Domains are About Math. Division Creates Smaller Audiences & Smaller Value.


Morning Folks!



I think one of the problems and one of the biggest things domainers ignore is the size of their audience. There are 7 Billion people on the planet. But who and how many folks you target is the key between success and failure and when you divide too much, you get really close to ZERO!



I talked about the .Kiwi guy. He overestimated his market. Why? Because he forgot to divide! Since more than 6.9 of the 7 billion DON'T live in his neck of the woods, he never took that into account.



So let's start dividing domain's value and I will end with an example. The 7 billion is automatically 3.5 billion because half the world has no buying power. ZILCH! It may be a lower number than that.



But let's say you focus on the USA. 350 million. 1/10 of the 3.5 billion. We get there by division. So we focus on the 350 million now. 100 million of them have no buying power. Whatever they use and consume are provided by the 250 million. So the USA is the focus even if it is for an item for the 100 million.



So, I saw this domain today on auction. LibertyLake.com. Sounds good. Looks good. Let me see if there is such a place. Yup. Liberty Lake, Washington. Population 7700. So as a Geo domain, not so good. Is it as good as SaltLake.com? Well, probably not. Salt Lake is a metro area with 1 million people. BIG difference and a big difference in value.



Now in this example, I see something also brandable. So from that lens, it has more value than from the geo lens. Liberty Lake can be used as a variety of brands. Brands are a long shot. But they can hit big. It may be a few hundred years or more waiting for the ONLY one.



The MAIN thing I look at when weighing the value of a domain is the size of the audience, the value of the product that the audience is interested in and the profitability of that good or service. That's my basic equation. There are many other factors. That is the "Top of the Pyramid". If you get the top 3 elements wrong on ANY decision in life, you will get it wrong. PERIOD!



If you sell badges and you only sell badges to a group that has 100 members, and they buy one badge when they join, you have a hobby not a business. If you sell badges that are universal and can be used by many groups and organizations and clubs and all types of audiences, you have something much different.



I meticulously go thru each and every data point. Good, bad and ugly. What I never ever do is refer to the size of the market. Real Estate is a trillion dollar industry. Who cares?? It's meaningless. It's a footnote. It does not even rise to the level of a data point. So when a domainer or any businessman LEADS with a FOOTNOTE, I automatically know they are on the wrong path. It may be something of interest, but carries no real weight unless you have this formula in place where you can syphon X% directly from the top.



The audience is the KEY data point. Size, value, qualifications, profitability, competition, sources, location, etc. Then you drill down to the next layer of questions. The ones that pertain directly to you. How much of that can YOU harness? If Real Estate is a trillion dollar industry and you harness no sales, that trillion is meaningless. It's foolish. See what I mean?? It's about what I or you can produce. When you talk about the volume of an industry, it says you are doing $0 in my book.



The great domain name gets you into the party. But not all parties are created equal. So first you have to find the right party in the right place and have the right item to provide them. But then the rest is on us. We have to sell and we have to have the skills to sell and exploit the market or the party. If you don't understand business basics and certain things there, it does not matter the size of your audience. When we suck, we lose.



I can have 100 customers go to a car dealer. One salesman will lose every single one of them. Another might close every single one of them. They both had the same opportunity and they both had the same audience. But one pissed away the gold that came and the other guy got the gold. They both did equal work. One was rewarded the other made zilch. Isn't it time to WAKE-UP??



Maybe the guy that blew thru 100 customers just asked "Are you going to buy a car from me right now for $30,000." Of course they all said no. But in a way, isn't that what a domainer does? He buys a domain and 30 seconds later he has it posted EVERYWHERE! Desperate and Foolish.



Compare that to the other salesman. He will introduce himself. He may offer some info to start a conversation. He might ask some questions. He may find out things that become helpful in making the sale. He provides a sense of security because he seems knowledgable and confident and seems in no rush. He's not pushy. Voila, he casually makes the sale. No fuss, no muss. The other guy is too busy complaining how bad business is. The other guy is just not good and belongs in another job or he is just a fool that will never learn. The definition of being stuck.



So, on one hand, it is the size of the audience and the other it is how you work that audience. How you understand and approach that audience.



And we can look at it a different way. Two used car lots right next to each other. one guy selling and the other guy struggling. This happens in every industry. It is universal.



The size and profitability of your audience is the key driver of domain value. If that good or service can then be easily sold on the Internet, it has more value. Value comes in so many different forms. That is why Estibot and Godaddy and any other outfit that uses an appraisal tool is folly. And if you are a domainer and you use those tool, you are a FOOL! If you rely on these tools in any way, shape or form, you are in the wrong business. Don't take my word, just look at your bank account.



