Five percent domain commissions aren’t sustainable

Namecheap’s Spaceship raised its fees. It won’t be the last company to do so.

Last week, Spaceship changed its commission for domain sales from 5% to 10%. The change came after a very brief test of charging the buyer a 5% commission on top of the seller’s commission.

Many domain investors are understandably frustrated about how Spaceship did this with no notice. (In fact, it still hasn’t sent an email to sellers as far as I know.)

But I don’t think the big headline here is Spaceship changing commissions. It’s the fact that domain investors have gotten used to 5% transactions, and this is not sustainable.

After GoDaddy acquired Dan.com, it raised commissions from 9% to a minimum of 15%. Paul Nicks, then with GoDaddy, stated that the 9% commission wasn’t sustainable. It was good for growing market share, but not for making profits.

Since then, many players have entered the space with low-cost options for landing pages or payment processing. Sav.com has 4% landers, Unstoppable has 3%, and many players offer payment processing/transaction processing at about the same price.

Let’s not kid ourselves: these companies aren’t making money on these transactions. They are using the low fees to attract customers.

The competition is great for domain investors, but eventually the dam will break. Companies can’t do this forever unless they are making money on other products and using it as a loss leader. But… many of these companies are also selling their other products at or near cost, too.

Last week, Efty’s Doron Vermaat admitted as much in a post on X. He said the company is subsidizing Efty Pay with its SaaS business and that the 5% fee is a play for market share. He said the low fee can’t last forever.

In many cases, companies want to grow large enough that another business acquires them. If this doesn’t happen, they’ll eventually have to raise prices.