Forget pay-per-click multiples. Domains are most valuable to end users.
A couple weeks ago I more than quadrupled my money on a domain name sale. I purchased the domain less than a year ago at a reseller market. I used a broker to market the domain to companies that sold the related product, and he brought in a nice five-figure sale. (I’m not disclosing the domain nor the actual sales price for confidentiality reasons.)
This domain didn’t get much traffic. Someone who values domains based on multiples of pay-per-click revenue wouldn’t have even plunked down the cash I paid for the domain, let alone four times that much. But I saw something in the domain when I stumbled across the listing many months ago:
1. The domain name is the title of an entire software category dominated by large companies such as Sun (NASDAQ: SUNW) and Oracle (NASDAQ: ORCL).
2. Although type-in traffic may be low, the term receives 5,000-10,000 searches per month.
3. Advertisers are paying $5-$10 per click for this term.
I bought the domain and watched as a few visitors hit the domain each day. It never amounted to much revenue. But an end user values a domain differently from a domain reseller. Here’s how I figure the end user viewed the value:
1. Assume the domain gets only two visits a day. If we’re paying $7 per click that’s worth about $14 to us per day. Granted, a type-in may not be as valuable as someone who clicks on our ad amongst many others, but the value is reasonably correlated. That makes the domain worth $5,110 per year in click value alone.
2. We’re battling large companies with brand recognition in this space. When someone types in this term at Google they are more likely to click on Sun’s ad than ours. That means we also have to pay more per click to get higher in the rankings. But if our domain name is the exact term that the user searches for, we can expect a higher click through rate and a better ranking. We’re currently getting a 5% click through rate for about 15 clicks per day at $7 each. By owning this category-defining domain, we can get a 10% click through rate for only $4 per click. Instead of $105 a day for 15 leads we can get 30 leads for only $120.
The company that bought this domain was smart and knew what it was doing. Other companies may figure out the slick move this company made when suddenly their Google ads are lower on the page.
“Who is this new competitor?” they’ll ask.
But it’s not a new competitor. It’s just a smarter competitor.
Basicity says
Andrew, what broker service did you use to market your sold domain? And typically what do they charge for commission? Thanks and congrats on your sale.
Paul says
Andrew, I wanted to find out who the broker was also. I own a high profile financial services name that is a monster and will be looking for an avenue to market this name to a financial services company. Any thoughts! I would appreciate any feedback you can give me. Thanks!
Editor says
Guys – let me check with the broker and make sure he’s OK with me posting his info. It may seem counterintuitive for him not to, but he’s very busy on projects. I’ll get back to you soon.
Chris Nielsen says
Nice story, and it points out something that domainers often overlook. And that is that the right buyer for a domain can result in a very nice profit.
But the other side of this is that I can take a domain like smellydeadfish.com and get more traffic per day by building good content and search engine optimization. 5 figures or even 4 figures will buy an awlful lot of SEO, content, and even link building.
myzine.com says
hoping those fish don’t give out bad smell to your visitors 🙂
Cheers
MyZine.com
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Editor says
All, the broker that handled my transaction was DomainMinds.com. Blair did a great job finding the right buyers and getting the right price for the domain. DomainMinds is very selective about which domains they take, so please don’t submit domains to them unless they meet the qualifications:
The domain name is highly-generic and represents the category-leading domain name for an important market or industry.
· The domain name generates a significant amount of traffic and/or revenue or has a clear potential to do so with minimal marketing spend.
· A list of multiple prospective buyers can be developed after analysis and research.
· The domain name could realistically be valued at more than $25,000 by a prospective buyer.
· The seller has reasonable expectations and is able to provide a price range within which an offer is likely to be accepted.
Editor says
I should also note that DomainMinds found me through the “broker wanted” section of DNForum. If you have a domain that might not fit DomainMinds criteria, consider posting a message in the “broker wanted” section of DNForum.
Basicity says
Great! Thanks very much for sharing the info. Much appreciated!
Emily Robbins says
You said, “the term receives 5,000-10,000 searches per month.”
Which tool did you use to come up with that number? I ask because I own many generic domains myself, and am trying to decide whether to renew my WordTracker subscription or try something new like Keyword Discovery..
Congrats on the sale!!
Editor says
I combination of Overture Inventory Check (which will be going away soon) and Google’s Adwords search indicator (which is just a ‘relative graph’ of searches.
Emily Robbins says
Thanks for responding re: keyword searches.
Isn’t it disappointing that Overture’s keyword tool will soon be no more?
Best regards,
Emily
Emily Robbins says
One more question with regards to monthly searches — did you count only those searches that were for the exact phrase (and only the exact phrase), or did you include searches with additional words along with your keyphrase?
In other words – if your domain was RealEstate.com, does the 5000-10000 searches per month account only for searches for the phrase “real estate”, and not include searches for phrases that included “real estate” with another word or two tacked on like, for example, “Boston Real Estate”?
Thanks again for your help with this – and for writing an article reminding everyone of the huge potential of generic domains and the short-sightedness of only valuing them based on multiples of revenue from type-ins!
Editor says
Emily, I usually count it only for the exact term.
Emily Robbins says
Thanks for your prompt response and for sharing your experience!
Adam says
Andrew are you ever going to post what the domain was ?
Editor says
Adam, I’m sorry but I can’t because of the agreement I signed with the buyer.