Learn math and stop depending on 3rd parties with motives to educate you about domains. You have to have some GUT INSTINCT in anything you are going to be successful in or any career. GUT! That is not something you learn. It is something natural or acquired. They can't teach that in college. Nor can they hand you a diploma that says "Dr. of Common Sense". This stuff is so simple, no wonder geniuses can't figure it out!



Rick Schwartz




17 thoughts on “Domains are About Math. Division Creates Smaller Audiences & Smaller Value.

  1. Mike

    “This stuff is so simple, no wonder geniuses can’t figure it out!”

    I think this might just be my favorite quote from you!

    Reply
  2. Marshall

    Hi Rick,

    What do you think of using billboard metrics when buying a geo-domain name?

    I reside in a borough of Williamsburg, Brooklyn where the local downtown has a population of 190,000 which doesnt seem big, YET,…the billboard spend ranges from $8,000 to $12,000 a month.

    When assessing geographic domains can billboard be used as comps?

    Reply
    1. Rick Schwartz

      All forms of advertising and overhead can and should be included in comps.
      However, my knowledge of billboards and rentals is limited.
      The best way to see if it is effective is if the billboard keeps getting renewed by the same advertiser or is there a new one every month. Does the billboard ever sit empty? What are they advertising? etc.

      Reply
      1. Marshall

        Thank you for the reply King. I will keep investigating as I am thinking of pulling trigger on this geo name. The Billboard is always occupied and goods/services range from Lawyers to McDonalds. That said, the guy at Larimer [Billboard leasing firm] says the pricing is predicated on 200,000 eyeballs a month. I recognize it will take time [if ever, as Id have to build out relevant content] to accrete that type of traffic from the EMD geo domain. Development in 19′ aint an easy thing for sure. Thx again for everything you do, sir.

        Reply
    2. domain guy

      no a billboard is not a reliable comp. Billboards are leased using the daily/monthly count of drive by traffic. Also it is pretty difficult to install a new billboard, row, commercial ground lease, one sided or two sided billboard, size of billboard etc…A 12k monthly billboard will have way over 100k drive by cars daily.

      Reply
  3. Jay

    Keep it coming Rick. i learned the domain business from you and your internet interviews. people need the meat and potatoes of domain names. listen up folks you are getting priceless information here.

    Reply
  4. Reuben

    What purpose will this math in domaining serve if/when none of the top 500 websites worldwide is built using a premium domain name, if/when Godaddy, Namecheap, hostgator, bluehost are doing much much better than DOMAIN.COM, DOMAINS.COM or DOMAINNAMES.COM, if/when Carvana.com, Cargurus.com Autotrader.com are doing much better than CARS.COM, if/when Amazon.com, Ebay.com are doing much much better than Buyorsell.com or Buyandsell.com, if/when Realtor.com, Remax.com, Movoto.com, century21.com are doing much much better than Property.com Properties.com, the domain names that I think you sold and maybe with you owning some stakes there, if/when even the owner of Uniregistry.com, Frank schilling, one of the biggest domain speculator, refused to buy a premium domain name for his domain registrar company by preferring to use a made up domain name (Uniregistry)? What purpose really will this math serve in domain speculation business if/when there are so many alternative domains names for the end-users?? In fact, for end-users, the alternative in finding a good domain name for his/her project is endless, taking into account the examples I above gave you. Don’t you think this is the real reason why the vast majority of premium domain names are parked or (un)(under)developed? Because I think the illusion and excessive and unrealistic hope to make profit or a lot of profit easily, which is the real driving force of this business, has some some limits. It got to a point where this business became exactly as gambling/lottery business. You need to be very very lucky to sell with a profit, except if you are one of those who were there when this thing started and hand-registered premium domain names or bought some on the market at very low price. On Namebio daily sales report you can see how people are losing as most sales show loss. I don’t think it is because they are not applying the math you are talking about that all these many domainers are selling at a loss. There just no end-users and illusion has a limits. Even fish get smarter to be fished when many of his relative disappear. No business can be sustainable if the product being sold is just changing hands among investors/sellers. Rick is trying to come up with a lot of excuses, but the reality is that end-users are avoiding premium domain names because they are too expensive when they are have many alternative domain names for very cheap. You must be lucky to find a nice guy, a domain name fanatic, who does not care, not end-user, to give you a decent money for your premium domain name. This stage where domain name business has gotten, that is, the stage of a domain name being bought as memorabilia, with no practical use, will pass, then domain sale (with profit) will die.. You will have to sell it for the price that the end-users are comfortable with, and that is, selling with no profit, and that is, if domains will still be useful in that time.

