2005 resale market explodes with entrants of new brokers, exchanges
April 3, 2006; 02:49 PM
Domain name research and appraisal services firm Zetetic reports that the median domain name aftermarket resale price increased by 24 percent between 2004 and 2005, while the average increased only 8.5 percent.
“We all know the domain name market is hot. But even though the supply of domains available for purchase has increased in 2005, buyer demand is very strong for value priced domain names,” Zetetic Senior Analyst Keith Pieper said. “Premium priced names have not shown the same annual price appreciation, likely because the new influx of domain names are mostly value priced names from many new, main stream exchanges.”
Zetetic is an independent research and appraisal company that tracks the secondary domain name resale market. They have collected over 16,000 domain name sales transactions from over 70 resale sources since 2003.
“This market has attracted several new entrants and opened the domain resale market up to a large number of small, casual sellers,” Pieper said. “Established exchanges like SEDO and Afternic have enjoyed market dominance and relatively high average sale prices. However, leading registrar GoDaddy's new exchange has dwarfed SEDO in the sheer number of resale transactions it manages, yet on average these are smaller sales.”
Pieper points out that GoDaddy's sale transactions are likely casual sellers who happen to register their names with GoDaddy, casually willing to sell at any price. “Based on our sample of 697 GoDaddy sales, the average sale on GoDaddy in December 2005 was $692 compared to the reported average sale on SEDO of $2,558,” Pieper said.
GoDaddy grew to become the largest domain registrar in 2005 and subsequently launched a domain name aftermarket exchange service which now leads that market in volume of transactions. As of this writing, GoDaddy reported over 10,000 domain name sales in the past 30 days.
Domain name brokers are cashing in on the market frenzy and some sellers have misaligned expectations from the publicly reported domain sales transactions. “Domain name sellers often get glazed over by reading the sale prices posted at industry trade sites like DNJournal and the many press releases that are distributed each month,” Pieper said. “In reality, most domain name sales are much lower than what domain name brokers tend to reveal. Due to the commission based resale structure, domain brokers and exchanges are inherently incentivized to inflate market valuations and tend to publicly report only their top sales.”
Zetetic analyzed a random sampling of domain aftermarket sales reported on DN Journal in 2005 (excluding expired and dropped names) and compared it to Zetetic’s broader sampling of its transaction database. The median sale price reported on DN Journal was US$4,733 compared to US$900 for the broader market.
“Having a top sale published on DN Journal is a feather in any domain broker’s cap,” Pieper said. “It brings credibility and sellers looking for the power broker that can drive the highest sale price, but does very little for setting realistic price expectations in the market.”
“The real wild card in all of these valuations is the private market,” Pieper said. “There is a very secretive underground market of private domain name transactions that more than often exceed past records but can’t be publicly reported. We estimate that no more than 20 percent of the dollar volume of domain names sold are ever made public. The other 80 percent of the market value are what drive the ‘irrational exuberance’ and greed many domain name sellers exhibit. And with good reason – it’s almost impossible to know if the guy you’re negotiating with might pay US$20 million for the domain name you’re willing to unload for US$5,000.”