. I'm often tempted to cash in and leave this space - but I have too much fun.

Demaestro




msg:4070021
 8:51 pm on Jan 28, 2010 (gmt 0)

physics,

That is a great example and made me re-think what I saying.

I still find it hard to agree that something is worth more or less depending on who is buying though.

The reality is that $50,000 must have been a fair price otherwise they wouldn't have sold it for that amount, and to put restrictions on something that say... "You can't profit more from this item I sell you, than I do" is anti-commerce. The whole point of a marketplace is that things can be bought and sold for a profit.

Image if domain registrars took on the suggestion that you have to sign a contract that requires the buyer of domains to disclose to the registrar who they are purchasing the domain for, or intend to sell or license the domain to someone else, etc... just in case they can make more off it then what they ask.

Imagine buying art for $50,000 and being told you can't sell it for a profit later otherwise we are going to charge you $200,000. that isn't how a marketplace works... you have goods, you price them out and sell them.. if someone can turn around and sell it for more... good for them, maybe you under priced it to start with, but prices shouldn't be subject to change based on who is the purchaser, that seems silly.

I think it is fair to assume that anyone who buys a domain is going to be looking to profit from it either by building a site or reselling it, student or corporation.

"""Sunglasses, I have sunglasses for sale only $10... oh hello rich corporate guy.. that will be $50 for you."""

Edge




msg:4070023
 8:52 pm on Jan 28, 2010 (gmt 0)

Recently, I was approached and asked if I would accept an offer to buy my Website (web-business). I said yes - never asked who the real buyer was - this is not important to me.

They then asked to see the books before making an offer - I said the books where confidential and I would open the books with an acceptable offer under proper business conditions, checks and balances.

They came back and first lectured me on the state of the economy and website values (I remained quiet) then offered a number equal to about three months of my revenue.

I said no-thanks and nothing else - they came back after a week and pressed me for an answer. I again said no thanks and indicated that their valuation model used on my website was flawed and not even in the ball park.

It has been two weeks and I have not heard anything from these folks.

CainIV




msg:4070071
 10:18 pm on Jan 28, 2010 (gmt 0)

2. Is the value of a domain a function of the buyer's ability to pay or does that type of thinking just screw up potential deals?

It sure seems to be.

I have yet to find the definitive handbook on domain valuation. The prices are all over the price, and yet most owners still swear it's 'market prices' - essentially to try and justify often ridiculous costs on those domains.

I always buy domains as an anonymous buyer. I don't reveal the company I am purchasing for, now should I have to. A price is a price, and should be based on some assertion of logic. Too often this isn't the case. Most times it is simply a test, a bid or auction, and not based on any 'tangible' rationale.

The response I get most often from domain sellers is

'X and Y company sold a 2 phrase domain for $4 million last month, so this means mine is worth

<insert non logical math here>

:)

walkman




msg:4070080
 10:26 pm on Jan 28, 2010 (gmt 0)

KenB,
the game is clear: sell it for maximum /pay the minimum. So if ATT wants your name, why not try to get some more? Technically even a 20% premium maybe a good profit, but why not get 20,000% if you can?

Demaestro, a good name doesn't need rankings, they are assumed. Now I mean a good name, not one that is released after the registration expires. I always try to add the fact that they will own the name for life, and that's worth something, not just x times the today's revenue. If I have a 'widgetfurniture.com,' name odds are that I can make at least a few hundred $ each month doing next to nothing for many years to come, with just a few pages and affiliate links. Does that count as something? of course it does. The name helps you go to the top 'widget furniture' and that position is worth $x,000 a year or whatever.

The most ridiculous offer was about one day's worth of revenue for a great domain name. He even had the nerve to wonder why I didn't answer to his "reasonable offer."

buckworks




msg:4070110
 11:21 pm on Jan 28, 2010 (gmt 0)

Deciding "worth" can be a tricky business, from both the buyer's and seller's end.

Domain names are not a commodity item to sell, they each have to be negotiated individually.

A domain could indeed be worth a different price to different people, because there could be big differences in their ability to monetize their new purchase.

Another factor that can make a difference is who initiates the discussions. Did the owner put it up for sale first, or did someone approach him/her to see what might be possible? That can shift the balance of negotiating power.

I've had the experience of being the "strawman" for someone who was likely to be perceived as having deep pockets. We got the domain for less than half the asking price, but I don't know if it made any difference that I did the negotiating. The domain had been for sale for several months at that point, so when someone came along with a tight-fisted but real offer, the owner decided to grab the money and run.

Edwin




msg:4070153
 1:13 am on Jan 29, 2010 (gmt 0)

I establish a fixed price for all my domains. That removes the need for a "straw man" type play, though companies still try it because they didn't download the price list. Once I send them the price for that domain, and a copy of the full price list, that problem goes away.