    Reply
    1. Johan

      Have you heard about Hotels.com? Cars.com, a large business with $100+ million/yr net profit. Business savvy+Great domain name! = Match

      EMD, Brandable or whatever. You can make it work. You are partly right. But I will argue that it’s easier to brand a one word domain name. Like Care.com, Hotels.com, Cars.com.

      By the way, heard of Booking.com? That business is $2 billion a year in net profit!

      Now, what is your marketing budget? How much funding? $1 million, nothing or $200 million?

      Everyone can be king when they have $50 million or more to spend on advertsing, PR and what not.

      Reply
  5. Johan

    I had decent gut today. As I did a search with Godaddy for 123Audiobook.com and found it avaiable and possible to handreg. By using Domaintools.com, I found it was a deleted domain name.

    I try also to ballpark figure market size, but I also use kwfinder.com(recommend) for search volume and CPC. Those are important for EMD’s and PMD’s domain name.

    Not sure LibertyLake.com makes sense to an end user. Unless you were turly serious about “wait 100 years.” =)

    I made an example a while back at NamePros for ThickCar.com. A domain name that doesn’t make sense to hand-reg. But domain investing newbies are experts at regging domain names that barley make sense.

    Amyhow, thanks for the insight king!

    Reply
  6. Bar

    I didn’t understand the car salesman analogy at first, but the more I ponder it, the more it makes sense.

    I’m writing this from the perspective of a new domainer who invests in “decent” to “pretty-good” domain names (not at the level of great, ultra-premium names where you are). Not in the black just yet, but close.

    98% of domaining advice (you’d be in the 2%) is to put up BIN and list it everywhere. It seems logical because it would increase your chances of selling it, wouldn’t it? If most sales (volume) happens in the 2-5k range, and most buyers don’t want to haggle or negotiate, then why not?

    When you’re dealing with ultra-premiums and the leads are flowing in, then it makes more sense to take the approach of “laid back” salesman. You have all of the negotiating power when you don’t need to sell.

    Selling a $5K (according to the “tools”) name for $100K seems incredibly unlikely. Is that what you’re recommending though? If a name is good enough, remove the BIN and learn to sell better with the leads that do come in?

    Reply
  7. Wolfgang Möcklin

    A thing in between is the Brandbucket.com marketplace. They enforce the condition that the domains aren’t listed on any other marketplace. So the domains are presented, inclusive logo, and potential buyers are getting an idea that the domains exist as possibility at all, in opposition to brandables out of sight because they are, by combinatorial multiplicity, often too fanciful to be discovered passively, at least in regard of most potential buyers. For generics it’s taking away the work and frustration to find out if the desired one is available for sale at all – there’s a squeeze effect on the availability of good short dotcoms taking place right now as we know. As result, domains on Brandbucket on average have a sell-through rate much higher than on other marketplaces (Disclaimer: I don’t have any names listed on Brandbucket right at this moment).

    Reply
  8. Ben Deschenes

    “no wonder geniuses can’t figure it out!”. Nobody can disagree.. they always take simple stuffs and make it complicated. And, it s not like they were able to figure out all the spying and corruption online. You should all go visit http://www.z.quebec

    Reply
  9. Wolfgang Möcklin

    There’s also the reverse math: multiplication creates higher value and bigger audience. Multiple desirable factors embodied in a single name – can eventually – increase value exponentially. Constraints create scarcity and scarcity correlates with value. A big problem might only have one solution. The bigger audience prefers some degree of fancifulness. Take Coca Cola, for example. Who would want to drink a “CC” ?

    Reply
  10. Jose

    You are very right in this post, over the years I have valued very much the audience that can get to have a domain name because if what you buy in false is like putting bad is standing on the stairs and if the noise is strong your public Nearest neighbors, sellers of other stores and if the fall is bestial the next day you appear in all local news.
    More audience luckily in a false fall, by a bad domain.

    I can now write that from July 2018 until today I have the best domains (.com) of all my 10 years as Domainer.

    Start to put my five senses in finding what I want for each one of my projects and online businesses, such as having studied advertising and market strategy to get the targeted that more interest for a product and service or products and services, work to have a lot and many hours of work to achieve my purpose.

    Audiences are the best asset for a domain to live, many years and when this lose the audience to sell is a premium domain the main objective is to have audiences of its target and advertising in different formats sold to your own competitors better impossible, this is the strategy of what is also impossible.

    Happy Day. Jose.

    Reply

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