Why is your domain so expensive?

“Why is your domain so expensive?”
Just one example of the various ‘shocked’ responses to prices given in reply to inbound domain enquiries. Many examples are not suitable for public broadcast.

Reality

The hard truth for domain investors is that most people in the broader population have a limited or indeed non-existent understanding of the domain aftermarket. It also the case that people want to pay as little as possible for acquisitions, or at the very least not more than what they believe is fair. These factors combined explain the large volume of offers at $200, $100 …or even $10 (that was a recent offer and a new personal record, at less than half of the .au registration fee!).

It is a long road taking someone from no understanding of domain values, to at least some appreciation of market value. It can (and does) happen, but most of the time you will not be able to both educate and close a sale with the prospective buyer. Sales are much easier when the prospect has at least an elementary understanding of asset value, otherwise it is entirely down to your communication and sales skills! Stay tuned to Domainer.com.au and we will help you develop the skills you need to increase your sales conversion rates.

Many prospective buyers will see you as some kind of ‘snake oil’ seller and may even close the interaction with quite direct indications of exactly what they think of you. If you are just starting out in domain investing, my advice is to develop a thick skin.

Responding

Given the odds of success and the old adage ‘time is money’, it is in your best interests to not devote inordinate amounts of time to dealing with people that are highly unlikely to convert to a sale. With that said, $100 offers can turn into $3,000 sales, so ignoring these prospects completely could mean missing out on additional revenue.

So what is the solution? Respond to every enquiry, but allocate your time according to the potential for a successful transaction. A good approach is to put together some short, well written ‘template’ responses for the ‘low-ballers’. This way you can quickly tailor the response as necessary and then flick off a reply. You can tweak the templates over time as you find out what works best.

Reasons why the price is more than ‘reg fee’

Not all of our readers are domain investors – in fact, you might have even been sent here after making an offer on a domain! 😉 So, with the ‘customer’ or ‘non-domainer’ in mind, here are some of the reasons why my/their/our pricing is more than you might have expected:

Domain names have value

Domains are business assets that can deliver a huge competitive advantage (which is why all the great domains are already registered).

A good example is CarLoans.com.au. This Australian company switched from a brandable domain ‘Beep.com.au’ to the category-killer domain ‘CarLoans.com.au’. The results of their rebrand were staggering, with turnover going from $60 million to $100 million in just five months.

The company recognised the value in a great domain and achieved explosive growth for their business as a direct result of buying CarLoans.com.au.

Here are some quotes from the company founder:

We have not done anything different, we’ve only changed our domain name and that has seen this huge growth for our business.

Read the full story at AusRegistry.

By having the best domain name, people naturally assumed we were the biggest and the best, but even I had no idea of the immediate uplift we would experience. Every conversion metric we had increased. We got more website visitors for less, more leads from those visitors and, ultimately, more sales. We no longer had to educate people what ‘beep’ was, as our new domain name CarLoans.com.au was literally descriptive of the business. No explanation was required. Overnight, we became a major player.

Read the full story on StartUpSmart.

Domain names cost money

It is clear that many people see the $25 registration fee for a .com.au domain and then have expectations that the base cost for all domains will be of this quantum. The reality however, is that many of us pay hundreds or thousands of dollars to acquire domains in the aftermarket.

The acquisition cost is also just one component of the total costs incurred. As with any business, there are other overheads.

For example, inventory management takes time and other resources and so has a cost. Domain renewals, marketing, transaction costs, taxation, assets across the portfolio that never sell or sell at a loss – all further costs to be accounted for. I run a monetisation platform and marketplace for my portfolio and naturally there are development and hosting costs associated with this.

Commerce involves making money

Time to ‘get down to brass tacks’ – you want the domain to help you sell products to customers, which will make you money. That is how commerce works, it is a beautiful thing. When I invest in a domain and incur expenses in doing so (see point above), I too have the expectation that I will make money.

Consider for example, a property investor that wisely purchases inner-city property over a number of decades, would you expect them to sell their assets for ‘cents-on-the-dollar’ in a healthy market? I suspect not and neither should domain investors be expected to sell their investments below market value or indeed at a loss.

Property investors buy property ultimately to make money, otherwise they just have an incredibly expensive hobby. The same is true for domain investors.