Unsure of how to price domains for end-users? Well, after having overseen our 150th end-user sale since September in recent weeks, we have decided to put together a “cheat sheet” that domainers may safety rely on to decide how to price their domains when approaching end-user prospects. These are the sorts of figures you shoot out once you have e-mailed your initial pitch and your prospect has responded asking, “how much?” or “what’s your price?”.  We have discovered that experienced domainers who deal with end-users regularly employ the below pricing structure, but we have yet to observe this price curve publicly disclosed until now.

Below are the top criteria you should consider in pricing your domains. We list them here in descending order of importance:

• Annual revenue of the company you’re selling to; company size (both these statistics may be available on Manta.com or on the company’s website)
• Market capitalization and/or type of industry in which the company operates. Advertising firms and software companies are far more amenable to purchasing domains than, say, musicians and bar owners.
• Strength of the company’s web presence. Is their site professionally designed? Does a large portion of their revenue come from online sales?
• Breadth and depth of your domain’s end-user candidate pool: how generic is your domain name? How many potential candidates do the obvious outlets (Google / Yahoo! / Yellow Pages) highlight for that domain? Has any candidate already expressed interest in your domain?
• How badly would the company you’re pitching to want your domain? Is your domain a distinctly superior version of their own domain (Company.com vs. their current CompanyGroupLLC.net) or a core product they sell? If so, you have major advantage.
• Is the company advertising on your domain’s keywords, or very similar keywords?
• The company’s Alexa / Compete.com rankings. Does their site receive numerous new visitors on a regular basis, or do they only operate regionally and advertise primarily by word-of-mouth?
• Google search volume & PPC of your domain’s keywords. If a company you pitch to expresses interest in your domain, you can harness these Google figures to explain, in purely logical terms, why your domain name represents a lucrative investment. For example: “Expressions containing ‘diesel filters’ are Google-searched 118,800 times per year according to the Google AdWords Keyword Tool, and ‘diesel filters’ itself boasts a high PPC bid of $1.50. Whereas many advertisers are paying roughly this amount for their Google sponsored links, owning DieselFilters.com would secure you a permanent spot amongst Google’s top organic matches for the term. Even 500 hits to your landing page per year would effectively recoup you that $745 cost.”
• The company’s longevity, which you can frequently estimate using their Manta.com, whois info, or level of professionalism in their website’s design. Companies that have passed the test of time can more likely afford to purchase your domain than newcomers to the market who, in all likelihood, have yet to reach profitability.
• Level of professionalism / interest in the company representative’s reply to you. Their language and signature are often indicative of how serious they are about purchasing your domain and how large and entity you’re dealing with. Also consider the medium over which your prospect responded (e-mail vs. phone). SMBs and large corporations who inquire re: your domain over the phone may feel a strong sense of urgency about purchasing your domain.
• Miscellaneous properties of your domain name, such as: Number of TLDs taken, past usage (see archive.org), age, visitor traffic, etc. While many “smaller” end-users have no clue what these attributes mean, you should use them as chess pieces during negotiations with end-user prospects who understand terms like “search volume” and “PPC” — and yes, significant portion of business do

.

• Whether the company owns many other domain names. If they do, it indicates they hold a keen interest in securing their brand and, in many cases, owning domain names corresponding to the product they sell (e.g. Toothpaste.com => Crest). If their are domains are similar to the one you’re offering — e.g. you own the .com version of a .net they own — more power to you.

Generally speaking, you should price at:

• $50-$149 when selling to non or minimally revenue-driven entitles (blogs, academics, bands, artists, etc.)
• $150-$299 when selling to tiny businesses / nonprofits (1-2 employees, <$50K annual revenue)
• $300-$499 when selling to very small businesses (3-12 employees, $50K-$200K annual revenue)
• $500-$999 when selling to small startups / developing businesses (12-40 employees, $200K-$1M annual revenue)
• $1000-$1999 when selling to SMBs (40-150 employees, $1M-$25M annual revenue)
• $2000-$3499 when selling to large, well-established companies (>150 employees, >$25M annual revenue).
• Mid-high $X,XXX (and possibly even $1X,XXX in absolutely exceptional cases) when selling to an end-user prospect who represents a large enterprise (>1500 employees, >$1B annual revenue), you’re pitching a generic, premium domain (>2000 EXACT Google searches/month, >5/10 advertiser competition, and >$1.50 high CPC if a .com; >100,000 EXACT Google searches/month if a .net), AND either your prospect advertises heavily on your premium keywords or you have tangible prior evidence to suggest that your prospect’s core business surrounds your premium keywords. An example would be if you owned SprayPaints.com and your prospect was a multi-billion-dollar spray paint manufacturer with a splash page on SprayPaintsOnline.com. Domains plus prospects meeting all of these criteria are extremely rare and, to notch such a sale, you must take pains to approach the correct decision maker.

But you still MUST consider all of the factors mentioned earlier in selecting your price within these suggested ranges.

Again, these ranges apply only if you are approaching the end-user prospect. If it’s the other way around, ask your end-user to make the offer. If that figure doesn’t satisfy you, double the corresponding range in the above cheat-sheet and counter with the resulting amount.

Another important tip: Choose a round, even-numbered price figure and subtract $5 from it. A $495 tag looks a bit less intimidating on paper than $500 does.  Retailers use this trick everywhere you look.

If you’re fortunate enough to own an exceptional product/service-related one-word .com such as Headphones.com or Paper.com, you definitely should not approach potential end-users offering it — not directly or with a “buy it now” price, anyway — unless you’re desperate for cash. Sales managers representing major industry players will eventually come to you and negotiate. This is how $XX,XXX-$XXX,XXX flips happen.

This entry was posted on Sunday, August 9th, 2009 at 1:48 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.