I recently found my self in a position of negotiating the purchase of a domain from a domain reseller (or “domainers” as they are commonly referred to as). It is one of those outfits that buys up domains in bulk to resell them at a huge markup. Before I contacted HugeDomains I googled around and could not find much in the way of specifics on how to negotiate with them. I was not even sure if they negotiate at all for their domains. I am writing this article about my experience buying a domain from HugeDomains.com in the hope that it will help someone else buying a domain from them. My purpose is to try and document as much information as I can about the transaction.
First a bit of background about HugeDomains.com. They are a relatively new outfit which started getting into the domain reselling business around 2006. The company behind HugeDomains.com is TurnCommerce.com operated by Andrew Reberry. Andrew’s company is also affiliated with the domain registrar NameBright.com. All of these companies are located in Denver, Colorado. The company TurnCommerce has an A+ rating with the BBB (as of November 2010). While you can disagree with their business model, they seem to be a reputable business. I can state that my interactions with the company were entirely professional, and once a deal was reached the transaction was processed quickly. We had the domain in our possession, transferred to my preferred registrar within 3 days.
The Value of a Name
Figuring out the value of domain names is tricky. There are lots of factors which can influence the value of any particular domain name. Here are a few general ones:
1) How short is the name? People like shorter names because they are easier to remember and quicker to type.
2) What is the potential business value? If the name is obviously linked to a product or service that people are looking for then its value is higher.
3) What extension is it? For whatever reason everyone want’s a “.com” domain name. All other extensions are worth a lot less.
4) Is the name brandable? Short or long, some names are easier for people to connect with a concept or business.
5) Does it contain weird characters? Things like dashes or numbers in strange places detract from the value of a domain.
6) Are there other alternatives? If people can choose something else for cheaper that also works, then the value is lower.
At the end of the day value is completely relative. How much a domain name is worth to me is different that what it is worth to someone else. HugeDomains.com and other resellers have to walk a fine line trying to figure out the market price for a particular domain. They try to figure out for someone who is interested in using this domain for it’s maximum potential (i.e. building a business on it) how much would that person be willing to pay for the domain. It’s a hard thing to do and the success of their business depends upon it.
We were in the process of setting up a new website and needed a domain name. Unfortunately, it was already taken! HugeDomains.com already owned it and wanted $1,495 for it. In my opinion that’s an outrageously high sum of money for this particular domain name. Their website offers a one click buy button for the domain at the full asking price. Since we weren’t willing to do that, I sent an email inquiring about the domain to see if they even negotiate. Around a month later we received a reply from Christian, on behalf of hugedomains.com, he invited us to submit an offer for the domain.
At this point we needed to figure out how much we valued the domain. We were certainly not willing to spend the full asking price for the domain and after a long conversation about it we settled that our maximum amount we were willing to pay was $700, but that we’d make an an initial offer at $400. We received their reply to our initial offer very quickly, just a few hours later. The reply stated that HugeDomains won’t accept less than $500 for any domain that they sell. It then goes on to say that for domains in the $1500 range they typically accept offers in the $800 - $1000 range depending on “certain” factors. What those factors are, I have no idea. At they very end Christian adds one more wrinkle stating that our next offer would be “final”, what does that mean?
After receiving the reply we were unsure of what our next step should be:
First, I had assumed that the negotiation was going to be like a car, where you say a number, they reply with a another number, etc. This continues until you reach a mutually agreeable number or you decide to part ways. His email indicates that we are making a “final offer” possibly meaning we could not make future offers for some amount of time. We didn’t know.
Second, he states that they would not accept offers for less than $500. I don’t know if this is something he just added this to get us to increase our offer or if this is an actual policy they follow.
Third, he presents a new price range ($800 - $1000). If he’s voluntarily offering this information I am pretty sure it must be higher that what he actually thinks the value of the domain is. We immediately feel comfortable that we will eventually get the domain for at most our maximum value of $700. But the question is how much lower will he go?
As I saw it there were three options, 1) stick with the current $400 offer, 2) increase it to $500 the possible faux minimum, or 3) go straight to our $700 maximum. At this point we consult with several other co-workers having an engaging discussion on the best negotiation strategies to maximize returns. We had fun running through several scenarios and trying to predict what their response would be. However it boils down to the simple fact that we don’t know enough to predict their response or find the optimal strategy… it’s just a guess. In the end we decided that we would increase our bid to $500. Our plan was that they would either accept it right away or we would wait a few more months and try again at a slightly higher amount.
Our $500 offer was accepted right away. The domain transfer proceeded smoothly and everything worked just as expected. Happy ending, and we’ll have our website up soon.
I’ll never know if I should have stuck to my original offer of $400. I don’t know if they really have a $500 minimum policy or not. I am inclined to think I made a mistake and they would have taken the $400 offer. However I am glad that I didn’t jump immediately to my maximum bid!
Lastly, HugeDomains.com likely made a lot of money, even at the lower offer of $500. The prices that registrar’s pay for domains is fixed by ICANN at $6 for a 1 year registration. However, we don’t know how much it costs them to acquire the domain initially nor do we know know the overhead of employing staff to handle negotiations, etc. It seems reasonable to assume that they picked up the registration for relatively cheap from someone else dropping their registration and I doubt their overhead costs for a small operation are that high. The business also operates on high volume with multiple hundreds of thousands of domains in their inventory. Factoring all these things in, it seems to me that their business model is highly profitable with extremely high markups.
January 21st, 2011: The article was revised at the request of HugeDomains.com. I also took the opportunity to correct several grammatical problems and cleanup the article a bit.
September 5th, 2015: Removed the last name of the representative from HugeDomains that I interacted with from the post at the request of Andrew Reberry who noted that he no longer works for the company. His last name was also removed in all the comments on this post and replaced with underscores.