The Fatal Flaw with Domain Auctions and the Cure to Come!

Morning folks!!

The biggest mistake some of the auction houses are making is they don’t know how to ask the right questions, they don’t know what price points are attractive to domainers and then of course they don’t choose the right domains because they are not looking at it through the eyes of a DOMAIN INVESTOR.

And a domain owner is not looking at the audience they want to sell to. Therefore we have had some lackluster auctions over the last few years. We are investors not end users although eventually we might be both. Some already are. But they know the difference in a retail price vs a wholesale price.

I have a List of TEST of questions that must be met if a domain will be making it into the auction. The auction houses are not asking these questions and thus we see what we have seen.

Listen, we all want the end user to be there and buy. And generally 1 or 2 show up and a partly prearranged sale is confirmed in front of everyone. That sale saves face. But screw face. Let’s get to making a difference.

We are selling to domainers. What are domainers looking for? They are looking for an undervalued domain that they believe has a value at a minimum 10x what they are buying it for. But more than that they are asking the $1 Million test question. Can this $10,000 domain really have a $1,000,000 value? That’s what they want. They want at a minimum to know there risk is low. The best way to do that is having really good domains that everyone knows are really good domains. That can be developed if they choose. That mean something.

The domains for 6 figures still have to pass the minimum test or it is too risky and you can use you dollars better. So a $250,000 investment has to be easily worth $2.5M for it to be a bargain, for it to be attractive, for it to sit on the shelf for years while the value appreciates to that level.

There is a “Sweet spot” for selling domains to domainers. Buying a $10,000 domain that you could see being important enough to demand $1 Million is what the audience wants. To buy it for $10,000 and flip for $15,000 is all well and good but that part of the audience won’t be driving up the price to a real value. It will be undervalued.

Having multi-million dollar domains in an auction might look good, but unless there is a REASON to be in the auction, it’s wasting everyone’s time and the “Show-boaters” come out in droves.

It’s all about the upside and what I see in most auctions are domain names that can’t pass this test because nobody understands this test. Sure it is exciting to see a 6 or 7 figure auction. But what is better is watching genuinely great names at domainers prices being put on the table and letting the MARKET drive the value. If you want end user prices you need to go to that industry and have that auction. Domainers are not going to bite unless they see a HUGE upside. Especially now. Money is tight and every purchase is important.

What’s exciting is seeing a GEM come to auction with a low reserve and starting low and letting the market give it a great value. Great value because 1 or 2 saw a great use.

There was only a handful of magical moments in auctions. The first live auction in 2005. I still remember the line that broke the ice that made the audience feel comfortable. Somebody yelled out a ridiculously low bid and the auctioneer responded, “That’s for the bid Mr. Rockefeller”. That had everyone laughing and THAT was the MOMENT history was made. We had lightning in a jar and then we had a damn good run culminating with the 2007 June Auction in New York. $12.5M

Coincidentally, this was the only auction I had hands on input. Not taking away anything from Monte and his crew. They did the heavy lifting. It’s tough work and I know what a pain in the ass it is. But Howard and I had everything at stake because the show itself was going to lose $250,000. New York is expensive and the math did not work. But I also knew the industry needed to get there. There could be a real opportunity bringing domains to New York. The entire show rested on a successful auction. A bad auction and we were out of business and $250k in the hole. Game over. This was the moment and we had to go “All in.”

So when I tell you that everything rested on the auction, I am serious. It was the entire enchilada. I was banking that domains in New York would create a stir. Would be well received. But it was only what I believed in my gut because the spreadsheet let me know what a risk it was.

$12.5M later we did it. The big gamble paid off. I just wanted to break even and get New York under the belt of an emerging industry. Mission accomplished and we had some walking money. Point is, that was the model to copy and because of one thing or another it never was.

That auction was carefully crafted as to what domains would appear when to get momentum and excitement to build. It was done methodically. We had the right domains at the right price points for domainers. We had each domain in those slots for a reason. It was done with a lot of care. Once auctions became like every day events, that type planning never returned.

This October will be the first time I am personally picking the domains along with each auction house. Each auction house has a responsibility to meet the basic guidelines we set. What you will see is a completely open auction with almost every major auction house participating with a small group of GREAT domains at GREAT prices.

And the biggest difference other than those, we won’t look like fools by starting an auction at $1M and then dropping until somebody bids $1000. Each auction will start at $1 or $1000 and quickly bid up. Even if it does not sell, we will establish “True market value.” Reserves will be handled differently as well. This will prevent showboat bidding to look cool in front of everyone or to do somebody a favor. We won’t take non existent bids. If there are no bids there are no bids and we can just move on.

The auctions will be much faster moving and exciting because we will quickly establish a new way of doing business. We have no favors to keep. We have no direct selection of the domains only REJECTION of domains that don’t fit the audience. And we are starting the push for those domains in the next few weeks.

So why pick TRAFFIC as the venue for your domains and commit early? Because our audience means business and we have demonstrated over the years that given good names at good prices the names get sold and we are capable of having a record setting auction.

It takes time to really market a domain. Each seller has a duty to HELP market their domain. Howard and I will do what we can. The auction houses will each be doing what they can. We will all be rowing in the same direction for the first time and you will see RESULTS when that happens.

There are other pieces to the formula that I don’t want to talk about right now. But I think you will see a huge difference. We will have but one auction to do in 2011. We have already begun the process behind the scenes. But the focus on one project to get it right will yield great results.

And here is a little secret. The “End user” will show up because there is enough time to do this right and not hastily putting names together. The sooner we assemble the final list, the sooner we can market.

So we are serious about fixing the auction process and we are serious about increasing all value by doing it right and restoring some credibility to the process. We won’t get it all right, but you are sure as hell going to know things have changed.

Have a GREAT Day!

Rick Schwartz

61 thoughts on “The Fatal Flaw with Domain Auctions and the Cure to Come!

  1. cleopatra

    Sounds good , but maybe this is good for”the elite domainers”.
    I think that 90% of the domainers outthere would not have a chance neither to sell or buy on this auctions.
    Most auction sites will want to speak to this 90% as well , for buyers and sellers.

