A win-win for GoDaddy and most bidders.
A lot of people are frustrated with the bidding process at GoDaddy when it comes to closeout auctions.
The idea behind closeout auctions is smart. If no one bids at least $12 for a name during the regular GoDaddy expired domain auction, the domain goes to a Dutch auction where the price starts at $11 and decreases by a dollar a day until it hits $5.
Closeouts allow GoDaddy and its expired domain partners to get something for a domain even if it’s not worth the $12 starting bid price.
But how things work in reality is very different from how they work conceptually.
People don’t want to get into bidding wars in auctions. If no one else has bid on an expired domain as the clock winds down, they (or their computers) stand ready to ping GoDaddy the minute the domain goes into closeouts so they can get it for $11 rather than what is likely hundreds if they place a bid during the regular auction.
Think about what’s happening here. An auction will expire with no bids at even $12, but there are sometimes 5 or more ready buyers who would be willing to spend $100+ on the domain. The point of auctions is to sell things for the market price, but that’s no longer happening in these auctions.
That’s bad for people that don’t have automated means to snipe the closeouts. It’s also bad for GoDaddy and its partners because they are leaving money on the table.
The solution is fairly simple: raise the starting bid for closeout auctions.
Instead of setting a buy now price below $12, set it much higher. I’m not sure what the right number is. Maybe it starts at $75, drops to $50, then $25, then $10 and drops a few bucks after that. I know that I’d be willing to pay $75 or more for many domains that close with no bids.
Raising the price will have two effects.
First, people will be more willing to bid in the regular auctions rather than wait for closeouts. The potential savings of waiting won’t be as great.
Second, GoDaddy and its partners will make more money.
The only people who will lose out are those that have perfected their systems for sniping closeouts.