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How to make an offer for a domain name.

when the owner wants a ridiculous amount

8:35 pm on Mar 19, 2010 (gmt 0)

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Okay, you domain name investors out there: how would you suggest approaching a domainer who owns a name that he thinks is worth thousands of dollars ‘ but isn’t? Or should I just sit tight, and wait for the next expiration in a couple of years? I can't believe any other buyer will come to him before that - or that he's even making enough parking revenue to cover the renewal.
My company is a small business that’s had its trade name, which I’ll call ‘Example Widget’, registered since 1995. We’ve operated our Web site as Example-widget.com since 1997, and it’s #1 or close to it on every major search engine for the terms Example widget.
"Example" and "widget" are both popular search terms - but only someone not in the business of serving the ‘Example widget’ market would imagine the name would be valuable for a web site. ‘Example’ buyers only buy custom ‘widget’ products, and insist on speaking with a human at every stage of their order. Those who would be attracted by the word ‘Example’ refuse to buy online, and consumers would likely assume the prices would be high. (Actually, since ‘Example’ buyers purchase their custom widget products in volume, the markups are low. Low markups and high customer service costs do not equal easy money.)
The domain name Examplewidget.com was originally registered in 1996 to sell a book on a related topic. The author and original registrant (with whom I became acquainted) died in 2005, over a year before his domain name registration expired. I backordered that name for the sole purpose of protecting my registered trade name ‘ but somehow, instead of expiring, the name was renewed. It was then transferred to a domainer.
This person attempted to auction the name in 2007 with no bids, then parked it. He has since offered it for sale on Sedo (as ‘make offer’), also without drawing any bids. Any residual value from the original site has long been eroded ‘ the links have all been removed, Examplewidget.com doesn’t come up on any search, and the pagerank is zero. I used twelve different free domain name valuation tools, and the average value of the name was under $50. I imagine any other domain name investor would check at least some of these tools before making an offer ‘ and look for potential end users who might want it.
I only want the name for trademark reasons, and none of my competitors (all of whom use different names) has shown any interest in Examplewidget.anything for years. The .net, .biz, and .us were all previously registered as alternate domain names, and were all abandoned. I acquired them all for registration fee only after they sat unclaimed for months to years.
I recently made an offer of $100 for the name through Sedo, which I thought was generous compared to an average valuation of less than $50. I got a counter-offer in the five figures, which I considered not worth even responding to, so I simply cancelled the negotiation.
Should I make a direct approach? I am willing to pay somewhat more than $100, and I have the current registrant’s email address from before he made his registration private. If so, what argument would be most persuasive:
1) Describing the actual market situation,
2) Pointing out the lack of demand for the other TLD’s, and the number of other related domain names on offer with zero bids (about three dozen).
3) Sending a summary of the valuations I got,
4) Pointing out that I have a common-law trademark, so there’s a dollar value above which it would be more cost-effective for me to bring a UDRP action. (He has already lost one.)
5) More than one of the above.
6) Or simply ‘this is my offer, take it or leave it’.
Thanks for your help.

[edited by: Webwork at 10:13 pm (utc) on Mar 19, 2010]
[edit reason] Tidying up display issues [/edit]

11:07 pm on Mar 19, 2010 (gmt 0)

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You indicate that "the owner wants a ridiculous amount".

How did you determine the fair market value of the domain, i.e, the amount you offered?
8:21 am on Mar 20, 2010 (gmt 0)

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Why would you want to replace a mechanism that allows you to bid anonymously on the domain (without emotions or justifications getting the way), with a direct contact that tells the domain seller the name is more valuable to you than anybody else?

Just respond (next time) with low increases to your initial offer. Let the seller decide when to cancel. He probably has a minimum figure in mind, might be only a few hundred dollars if the name is genuinely getting little income. But it's unlikely to be just $100.

The value is what he is prepared to sell it for and what you are prepared to pay. Not what some automated process says. You buying the other extensions has certainly helped increase the value.
2:56 pm on Mar 22, 2010 (gmt 0)

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Webwork: Maybe you missed where I said that I used twelve different domain name valuation tools, and the average value they estimated was under $50. Sedo wouldn't let me offer $50, but when I tried doubling it they took it.
Robho: Thanks for your advice.
4:35 pm on Mar 22, 2010 (gmt 0)

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Doh! Yep. I did miss it. ;)

Twelve free estimates? Wow!

In those (rare) cases where people approached me with offers they said were based upon a "domain name valuation tool", AND we actually closed a deal, the final number was usually between 5-10Xs+ what the tool said the domain was worth.

Was that because the tool was wrong? Hmmm . . . Judged by the final arm's length tranaction, between a willing buyer and a willing seller, my answer is a resounding YES.

Based upon my experience I'll venture a guess that most offers that arrive with a reference to "tool value" don't even get a reply from holders of portfolios of any size. Why? Because many domain holders view free domain valuation tools as being useful for entertainment purposes only, they don't take the numbers seriously.

Once someone tells me they think they know a domains value, based upon a machine valuation, I know - that if the person "is serious" (about the machine's valuation - that I'm dealing with someone whom I consider seriously misguided. Again, misguided based upon my own past experience and knowledge of the industry. "Serious" is an important modifier. You can often tell "how serious" someone is about the machine evaluation based upon how that reference is embedded in an email. ("I don't really know much about values but according to BlahBlah . . " versus "According to BlahBlah your domain is worth . . and therefore . . . )

I have never publicly reported a domain name sale. Based upon dialogue with many other domain holders I'll say that most domain holders never/rarely publicly report sales. (Why should we?) Further, most of the best domains don't need to be listed at Sedo, etc. to find buyers. Buyers find them all by themselves.

I'll venture that, at least up to ~2009, only about 2-5% of all domain sales were publicly reported, making the dataset used by the free domain value tools somewhat lacking.

Worse, unless the "reported sales" data is verified (only DNJ verifies private reported sales) the valuations can be even less reliable. I'm not certain if all the reverse/non-closed auctions are cleansed from the datasets.

The many variable that affect sales make the value of machine domain valuation only marginally useful in any specific case.

So, depending on who you are dealing with, I'd say forget mentioning valuations . . or mention then at your own risk. Forget "take it or leave it" comments. Such comments have a certain . . air, one that seldom impresses. Also, you risk sending the message that you think the seller is clueless if you attempt to "explain the market". (You might assume, by the act of registration, that the registrant has some idea about the market.) And, lastly, be careful about sabre rattling - especially about common law marks. Threats of legal action are rarely conducive to dealmaking. Worse, they can invite countermeasures - such as the filing of declaratory actions.

My advice at this stage is to make your best offer, put the offer in the subject line, and if you don't get a response - move on.
9:52 pm on Mar 23, 2010 (gmt 0)

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The current registrant lives in a third world country with no widget market to speak of - so actually, the more I think about it, the more his asking price seems to be to my benefit. The chance of anyone with a clue about the widget market (in the toilet), much less the example sector (the hardest hit) making a bid is slim and none. "Move on" seems like very good advice. A parked domain name is no threat to my trademark.

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