What I've found is that the larger the company, the quicker they'll say "yes" if they want the domain (because I don't jack my price up beyond "reasonable"). On the other hand, very small businesses often complain because my prices seem too high. I'd rather lose the folks with unrealistically low price expectations but get a steady stream of mid-tier sales than lose everyone except the billionaires by trying to price up as far as the buyer can bear.

MrHard




msg:4070217
 4:20 am on Jan 29, 2010 (gmt 0)

You sell something for what you think it's worth. Nobody should be fleeced, whether rich or poor.

JS_Harris




msg:4070303
 8:20 am on Jan 29, 2010 (gmt 0)

Keep it simple, come up with a price you feel is fair and when the money clears happily let the site go.

Who? - doesn't matter.
How rich are they? - doesn't matter.
Sob story? - throw in a box of tissues with the deal, for the same price.

Bennie




msg:4070345
 9:45 am on Jan 29, 2010 (gmt 0)

Isn't the truth a fine art between what *everyone* has said? To not at least consider the other side is remiss.

As if you'd price a domain without at least hearing what they have planned for it and who they are, even the sharpest of email negotiations usually goes on long enough to find out a few things about the other party. Trick is to get their price first, regardless of buying or selling :D

I've given away domains far cheaper to genuine individuals having a go, as well as asked for larger sums from larger companies, that expect to pay more. It also depends on what you are selling - real generic domains, or regular junk repackaged as *something* :S

anallawalla




msg:4070366
 10:43 am on Jan 29, 2010 (gmt 0)

I get about 2-3 offers to buy every year and some have been the proverbial poor students. Other than some I sold through that German company, I usually ask for a ridiculous price because I don't want to sell that particular domain. Not one has come back to haggle.

I think there are two issues here:

* The buyer might be an agent for someone else.

* The buyer (or his principal) is wealthier than he makes out.

I don't think either matters as long as you get what you think it's worth. I can only think of one situation where you would care - if the domain name represents a website you cared about but can no longer maintain and you don't want it to be misused for an evil purpose.

Edwin




msg:4070369
 11:10 am on Jan 29, 2010 (gmt 0)

As if you'd price a domain without at least hearing what they have planned for it and who they are, even the sharpest of email negotiations usually goes on long enough to find out a few things about the other party. Trick is to get their price first, regardless of buying or selling :D

Actually, I found I do much better with pre-priced domains. I've stuck a pricetag on over 5,000 of mine, and since I moved to publishing the pricelist over a year ago sales strongly increased. I think some people are reluctant to email with no knowledge of whether a domain is going to cost them $50 or $50,000 - whereas if they can see a clear price that at least gives them a ballpark to work from (a lot of buyers still try for some kind of reduction of course, but it's proportional rather than crazy)

oddsod




msg:4070384
 11:45 am on Jan 29, 2010 (gmt 0)

I wonder if we can draw in folks who have faced the same issue with inquiries about buying their website?

Happens for the smaller sites. In the higher price brackets there's a lot of back and forthing - even on the issue of the terms in the Letter of Intent. Then there's the due diligence which often involves an NDA and access to highly confidential material. There's invariably at least one lawyer and one accountant involved. Not practical to have a front man. Earlier this month I did due diligence on a $seven figure website property for a client. Can't see how that would have worked without the seller knowing who the principal was.

BillyS




msg:4070436
 1:48 pm on Jan 29, 2010 (gmt 0)

2. Is the value of a domain a function of the buyer's ability to pay or does that type of thinking just screw up potential deals?

The value of a domain may vary by buyer. For example, a large corporation that wants to launch a product and you own that domain name may place a very high value on that domain.

If you're getting paid a lump sum payment, then it shouldn't matter about the ability to pay. Either they can pay or they cannot no premium required.

If you have competing bids, then you might want to adjust each bid for its risk of non-payment.

ponyboy96




msg:4070554
 4:20 pm on Jan 29, 2010 (gmt 0)

I have always been of the opinion that to sell a domain name for a marked up price, you have to add value to it. Achieve some decent rankings for related keywords or something.... but putting ads on them and parking them does nothing but hurt the domain's credibility.

Exactly. If the domain name is a keyword rich name that someone would use for SEO purposes, parking ads on it greatly reduces the value. It takes quite a bit longer to pull one of those sites out of the black hole than one that had legit content on it or nothing at all.

BTW, I've been asked to play "strawman" at my current job a couple of times. It's not something I've really enjoyed doing, but it's not an unrealistic request so I've done it. The reason for this is because they know that the seller with try to rip us a new one if I say I'm from "Acme Corp." I usually just say I'm starting an xyz business (which is true) and I'm interested in your domain name. I know before I call what I've been authorized to pay. It's set in stone.