  2. Francois

    You write:
    “They are looking for an undervalued domain that they believe has a value at a minimum 10x what they are buying it for.”
    If I undestand correctly, this translates to”wholeseller price is 10% of appraisal”.
    It’s the SAME ratio I suggest myself in to list names if sellers want to get the attention of domainers and this way make a fast sale.
    But after you say:
    “Can this $10,000 domain really have a $1,000,000 value?”
    Which suggest the ratio should NOT be 10 but 100 if one want wake up the interest of domainers.
    This is where I am lost for 2 reasons:
    a) Looks in contradiction with the first part of your post where you talk about x10.
    b) It’s extremelly difficult to have sellers submit domains for a reserve x10 lower than appraisal (and when this happens it’s rarely with premium domains) , but x100? It’s probably impossible!

  3. Kevin

    The fatal flaw is simply the mismatch between the sellers price objectives and the financial resources of the audience.
    If you took the TRAFFIC audience and put them at a Sotheby’s million dollar fine art auction, how many million dollar paintings would sell?
    There aren’t enough deep pocket buyers at the domain auctions. Plus, at most, perhaps only 50 truly wealthly domainers can write a check for a million dollars, without blinking an eye. Maybe not even that many. And is that how they got wealthly in domain investing? Did they go out and buy $1, $2, $5 and $10 million domains?
    People talk about”end users” like they’re clueless about domain prices. It takes 10 minutes of googling to figure what the going prices are for undeveloped domains. End users aren’t dummies. Most are way more successful than the average domainer and they didn’t achieve their wealth by being unaware of the market value of assets. Corporations especially, with all the financial and analysis resources they have at their disposal, do more research than any domainer before buying an asset.
    In my opinion, very few, if any, end users are ever going to show up at domain conference auctions. There’s been enough publicity, marketing and promotion over all these years to attract them and they haven’t responded. I think the main reason is it’s just not there way of acquiring million dollar assets, especially unproven assets being sold on their”potential” to justify the pricetag. It’s also so competitive out there now in business, most sharp companies make their moves as stealthy as possible, not buying assets in an auction room.
    I don’t think many domainers who own the real gem domains will ever place them in an auction with a low enough reserve that will enable the auction process to really work well.
    The future trend is going to be building successful businesses first on our great domains and then going for the huge paydays. We need to first PROVE that a multi-million cash flow can in fact be built and maintained on the one word generics.
    If you want to see an auction that will blow your socks off, start auctioning the premium domains once a premium million dollar business is operating on them. You’ll have a line out the door filled with deep pocket Wall Streeters, Fortune 500 companies, Venture Capital firms, etc. with mega million dollar checks in hand.

  4. Rick Schwartz

    I believe it should be a minimum of 10 fold but up to 100 fold. I look at a domain in the hands of someone that can use it the best. The flippers are the ones that domains should be at auction. They are happy with their markup and the domain investor still has enough upside to buy.

  5. Rick Schwartz

    “The fatal flaw is simply the mismatch between the sellers price objectives and the financial resources of the audience.”
    Kevin, EXACTLY right! Fixing this flaw will transform the auctions. A meeting of the minds and expectations of buyers and sellers will transform the auctions. There are about 6-8 elements that are now flawed but when put together will transform the auctions. Like I said, The”Sweet Spot” is coming and in a few weeks I will go into just that element of this.
    Many of the things you say will happen in time. I would much rather auction off a profitable web business. But good luck with that now. But in time, that will happen.

  6. Rick Schwartz

    And you won’t see”Pigeon Shit” domains that don’t belong in a PREMIUM auction. Domains must be of investment quality not just liquidating some questionable .net or .info.
    That means you probably won’t see many domains for $1000. The focus would be domains between $5k and $100k.
    You won’t see domains that have been at auction after auction year after year UNLESS it comes to us with no reserve.

  7. Jeff Schneider

    Hello Rick,
    Now you are talking turkey to hungry fans. We knew from the start of auctions that after New York something went terribly wrong. Great behind the stage information you have released. Thanks for revealing the true SKINNY on the past. I know you had to wait a while to release this information as to buffer the situation with colleagues and friends, you care about. I am sure they will understand your reasoning and ultimately enjoy the results. I know this years event will deliver. Congrats !!
    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  8. Rick Schwartz

    I wish I could articulate all the changes that are coming but there are so many because the entire approach and mindset will be different.
    Domains will be announced on or before Labor Day. Some auction houses may even announce sooner so they are better able to promote. We too will advertise domains we think are appealing and priced right at our own expense.
    The reason this will work is that when Auction house #1 gets 10 domains approved to be auctioned, they have a focus and a reason to focus and that focus will produce some fantastic results. They don’t have to do 20 different things. There job is to promote those 10 domains. Those that do the best will earn more spots going forward.
    This is a formula. A new formula with a tried and true approach. The numbers will say more than I ever can.

  9. Rich

    Lots of good points with no clear fix:
    1) No premium owner is going to sell at an auction that is going to bring 1/10th the end-user value. So, what you will see is lots of junk pretending to be premium being sold as $1. A good way for domainers with largely useless inventory to hopefully unload the inventory (e.g.
    2) As Kevin suggests, end-users are smart and they are not going to get into a bidding war for a domain. As things exist today, they will try to acquire it before any auction.
    3) The biggest problem with the auctions is that the brokers do not understand end-users. They are domain speculators who are selling to domain speculators. Successful brokers/auctions need to be run by brokers who: a) understand the marketing/branding departments of large and medium size organizations, b) have developed connections within these organizations, c) have developed the ability to create bidding action between multiple organizations for a single name. This does not exist at this time. What exists is competition between speculators who are trying to get a domain name at 1/10 the value. A zero value proposition for the seller.
    I believe what the seller needs at this time, is a good brokerage house, that understands how to sell a premium domain name to an end-user at a fair price. Arriving at fair price means multiple end-user buyers competing for a name inside or outside an auction. I emphasize this is what the seller needs and until the seller gets a fair shake any auction of any type is going to fail.

