How to Improve Upon Record-Breaking Domain Name Auction
Thursday, June 28th, 2007
Moniker’s latest domain name auction is over and pulled in over $10M in domains. How can Moniker take it to the next level?
The past week has been a record-breaker for domain name company Moniker. Last Thursday it sold nearly $11M in domains in its live auction in New York. The silent auction ended yesterday with about $1.5M more in sales.
A lot of domainers think Moniker is getting rich off these auctions. I don’t think it is. The total commission from this auction was about $1.65M. Moniker then pays TRAFFIC’s organizers and the auctioneer. But that pales in comparison to the other expenses of organizing the auctions:
-Sifting through 60,000 domain submissions
-Setting up the back end technology for silent auction
-Managing over $20M in fund transfers ($10M in, $10M out)
-Handling transfers and escrow of hundreds of domains
-Taking on legal risks associated with the auctions
Moniker isn’t doing this for charity, but my point is no one should cry afoul that it’s getting rich. Moniker isn’t in this for $10M auctions. It’s in this for the next $20M auction, $30M auction, and $50M auction. That’s when the company will start cashing in. And that’s just around the corner.
How can Moniker boost the auctions to that level? Here are some ideas to improve the auctions:
1. Limit the live auction to 2 1/2 hours. I saw a number of people who spent a quarter million or so leave the auction early. It was just too long. There are a couple ways to shorten the live auction. First, reduce the number of domains from over 200 to perhaps 160-170. Second, make the bid increments larger. There were countless auctions that received a dozen bids in $1,000 increments. At some point you need to lower the increments, but it was excruciating to sit through some of the lots.
2. Reduce the silent auction inventory to 1,000 domains. Moniker is in a tight spot on this one. On one hand, their customers get frustrated if all of their domains are rejected for the auction. On the other, buyers get frustrated sifting through so many junk domains. I’m sure I missed some good domains in the silent auction because I was sorting through so many bad ones. The silent auction should be limited to .com, .net, .org, and perhaps a few other extensions if they are great domains. But .ws? I own some good .ws domains. Believe me, they aren’t worthy of this auction. By reducing the number of domains at auction Moniker will actually boost the number and prices of domains sold.
3. Reward past sellers for successful auctions. Sellers can argue all day that they set reasonable reserves for domains. But past history tells the story. When selecting domains for auction, Moniker should look at the seller’s past submissions and how they did at the auction. For example, 3 of the 5 domains I had in yesterday’s silent auction sold. That means they had reasonable reserves and were good domains.
4. Create an added mechanism for getting domains into the live auction. Many of the domains that sold in the silent auction would have sold for double in the live auction. That’s how auction fever works. I’d be willing to pay a greater commission or offer lower reserves for domains that are accepted for the live auction. Some of the domains that had no reserve in the live auction ended up selling for $10,000-$25,000. If they would have been in the silent auction they would have sold for much less.
5. Pre-sell high dollar domains to large companies. Let’s face it, the corporations weren’t at TRAFFIC buying domains. Sure, a couple probably buyers were end users, but the majority went to domain investors. If Moniker can get a few corporations to send in advance bids then it can ramp up big ticket sales.
6. Eliminate absentee fees for big buyers. The $500 absentee fee for this auction was applied to any purchase. But if a big bidder wants to place an absentee bid, why make them jump through any sort of hoops? If an absentee leaves a bid of $20,000 or higher, don’t charge them a fee. Even if they don’t end up getting a domain, they’ve pushed prices higher.
7. Eliminate any appearance of conflict of interest or shill bidding. There was some talk after the auction of shill bidding. This means that people bid on domains to boost their prices with no intention of buying. This can be done a couple ways. First, someone could jump into a bidding war on a friend’s domain to bump it up. Second, someone could bid on a domain below the reserve to get it close to the reserve to create a bidding frenzy or to create excitement. Of the $60M+ of unsold bids during the live auction, how many of them were real? The reserve categories were stated. If a domain had a reserve of $5M-$10M, there was no danger of bidding $4M just for fun, even if you had no intention of buying the domain. One buyer even suggested that .mobi fans were bidding up domains close to the reserve just to prop up the image that .mobi had value. Perhaps Moniker could sprinkle in some “fake reserves” so that people are always at risk of buying domains they bid on, even if it appears they’re well below the reserve.
The second issue here is that anyone who has a financial interest in the overall auction shouldn’t be able to bid. I’m not talking about sellers, but anyone who gets a cut of the fees from the auction.
Are these really issues? Was there really shill bidding? It doesn’t matter if there was or not; what matters is that there was an appearance that this was going on. That’s what matters to buyers. Proving one way or another is difficult.
Perhaps Monte should provide a legal warning before the auction begins.
8. Keep doing things right. With seven suggestions for how to make the auctions better, you might think I’m unhappy with Moniker’s auctions. On the contrary, I believe they’re doing an incredible job. This auction included phone bidding, which helped drive up prices. There’s also a good mix of domains, from 4 figures to 7 figures. That keeps all of us interested regardless of spending ability.
Moniker is transforming this industry. I’ll be the first to pat the company on the back when it sells $25M at an auction and starts rolling in the dough. It deserves it.
