Sometimes Domaining Is Like a Trading Pit That Doesn’t Have Any Paper

Nov 29 2010

“Paper” is a term used in the trading pits that is used to describe outside orders that come in. It’s the lifeblood of many traders or market makers and without they would just trade amongst themselves.  Before the day of computer orders,  it took both sides to make the markets work and market makers were the other side.  The paper needed liquidity and the traders needed the money they got from making the spread.  Market makers were paid to create the market and brokers brought in the paper.  Domaining often reminds of the days when no paper would come in and everyone would just trade amongst themselves.

In the scope of things,  domain investing is a very very small community. Almost everyone knows each other by name.  There seems to be people that come and go with the core staying the same.  Because it is such a tight group, nobody wants to burn a bridge (except Mike Cohen 🙂 ) because there aren’t a hell of a lot of bridges in domain investing. Herein lies the problem.

If you want to make good money in this business you don’t want to sell to domainers.  The big auctions realize this and the result is that all reserves are set to end user pricing.  If they can get the eye of the end users and actually get them to the auction then it works well.  If they price the domains to those prices and don’t invite them to the party then it’s a waste of everyone’s time.  The problem, all the auctions are targeting the domain investors to come to the events but prices them out of their resale range.  I am all for liquidity and cash flow but it’s not my main goal.  I am not trying to sell at those prices.  I will and have,  but that’s not what I’m shooting for.

Other than buying privately, I do feel end users shop Sedo , Namejet, Afternic, and Godaddy quite often. I am only guessing due to the odd names and high prices that often show up.  Many of the names undoubtedly have to be purchased by the final user.  No doubt that Moniker has more companies on their rolodex than anyone in the world.

In short, in order to make good profits in anything you need to have investors/buyers from outside the marketplace.  Otherwise the only people that make any money are the people that own the marketplaces.  How do your reach those “outsiders”?  It’s a pretty simple answer.  Own a solid domain and they will contact you. The alternative is the 1000 year old tried and true method.  Become a salesman and convince them why they need to have your domain.

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Outsmarting the Dumb, Outworking the Smart

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3 comments

  1. Morgan

    Great post Shane and excellent points. I like the analogy you make and completely agree with you about auction pricing this year. Domainers are looking to buy domains at wholesale prices.

    Everyone I know that actively sells domains full time (not me) sells domains through offers that THEY receive. When I asked them if they’ve ever tried to actively sell one of their names they laugh and say, “why would I want to give-up my leverage?” A great domain name gives you leverage and should get offers every week.

    At the end of the day I think if you want to sell domains you have to be a smart investor and buy good domains. Too many people own portfolios full of junk (pigeon sh*t as Rick would say) that want to retire off their domains. Some people need to realize that if nobody has made an offer on your names and after actively promoting the names you get no takers than either your pricing is wrong your names suck.

    Great domains that are priced properly are selling everyday. If you want end-user pricing don’t worry, they’ll contact you! 🙂

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