  10. Rick Schwartz

    Circumstance is what drives an auction. Your audience drives an auction. Value drives an auction.
    An auction provides immediate cash. Some folks don’t have the time to deal with a broker or don’t want to. But most of the domains will be coming from brokers themselves. They know their inventories and their clients expectations.
    People don’t talk about”Circumstance” because it is invisible. But it is the motivating factor that makes the world go round.
    A mortgage payment or 2 is one hell of a motivator when funds are tight and you have a family.
    When we demonstrate the difference people will realize it. We have the right audience, we just have not had the right inventory geared to that audience.

  11. David

    This post just shows how much your are actually out of touch with domainers and resale pricing in general. I can only point to your quality of purchases over the last few years as an example. I challenge you to name one recent purchase you expect 10-100x return on and not one you’ve lost as much on. Taking advice or valuations from someone with your track record may have been a good idea 5-10 years ago. I think you need to stop reliving the past and packaging it as a future.
    Your opinions on auctions are laiden with completely unrealistic expectations and ultimately no real fixes as mentioned. Bottom line, your expectations are yours alone and may be trapped in 1995-2000.

  12. Rich

    Hi Rick,
    You are discussing an auction of”distressed inventory”, many examples of which exist in today’s housing market. This is certainly one type of auction and is very advantageous to buyers who have cash and are able to accurately appraise market conditions – and are willing to bet that housing prices will increase at some time in the future. But this type of auction should not be confused with a Sotheby type auction where assets are not sold because the Seller is in a distressed situation but rather because Buyer desperately desires a rare and premium asset. This brings maximum value to the seller as opposed to a distressed auction which brings maximum value to the buyer.
    In any case, there is room for both type of auctions. However, I doubt there are many owners of truly premium domain names that are under distress. We shall see.

  13. Rick Schwartz

    To dismiss all the elements of the auction that we are about to change guarantees a different result. The current model is stale and broken and insults the intelligence of professional domain investors.
    If you are a flipper you buy today and sell yesterday. Sell today. Sell tomorrow. With investment grade domains you have the patience to follow how the future unfolds and your time line is significantly different.
    It’s a different game.
    You can play both. But some folks can’t survive unless they are flipping as fast as they can.
    My opinions on auctions have to be followed up by more than words and challenges. You get the luxury of posting and not have to do anything. I have the eyes of the industry and guys like you with knives in their hands to answer to.
    The status quo is what got us here and we all can agree that the auctions of late have been flawed to put it mildly.

  14. Rick Schwartz

    That’s a good way to describe it. We think we have both types of audiences and can achieve both. It is a balancing act. It is not easy.
    It all starts and ends with quality and value.

  15. David

    I have no knives for you Rick, only my opinions.
    As for me doing nothing and just using words, there are few on the planet who know the domain market as well as I imo, I speak from years of experience and millions upon millions in trades. The numbers you throw around are based on nothing more than a handful lets call them great foresight, fortunate investments and getting in early. You cannot take these examples and use them to valuate domains and potential roi of 10x-100x 10-15 years later.
    I agree completely the auctions have been a bust, the market is down, when names were flying for big money and you.moniker were auction kings years ago there was no cry of” over priced” was there! The world economy has as much to do with our market as any other (cash). The difference is as domain investors we do not accept reality for the most part. Finding serious investors with premium names willing to sale for less than 2007 is next to impossible!
    Again there is no disagreement that how these auctions operate needs to change for the most part, I simply disagree with you on how and why.

  16. Rick Schwartz

    An auction is more than just a bunch of domains and prices. If you were packing a cannon you need the right ingredients in the proper order to cause it to make an explosion and have the cannon ball not blow up in your face. If you even got to that point that is. There are elements that have been missing in the auctions that prevented that explosion. It’s not rocket science. There was no fuse at times, there was no ignition, there was no substance and sometimes there was boredom.
    And that is understandable because there is not enough hours in the day when you run auctions multiple times. It is tough as anything. A killer job. A mammoth undertaking.
    That is why we are changing that so the burden is shared and streamlined. We have been working since last year for an auction in October. That is the FIRST thing you need to do if you expect an end user to be walking through those doors. The FIRST thing.

  17. Rick Schwartz

    Fair enough. We see things differently as I believe there is even more opportunity now than before for those type returns. The Internet is maturing. The field is changing. There is also real pain and struggle out there and that allows great domains to come into play that normally would not.
    Either way, Howard and I have to meet the challenge head on and I have articulated some of the ways we are going to achieve those goals so they are not mere words. Simple as that. Stay tuned.

  18. Donny

    So many auctions that go on now. Buyers from companies/non domain investors don’t even know it’s for sale. The whole structure of domain name auctions need to change if they are to be successful for the future. I guess we should say for names in the 10k on up area.
    The hard part is when your going to sell your own name and approach a company they really can’t see spending 25k or 50k on a domain name. And your approaching them ughhh. But that is why it’s a numbers game someone will hit. The fun part of domain names is selling them.
    So we believe it takes hard work and patience to find a particular buyer for a domain name. That is if you want top value for your name.
    Auctions are good if the party is promoting them and they are buyers are given 2-3 months to think about a purchase. Most big companies take a good 4-8 weeks to get anything approved.
    The big issue is that with many of these auctions is that they are putting up a for sale sign in the desert. Nobody knows they are for sale

  19. Rick Schwartz

    “when names were flying for big money and you.moniker were auction kings years ago there was no cry of” over priced” was there!”
    The”Market” is the”Market”. The market determines the price. Not anyone else. Not you, not me. The market will bid up an under priced commodity or bid down an overpriced one.
    In those days we were selling domains like for $1.5M and for whatever millions that went for. And guess what? Give me those 2 domains today and let’s put it in the October auction and I say they sell for more, not less.
    The point is getting domains like THAT. Of that quality. Folks know they got flawless gems no matter what. They sleep great at night with purchases like that.
    We will have a combination of low lying fruit and flawless gems.

  20. Kevin M

    Rick, Another of the problems with auctions is buyers are not qualified to bid. And many buyers simply don’t pay after. I wonder how many ‘sales’ there have been where nonpayments are never even reported. I’ve had a name sell in two live auctions, one at Domainfest last year, and one at TRAFFIC this past October. And not for big money either. One for $1000, and one for $15000. (and of course there’s the 2 big TRAFFIC Miami sales that went unpaid.) The auction houses just say they can’t reach or contact the buyers after the auction. Bidders should have to put up a $500 deposit to get a paddle, that is refundable only if nothing was bought. May not be a big financial stake, but it’s something that at least shows some intent to pay for bought items, and some kinda restitution for nonpaying.