What I've found is this:
1. Most people want me to make an offer first. To which I make the offer that I've been authorized to make. I don't have wiggle room. The response is always, well I've been offered more than that before. At this point, I'm thinking, well you should have sold it then. Just give me a price that I can go back to my boss with and let them decide. If you own 20k domains (I know this before I call) and try to play country dumb, you are not going to get anywhere with a big company. You have a better chance of more money if you only own 5 domains.

2. People sometimes ask for a ridiculous amount of money out of the gate. Example: I called one guy and he immediately said I want $1 million. Whatever, I just say thanks for your time and move on. I had only be authorized to offer up to $10k and I'm not going to spend any time on this. His loss, the domain is still sitting which it has been for years and years.

3. When I make an offer and the person says, "I've had people call and offer me that same price before. I would be interested in selling for $x." Chances are, if you've had the same offer a few times now, then that's what the domain is worth.

I don't buy and sell domains professionally. I am a professional SEO and have occasionally had to buy domains from time to time for projects. These are just the experiences that I've had.

BillyS




msg:4070566
 4:29 pm on Jan 29, 2010 (gmt 0)

@ponyboy96

I really don't know how anyone can value a domain just by scanning it. I've yet to see a stat service that comes close to the actual traffic we have. They're usually off by a factor of four.

I've also played around with those "what's my website worth?" sites. They're clueless too.

If the name itself is worth something, that's a different story.

physics




msg:4070600
 5:05 pm on Jan 29, 2010 (gmt 0)

physics,

That is a great example and made me re-think what I saying.

I still find it hard to agree that something is worth more or less depending on who is buying though.

The reality is that $50,000 must have been a fair price otherwise they wouldn't have sold it for that amount, and to put restrictions on something that say... "You can't profit more from this item I sell you, than I do" is anti-commerce. The whole point of a marketplace is that things can be bought and sold for a profit.


Well, that's an interesting point. But I still think DOS was worth more than $50k and so did Bill Gates (this transaction is actually one of the reasons he gets a bad rap, he knew he was ripping those guys off). Maybe you're right that saying "You can't profit more from this item I sell you, than I do" is anti-commerce. A better way to put it would be - if you want to maximize the amount of money you get, for anything, know your market and know how much money you might be able to get if you could get the party with the deepest pockets / most desire for your item. There's nothing anti-commerce about that. Seller beware. Otherwise you might end up like the Seattle guys...

Demaestro




msg:4070644
 6:16 pm on Jan 29, 2010 (gmt 0)

Well, that's an interesting point. But I still think DOS was worth more than $50k and so did Bill Gates (this transaction is actually one of the reasons he gets a bad rap, he knew he was ripping those guys off). Maybe you're right that saying "You can't profit more from this item I sell you, than I do" is anti-commerce. A better way to put it would be - if you want to maximize the amount of money you get, for anything, know your market and know how much money you might be able to get if you could get the party with the deepest pockets / most desire for your item. There's nothing anti-commerce about that. Seller beware. Otherwise you might end up like the Seattle guys...

Excellent points, I think you are right. A lot of research is required before entering any deal.

You see that same sort of thing in art, antiques and any collectible. Where the buyer knows the true value of an item but the seller doesn't.

buckworks




msg:4070647
 6:18 pm on Jan 29, 2010 (gmt 0)

still think DOS was worth more than $50k

A vital part of what made it worth more was the knowledge and connections that Gates brought into the situation. Should we begrudge him for doing his homework?

I've heard of similar things happening to writers or artists who would sell all the rights to something they'd created, only to watch someone else develop their baby into something famous and profitable.

The lesson here is that when selling intellectual property, it's wise to negotiate some sort of provision for ongoing royalties if the [whatever it is] turns out to be profitable.

Like Colonel Sanders did with his recipe for fried chicken!

ponyboy96




msg:4070667
 7:00 pm on Jan 29, 2010 (gmt 0)


I really don't know how anyone can value a domain just by scanning it. I've yet to see a stat service that comes close to the actual traffic we have. They're usually off by a factor of four.

I've also played around with those "what's my website worth?" sites. They're clueless too.

If the name itself is worth something, that's a different story.

I've never used those type of services. How we look at it is, what kind of traffic do we think we can drive to this site? How much money do we think we can make? (For SEO) does this site have the keywords that we are interested in? Is it an exact match? Partial match? etc... In the end, it's how much is this domain worth to us. Of course that is going to vary by person.

I like to think of domains like a piece of land.

This 35 message thread spans 2 pages: 35 ( [1] 2 > >
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