  21. Rich

    Thanks for responding Rick. This is the best discussion concerning the domain buy/sell industry that I have read in a long while. Execution of a new idea takes lot of heart and effort so … Best of luck with your endeavors!

  22. Rick Schwartz

    Kevin M
    It is a problem and a growing one at that. Folks don’t follow through on their obligations and you can’t put a gun to their head. So while this happens, all you can do is be as transparent as possible and let the chips fall where they may.

  23. Tony

    “Fair enough. We see things differently as I believe there is even more opportunity now than before for those type returns. The Internet is maturing. The field is changing. There is also real pain and struggle out there and that allows great domains to come into play that normally would not.”
    More opportunity now than before? Sahar started at 24 and was able to retire if he wanted to at 26 in 2001. Frank started in 2002 and was set for life within 6 months. People should call you out on statements like these more often. If you really believe this, sell me your domain portfolio for $200,000 cash right now and see what you can do with it two years from now. This is a 100% serious offer/challenge.

  24. Aggro

    Don’t believe the shit sold for $370,000
    Yet that sum took a group of about 10 partners to complete.
    All the”big boys” – despite talking their book about escalating domain values & whatnot – are NET SELLERS.
    They AIN’T the ones spending the big $$$ at auctions!
    Proof is in the pudding.
    Follow their actions – NOT what they preach.
    Some of these guys are NEARING SIXTY (60)!
    They ain’t immortal – they need to eventually cash out while they can before they meet their maker!

  25. Johnny

    Domain auctions outside no-reserve liquidation of junk are dead and need to be buried. Getting top of the line domains listed with reserves at 10%, 20%, 30% of end user value is a total pipe dream. I can think of maybe 5 sales in the past few years –,,, maybe 2-3 more. And those were rare recession-driven fire-sales. Domain auctions and domain brokers as we no them offer zero value to owners of top of the line domains who did not sell already.

  26. Altaf

    Hi Rick,
    Today is the maximum time we saw you commented or counter commented on a topic discussed. That way we get your maximum expert logical views over other expert views/feedback. Please repeat it. Gratefully,

  27. Tarry G

    Hey Rick,
    Domain auctions have been watered down by”rules” and the silent auction after the live auction factor.
    I’ve mentioned a few times – but clearly to the wrong people….that in order to get the true benefit of a”LIVE” and competitive auction that the domains must be the following:
    1. Actually auction worthy good domains…
    2. A lower reserve – ie a price that would NOT be an acceptable selling price but ONLY with the following other rules below
    3. NO hold by the auction house AT ALL after the auction – the domain was priced right enough (and the auction house agreed with it) AND if the auction did not bring the required bidding to actually sell the domain – then the domain (because the auction was run so well) WILL NOT SELL at all – so why would there be a”hold” on the domain post the auction.
    4. NO silent auction for domains that didn’t sell in the live auction – buyers have to know that there is ONLY one opportunity to buy a domain in the auction and that is during the live competitive part of the auction – if they wait till after the auction is over – TOO BAD its OVER. They also need to know that there is no way the seller would sell them the domain after the auction for the reserve price – because the reserve price was too low in the first place.
    Also the Seller knows that they’ve exposed themselves to a lower reserve ONLY during the live (competitive) auction part and not after.
    Rules like what I’m suggesting above will create an active aggressive bidding process. This will eliminate the potential buyers from NOT bidding on a domain they are interested in if no one else bids….because why bother – you can then try to buy it later in the silent auction.
    Unfortunately because auctions have not been run this way in the last few years – people who list a low reserve might be taking a bigger risk (at first) until domainers realize that the only way you are going to be able to buy a domain at auction is by buying it in the competitive live auction process.
    For the auctioneers – yes they would lose the advantage of”holding” the domains for 90-120 days after the auction – but really if the auction is done well with the above rules in play – if a domain didn’t sell in the live auction – when will it sell? Auctions should be run so freely and open-source style as above that they should be the perfect fast competitive priced environment to sell domains in.
    Instead now…my eyes glaze over as a seller because there is no way I’m willing to give an attractive enough reserve (for a LIVE auction) and have that be the reserve for a”silent” post auction auction. I’m also not willing to tie up any domains with an auction house for 3-6 months if they didn’t sell at the auction.
    Everything above of course has to be incorporated at once – you can’t have low reserves and also have the name be potentially sold in the significantly less competitive silent auction for example.
    It will take an auction or to run like that to make in known in the industry that auctions can be a great place to sell or buy domains. The more the auction houses”trust the live auction process” AND set the rules up so that they are holding the domains open handedly the better and more profitable the auctions will become – for everybody.
    There was a dismal domain auction some time ago – I think it was DomainRoundtable in 2008 the auction was a bust generally although great intentions by all involved – I listed with a 5K reserve – I purposely listed it really low – trusting the live competitive bidding process – it worked – unfortunately there were bidding and communication issues but the domain was one of the few that was bid up fast and ended up selling for 18K – lower than it should have at the time – but nevertheless an good example of the low reserve with a good broad and competitive domain audience.
    I listed that domain (and others) low in that auction because I had made agreements like those I’ve suggested above with the organizers of the auction.
    A combination of low reserve, good domain (in that era) and good”rules” that led to a sale.
    Also I had a domain in that auction that didn’t sell – it didn’t receive a bid (it should have!). I had emailed people that had expressed interest in that domain and told them the domain was listed in the auction with a low reserve – I told them that they should bid on it in the auction because there is NO WAY that they would be able to buy the domain from me later for anything resembling the reserve price…
    Domain doesn’t sell and they contact me 2 months after the domain auction and ask me if they can buy the domain – I quote them the price I want for it – which was the same price I gave them months prior and they said that the reserve price in the auction was lower….I agree and tell them that the reserve price was ONLY available in a live competitive bidding environment and that the price for the domain was going to be the price I quoted them. Btw – that is 60% higher than the reserve price (for an xx,xxx priced domain). A week or so later we did the deal at my price. Really.
    Yes btw – I get it, in this situation the auction house did not benefit – that happens, rarely but it happens – but REMEMBER the auction had a shot at the domain for 60% LESS than what it sold for two months later (to people that had been told to buy it in the auction)
    Tarry G

  28. Anunt

    What we need is fresh inventory of domains…not bullshit domains that keep going from one auction to another auction.
    We need 10 Top Domainers to send 3 great domains each to this auction with NO Reserve with a starting bid of $1.00
    Rick, you’re first…put 3 great dot com domains for sale…must make $1000+/month with natural type-in traffic…no reserve starting bid $1.
    Frank Schilling, then Kevin Ham, then 7 more other successful domainers need to put 3 great domains each for sale in this auction…money making domains with natural type-in traffic with no reserve starting bid $1.
    All domains listed in this auction should have a link to their traffic and income stats…atleast 3 months stats…TRANSPARENCY!!!!!
    Off Topic…
    I emailed the owner of a $100k+ domain name for sale that he had in the domainfest auction…i asked him…how much does it making from that parking page that he had running…and how many unique visitors does it get on average..monthly…this asshole responds and says…”hmmm, i dont know…maybe 10 visitors a day and i have no idea how much it makes”…..and you fucking expect me to pay $100,000 plus for a domain and i dont even know anything about the fucking domain…Are you domainers fucking RETARDED!!!…he had a parked page…he has all the fucking stats…spit it out bitch…if it only makes $10 bucks a month…say it…you fucking retards!!!
    Anyways…calm down…calm down…back to the discussion…
    If the domain has no traffic and makes no money…and it doesnt have the stats…RICK, DONT FUCKING PUT IT IN THE FUCKING LIVE AUCTION!!!
    If 10 top domainers put 3 great domains for sale like i discussed with no reserve and starting bid $1…this auction will be self-promoted…and everyone, especially the domainers will be watching and bidding…thats how you get an auction going!!!
    Your job is to find the end-users
    and if you have great domains for sale…promotion will be very easy!
    There is alot of CASH out there right now…people ready to buy…with the recent stock market gains…people including myself are sitting on a mountain of CASH…ready to invest…but we will not buy bullshit domains…
    people want dot com money making domains that have natural type-in traffic…
    i gotta go…
    best of luck Rick!

  29. Adam

    2007 was one unique point in time . Every auction is. It’s like a storm, everything has to line up for that lightning. The conditions in NYC were far different than today. Many things have changed. I’m really not sure you can line up the stars like that again. I look forward to seeing you try though :)

  30. Carl Travis

    How do you submit names for the traffic auction Rick? Not everyone with nice generics knows the big names in the industry personally and I see no links or e-mail or anything to submit domains for review.Thanks for the info.

  31. Jeff Schneider

    Hello Rick,
    We personally believe that you have hit on many of the weaknesses of past auctions. There is every reason to believe that your upcoming event will be a huge success. Those who believe otherwise and judge from the past and not the hope of the future are wrong. You can be comforted in that. Thanks for your hard work towards improving all DOMAINERS future prospects.
    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  32. Rick Schwartz

    Domains can not be submitted directly to us. What will happen is that auction houses like Sedo, Snap, Namejet and others will be able to submit domains. We will go over the submissions and accept the domains that belong in our auction.
    Since we are not trying to tie folks up with long contracts we can focus on getting the right inventory. If there are 100 good domains with the right pricing we will use those. 50 and that is how many we will have. Strictly based on quality.
    Tarry, We won’t be having a silent auction. Live auction only. Lots of changes and streamlined.
    Thanks for all of your comments. This helps us a great deal!


    Hello Rick
    We wish you the best of luck. Whatever you try is certainly better than what has been going on for years. Auctions now are a JOKE. Think about the following:
    1. Partner with Sotheby’s. Domain auctions need publicity. You cannot do enough on your own. You are the KING but you need help. It is possible that Sotheby’s would bring out buyers no one even knew existed.
    2. Substantial money needs to be spent with brochures and marketing material specifically tailored to each major domain and sent to potential buyers. You need to reach end uers and not domainers. In almost all case No domainer can pay what an end user would. I.E.
    3. You are correct domains from 10-100K have the best chance of selling at auction. The last DomainFest auction was a disgrace.
    4. The sellers must be reasonable. This idea would be a HUGE winner. NO RESERVE, You can bid on your own domain but if you buy it back you pay a buyers premium of 10% up to 50K and 5% over 100K to the auction house. This will show who are the serious sellers.
    We would participate if we believe the advertising was good.
    This will ONLY work if the marketing is done correctly. You lock up the sellers first. You can spend the buyers premium on unsold domains in advance on advertsiing as some domains will be bought back by their owners.
    Extra money can be used by you for advertising at future auctions.
    We would try this if everyone else did. Coin and some other auctions do this and it works well.
    We work with many auction houses. THEY set the reserves because they are in the business to SELL the items. Look at all major auctions houses. Most auctions sell 75% of the items. Heritage is one of the best.
    Good Luck
    National A-1

  34. Rick Schwartz

    Richard, (National A-1)
    Thank you for that great and thoughtful post. You hit many nails on the head. And you are right, I can’t do this alone.
    What folks don’t get is that guys like you and Kevin and Franky are my target audience. I remember the days you guys would come with books in hand and knowing exactly what you came for. It was serious. I know if I hit the bulls eye with you guys, I hit with all.
    #4 is very interesting.
    Thanks again!

  35. Steve Cheatham

    10-4 Rick and the rest of the gang. This post is so long I will have to come back and contemplate it later. But I have been thunking on this prob for a couple of years.
    IMHO The auction business has been done wrong since 2007-08.
    IMO We can only sell to each other for so long and that era seems to be over. Everybody that missed the hand register era has bought what they need to build their portfolio for development. Flipping seems dead to me but I am not a flipper so I do not know first hand.
    My take on it: We need end users at the auctions. Quit being paranoid and hiding your end users from other domainers. Bring them to the auction, get them involved. They will spread the word and we will all be better off for it.
    BTW, The term”Internet Address” is much easier for them to apply to their business model and communicate to their associates.
    Drop the term”domain name auction” Invite the public to the auction for”Internet Addresses and Web Sites” on the auction day.
    2.5 cents worth. Have a good day.

  36. Mike

    Hi Rick,
    I’m that guy that wanders around TRAFFIC with badges of my pretty-darn-good names (,,,,, I’m also one of those cranky old geezers that just keeps holding on to their names. :-) This is a great discussion and reaffirms some of the things that have kept me holding the names rather than selling them off. I’d like to reinforce a few points …
    You said”If you want end user prices you need to go to that industry and have that auction.” Yup! Especially for one-word generics like mine. There’s an important choice to make before doing that though — you need to identify which industry is the best one to take the name to. For example — is better sold to the”have a beer” vertical or the”get legal services” vertical? How does that research get done? How is the decision made? Tricky, but very important.
    Kevin said”the fatal flaw is simply the mismatch between the sellers price objectives and the financial resources of the audience” and”very few, if any, end users are ever going to show up at domain conference auctions.” Yup! That’s the flip side of the earlier point. This isn’t necessarily a Bad Thing, it actually helps narrow the focus of the auction (to domain-investor buyers and the sellers who want to reach them). A narrow focus can be a very good thing indeed.
    Aggro said”Some of these guys are nearing 60 — They ain’t immortal – they need to eventually cash out while they can.” Amen! Some of us are *over* 60. The clock is ticking fersure. But that’s also an important demographic and psychographic datum. This is probably pretty close to the last shot for us geezers — we ARE worried about converting these things to cash before we die. So we’re being irresponsible to our families if we don’t get the best prices for our names. If you’re a broker, don’t beat me up for my”unreasonable price expectations” — I’m being reasonable, given my circumstance.
    You said”The flippers are the ones that domains should be at auction. They are happy with their markup and the domain investor still has enough upside to buy.” Yup! More confirmation that the auction-focus should be on domain-investor sellers and buyers. I also agree with the $10k to $100k sweet spot that emerges down-thread. I’d lean away from the high-6/low-7-figure names — for a lot of the reasons that others have stated — buyers aren’t there, domain-investors can’t write checks that big, etc. In my view, these auctions aren’t the right way (or place) to sell names like mine.
    Rich said it well”Successful brokers/auctions need to be run by brokers who: a) understand the marketing/branding departments of large and medium size organizations, b) have developed connections within these organizations, c) have developed the ability to create bidding action between multiple organizations for a single name. This does not exist at this time.” Yup! But with a caveat — I think Rich’s point is right on when it comes to super-premium names. But if I read the tea leaves right, that’s not the focus of this auction. My suggestion would be to make this clear right from the start. I think this kind of auction could be very successful if it’s aimed at the domain-investor who’s trying to buy/sell in that $10/100k range — because transactions of that size can’t support the cost of the kind of campaign Rich is describing.
    Rich also said”I doubt there are many owners of truly premium domain names that are under distress.” Yup! Those of us that are left are pretty comfortable — the distressed folks have already sold. That’s another important piece of marketing data for the community — us geezers don’t need the money, we can afford to wait until the kind of broker Rich is describing actually emerges.
    To sum up — I like where you’re headed. I’d lobby for that narrower focus rather than trying to pull in folks like me and the end-users we want to sell to. An auction with a boatload of $10-100k transactions would be completely nifty.

  37. T.J. Demas

    Hi Rick,
    Did you see that AOL now owns your old That was part of the package with Huffington Post in the recent $315 million acquisition. I think AOL should re-brand itself as (by buying my and thus control (to keep it in the USA), but it’s probably a longshot. However I’d be willing to put it up for auction on 11/11/11 via a combined TRAFFIC/Sedo co-sponsored event IF the proper marketing and advertising was put into it in advance. That’s what I’d like to see – more effort before the auctions to raise awareness and find the right buyers.
    There’s a gentleman in Abu Dhabi who paid $14.3 million in 2008 for the license plate #1 in a very competitive auction ( This is the type of potential new investor/buyer that I would like to see courted for future domain (and/or”internet address”) auctions. What is being done to attract people like Saeed Abdul Ghafour Khouri to this industry? I was new to this industry in 2007 (thanks Bill), and by the end of 2008 I had spent over $1M USD. I believe in the upside – I get it. But it’s also true that I don’t need to sell, and much like a rare Picasso I view the majority of my numeric domains as classic pieces that will only appreciate over time (like zero coupon bonds).
    In the meantime though I am trying to tie them (most of them) all together in an application related to the exceptional lie algebra E8. It’s been over 120 years since E8 was first discovered (1888 Wilhelm Killing, Germany) so it’s not going to happen overnight, but I do believe it will eventually happen. I like to multi-brand my initiative with domains like,,, and I really only need one of them, but then again I like capturing traffic (like capturing neutrinos) so for the time being I think I’ll just keep them all. Richard Branson has taught me though that if it’s not working out I can”put back” my assets (like he could have put back his 1st 747 for Virgin Atlantic to Boeing), but I haven’t seen the need to do so yet. But if/when I do, an effective/efficient domain auction format is a must – liquidity is essential to snag the big cats.
    So what’s the point of this quick message to you and fellow domainers? Quite simply – only buy what you can afford to keep and own/develop over time. Look to bring new investors into the industry who may be willing to buy domains based purely on their collectible/branding value versus their monthly traffic revenue value (those days are over). Finally, consider finding a Sotheby’s (ticker BID – I like the stock right now) or Christie’s or eBay or some well know global entity like that to partner with in an effort to expand the potential customer base and bring more attention and timeliness to major auctions globally (even if only 1-2 per year).
    Hope there was at least one small nugget in there to embrace. Look forward to seeing everyone at my 1st TRAFFIC conference in 3 years this October in Ft. Lauderdale. 11/11/11 is coming a month later – seems fitting as the correct/timely date for a major domain auction where both buyers and sellers can”make a wish” and have their domain dreams come true.
    Best regards,
    T.J. Demas – mapping the 248 dimensions of your world

  38. ScottM

    Agree with Richard and Rick. No domainer with a high-6 or 7 figure REAL category killer generic or 2-letter domain is ever going to risk putting it in a domain auction with a low reserve and risk an on-the-books asset walking out their door for pennies on the dollar.
    Those premium domains don’t belong in any traditional domain auction, and I hope a Sotheby’s or a Christie’s gets into this premium domain auction business eventually, because usually there are other valuable assets to go with a preimum domain, including registered trademarks and a matching vanity telephone number(s) which cannot legally be sold without being attached as part of some other sale.

  39. Domain Godfather

    Amazing domains :) Good to see domainers with great names
    because I’m getting sick of viewing crap domains on blogs/forum
    wish there was a network for professional domainers and you could
    only get accepted if you have cream of the crop domains.
    Your 100% correct with this point
    (If you took the TRAFFIC audience and put them at a Sotheby’s million dollar fine art auction, how many million dollar paintings would sell?
    There aren’t enough deep pocket buyers at the domain auctions.)
    Sotheby’s History
    1744, Samuel Baker, founder of Sotheby’s, held the first-ever sale under his own name.
    There are more than 100 Sotheby’s offices around the world.
    Rick I love your post about the baseball players showing roadmap for domain values.
    The same system would work for this but it’s going to take TIME! HARDWORK,15- 20 years to be getting buyers like Sotheby’s
    Rick you need to get together with people like and set up a system so you are collecting data from lots of domainers and when they become members on your sites they have the option to revive emails about auctions and in the sign up form they click the domain subjects that interest them. Also you should have the option in the form so domainers can list their domains for sale this would help you find premium domains for the auction and help you find the right buyers for the domains.
    Adultfriendfinder for domains version they have a huge database. Take your time and build the database so it’s huge. Until someone has this database auctions will keep failing.
    Only do the auction every 6 months at first so you have lots of great domains and time to build up the hype.

  40. Anders

    Auctioning needs to go where endusers are. You are absolutely right! That is not at some highclass venue full of domainers. Get programmers to set up an all platforms auction app. Get a campaign office loaded with professional salesmen. Start bombarding endusers. Independent auctions could be running all the time for everything from great names to niche names. If one gets it – others will follow. Just get going now, those of you who are sitting on funds and resources!

  41. Gazzip

    “Lots of good points with no clear fix:”
    True but this would work
    How to make a GREAT DOMAIN AUCTION:
    Convince the likes of Tucows, and all the other registers that have been holding back, warehousing thousands of domains over the years to put all thier (reg fee) names up for auction.
    Low reserve – They only paid less than $10 reg fee for them anyway so its impossible for them to lose out.
    The Result, a great auction full to the brim of willing buyers bidding like crazy… again.
    Sorted ;)
    “My take on it: We need end users at the auctions.”
    @ Steve
    Most End users don’t have any clue what domains can and have sold for now or in the past.
    I just got called”an opportunist” by a multi-millionaire Investor for not accepting a $300 offer for a two word domain I’v had for 5 years ;) I was asking $6,000 for it.
    Long way to go there.
    Without great domains at low reserves there’s very little chance of much excitement.
    Great names drop every day and go for far less than most these Auctions set their reserves at.
    Todays example would be TeenAss(c*m) – sold for under $1K

  42. Altaf

    T.J Demas said,”What is being done to attract people like Saeed Abdul Ghafour Khouri to this industry?”
    Rick, I totally agree with Mr. Demas. You concentrated to US and EU investors while ignored people having huge cash flows to invest in this industry without having much knowledge about domains. Organizing a T.R.A.F.F.I.C event in the Convention Center, Dubai, where all tools & amenities remained intact after the World Bank & IMF Conference, will pull a HUGE crowd to listen to you that cannot be imagined. Please do something to attract & educate those untapped crowds.Gratefully,

  43. Gazzip

    There’s a gentleman in Abu Dhabi who paid $14.3 million in 2008 for the license plate #1
    Ask him if he wants to buy ;)

  44. Anders

    The domain market has never been closer to reaching critical mass. The final effort to light that fire would be costly but infinitely rewarding.
    How about investing in the future of domaining, instead of just domains, with just as big investments in marketing and sales infrastructure?
    For domaining, yes that would in part mean education. But with a hardhitting venture – endusers will feel the need to educate themselves.
    We keep jabbing, when we need a knockout punch. Show them the deal.

  45. ScottM

    Monte is a great guy but I personally know people that had premium domains Moniker said should have reserves for their auction and Moniker valued them at $225,000 that sold for more than 5X that to an end-user. I know of another example where the domain was also valued at $500,000 for the Domain Roundtable auction a few years ago. The domainer owner has turned down a couple of real offers from end-users or competitors for 7X that. If you have a $2,000,000 mansion sure you can get lots of interest, publicity and buyers lined up around the block if you have a raffle or put a low-ball asking price on it. That’s what a domain auction is analoguous to for premium domains. Who would want to take that chance.

  46. Domain Godfather

    You’re the domainking so please invest some of your money
    and set up this type of auction website.
    Sotheby’s can find buyers because of their huge database of customers and they have 100 Sotheby’s offices around the world. So your way to make the offices would be the online version and team up with all the top registrars like mentioned above. Also you have a huge domainer following and I know that lots of domainers would add a banner on their website if you listed their domains in the auction.
    More traffic,More demand,
    The reason I think building the database it such a good idea is because when people are interested in subjects and the domains match
    them and help their business it’s like putting meat in front of a lions face. THEY WILL BITE!

  47. Gazzip

    “There’s a gentleman in Abu Dhabi who paid $14.3 million in 2008 for the license plate #1 in a very competitive auction”
    I would just like to ad that it was a charity auction


    A truly fascinating post and worth a second thought if one can stop there! I am impressed with your E8 concept.
    I too think it’s high time to create an alliance with Sotheby’s & Christie’s for their superb databases & wealthy resources considering the immense values of premium internet real estate.

  49. Stian Eng Holtet

    I’ve always hated the”showboat bidding to look cool in front of everyone” that’s been going on at all major live auctions. Keep the reserve hidden and start low. Great idea!
    Also, really looking forward to the next T.R.A.F.F.I.C., which will be the first show I’ll attend. :)

  50. Favorite Domains

    Really nice blog related the domain auctions.
    Many recent domain auctions were waste of time because the domains were valued at end user prices rather than for domain resellers or domainers.


    Hi Rick
    you have mentioned two groups which i would appreciate you giving clarity to, for the benefit of your readers.
    please explain your view of a”flipper” and your view of a”domain investor”
    or do you think both are the same?

  52. Rick Schwartz

    Thanks for all of your input. Howard and I will be studying all of your comments. We feel like we are surrounded by some of the smartest people anywhere and 100 heads are better than 2.
    biggie, I see it this way. A”flipper” buys”Inventory” and moves it as fast as possible to turn a profit. They are more apt not to be collectors. They have a job to do. Buy low, sell high and do it as fast as possible. Most don’t care what gems they have go through their hands as long as they turn a profit. Nothing wrong with that. This activity is what makes the world go round. They are less attached to their properties may be another way to explain it.
    A”domain investor” is a little more complicated because there are many motivations. Some to develop. Some to hold. Some as a safe haven with the dollar on the ropes and then 50 more. But generally an investor looks at it with a longer time horizon. They add to their”portfolios” to make their other properties more valuable. They too might flip depending on the circumstance. They are looking at an exit strategy. But before they do that they study the domain and learn about the market it could serve. Do tests. It’s just a different game in many ways with many commonalities and overlaps.
    But at TRAFFIC, we cater to the latter. We cater to the connoisseur. The long term investor. Folks looking for quality over quantity. Folks that would rather buy a great domain than gold or art. They can appreciate the portability and potential earning power.
    This would be a series of posts just to articulate that.


    Thanks Rick for that reply
    so looking at the”supply” side of this.
    do you see”flippers”, as the main suppliers to the auction and”domain investors” and end-users as the demand side.
    if they (flippers)are less attached to their domains, then they are more likely to price them lower, than domain investors would in the same auction or market.
    i gather that from the”point” spread you provided earlier, the (10x to 100x) ratio.

  54. LS Morgan

    don’t beat me up for my”unreasonable price expectations” — I’m being reasonable, given my circumstance.
    You have some amazing domain names, that’s for sure, but seriously. Since the value of these things cannot be fully quantified, at what point does someone in your position decide to ring the register? Have you ever considered that the seven figure offer may never come and that you are indeed doing your family a disservice by blowing off liquidity events that aren’t going to repeat themselves?
    I have no idea what sort of price points you’re assigning to your names, but I think its safe to assume they’re very big prices (naturally, since those are very big names), but is there any doubt that a mild-to-severe case of Pollyannaism might be in play?
    Merlin Kauffman nailed it in the DNJournal cover story.
    “Looking ahead to 2011, I think that there are more opportunities than ever before – however, I think there are two challenges which still stand in between most domainers and these opportunities – these challenges are greed and overoptimistic valuation of your own domains. Domainers tend to think their $10,000 domains are worth $100,000, and their $100,000 domains are worth $1 million. If we keep thinking like this, we may never take money off the table from many domains.”
    It’s a fantastic position to be in- owning names like,,, etc. That’s for sure. All I know is that if I were in your position (which I definitely am not), I would have a nuts and bolts exit strategy in mind, rather than ‘waiting for the right offer to come along’, which seems to be standard MO with a lot of you guys who got the low hanging fruit years ago and have been sitting on it ever since.
    Schwartz has made the case for ‘doing nothing’, but it won’t take much to change for that theory to be blown out of the water, leaving a lot of people wishing they had made hay while the sun was shining.

  55. Domain Godfather

    @LS Morgan
    I look at it this way, domainers who bought the low hanging fruit
    years ago are the clever ones so they know what they are doing
    most of them so waiting is fine.
    I bet Mikes traffic is going up every day on those domains.
    Mikes domains are Luxury Real Estate and they are always
    going to be worth lots of money.
    This comment
    (leaving a lot of people wishing they had made hay while the sun was shining.)
    The sun is at 6am and its going to take 5-20 years to hit it’s peak
    Look at this post in 5 years time and you will know I was correct.

  56. LS Morgan

    DomainGodfather: I agree that domains have great potential, which is why I’m lightly involved in this space, but one thing that is glaringly apparent to anyone from the outside of the domainer-bubble looking in is that mindless boosterism and a Pollyannish attitude prevades a lot of the logic people employ.
    In investing, people have to quantify everything they do, everything they say and ultimately, make their decisions on that basis. In domaining, everything is organic and qualitative, so people are prone to cheering without bothering to look at what’s really going in.

  57. Domain Godfather

    @LS Morgan
    I agree about your points about in the domaining world it’s heading
    for a bad time. I feel sorry for the average domainer investing in .co etc
    95% of domainers are going to realize they can’t make it in this business and give up and blame it on the domaining business saying it’s dead! We are going to have domain drops like never before
    these next 1-3 years
    The problem with the domaining world is we don’t have a blackbook so people can understand the true value of premium domains. Instead new domainers will come along with 40,000 to invest in this business and buy crap domains like .co
    When they could of bought 1 premium .com for that money and only have to pay the renew fee for 1 domain
    So many things are looking bad for domainers we are going to have
    to prove to clean up this business
    1 Cybersquatting – Needs to change to Virtual Real Estate Investors
    2 Blackbook guide so it’s like the bible for domainers
    3 Economy needs to get back on it’s feet
    I really hate .co because it’s so bad for our business it’s going to get even more people calling us cybersquatters and add another 5-10 years before they realize we are clever virtual real estate investors . This is going to make it even harder to bring new people into auctions willing to spend good money.
    Owning .co is like doing a crime you will never be able to relax because your feel anytime the .com owner will come banging on your door with his lawyers!
    You can dye your hair but your true roots will always come back in the end. It’s like DECORATING SHIT!
    So what I’m saying is to stay alive in this business you need great .com domains and it helps to love domaining 100%
    I know the road ahead and it’s not very nice that’s why this is the time to start building your database because people want things of free at the moment and it’s best to have it ready in the future for your market when things pick up. Please Rick think long time about this auction it’s going to take time. You don’t have to prove yourself you have already done that!


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