POINT #1. KNOW THE PRINCIPLES TO DOMAIN VALUATION
- Chris started to talk about the domain valuation fundamentals as the heart of the business, center of profitability, center of branding, and center of brand equity.
- He said that it is the heart of what they do as domain investors or as domain brokers.
- If you get the domain valuations wrong, it’s either you sold your domain too low or you priced your domain too high.
- He said that if you get this wrong, you go to your board of directors and you say you want to pay x when it’s really xxx then maybe, your domain is worth in the millions.
- You got to understand the principles behind domain valuations and it’s not an easy topic.
- It is the fundamental reason why there is arbitrage and why you can still buy a domain name for $20,000 or $50,000 and you can turn around and sell it for 6 figures.
POINT #2. KNOW WHAT YOU ARE BUILDING
- Chris’ view on domain valuations is threefold: raw equity, brand equity, and perceived equity. Each of these buckets is going to increase the value for a domain name.
- com as an example sold for $30 million dollars. Why did it sell for $30 million dollars? Why was this one of the best and biggest domains sold?
- Chris said that it was sold because of perceived equity. The guy who bought it was a billionaire and for him $30 million was just like going to McDonalds.
- Perceived equity is knowing what you are building. The billionaire knew the fundamentals behind buying voice.com and he knew who his competition were, like: Facebook, YouTube, Twitter, and Instagram. The billionaire knew that he had to have simplicity and clarity to his brand to compete at their level.
- The raw equity is that there is a lot going around voice.com, but is there a lot of people that are putting their money behind it?
- The billionaire has a lot of brand equity because there is a lot of company that are in an industry that voice.com would’ve been a great fit.
- These are the three pillars to domain valuation.
POINT #3. WHY DO PEOPLE BUY A DOMAIN NAME?
- Chris goes to saying that often time, what we lose sight of the domain history is “why do people buy a domain name”?
- Chris explains that one of the hardest things about domain names is that there are so many different variations. He gave examples like having 1 or 2 in the domain name which could increase or decrease the value – singular vs plural. This is like apples and oranges. One can represent the industry or one can be a brand.
- Domain valuation is the heart of this process.
- The example he gave were hive.com vs hives.com and twist vs twisted. Both could be brands but there is a massive difference between even 4 letter words like what is that the commendation to that word.
- There are 4 strategies why people buy domain names. For macro strategies, the reason why people buy domain names is their brand. There is a brand marketing or defense of a nature.
- What is the value worth and when people come in to you to inquire or make offers, what is their top?
- In negotiation, you are trying to find the buyer’s top, and the buyer is trying to find your bottom. There is a gray area is where the fun happens. Example: the buyers top is 350 and your bottom is $150; in that area, there is the gray zone and that is where negotiation happens. You want to think about this when you want to get a deal done.
POINT #4. IT’S ABOUT THE BRAND
- Chris said that the biggest domain that have sold become brands.
- Healthinsurance was sold for $8 million. It has a lot of characters, and so you may ask: “how would you value it and what will it be on the scale? “Chris was in that process.
- We forget that it’s about branding. There are some great investors that share their sales. If you look at the domain that are sold, and if you follow Chris’ road map, you would see that small business entrepreneurs have some momentum behind them and they are looking to create in more simplicity and clarity. They realized that they need a great domain name.
- Look at the domain name in the essence like: “what does an employee costs me?”, and “what does a domain name produces, much more employee?”.
- Fundamentally, you got to think back to this road map. It is important to remember if it’s a brand, a sub-brand, is it a marketing campaign, or is it a defense of a nature. Each of the mentioned will be viewed differently to different companies.
- Chris says that some companies would buy a domain name as defense of a nature.
- They were able to sell a big domain but he did not disclose the name of the company as he signed an NDA; however, he said that it’s a 3-letter domain. The company did not do anything about the domain, it’s locked in their vault, but they spent 6 figures.
- Chris thinks that it would have been better off with a brand but the reality is this industry is settled and most of the players feel that they have the position and they are focusing more on their brands.
- Your domain = your brand is your brand equity. For the most part, this is the equation you want to think about.
POINT #5: THE PRETENDER VS THE PRODUCER SYNDROME.
- Chris emphasized that it’s about leadership, it’s about leverage, and it’s about scaling.
- Chris was talking about customer acquisition and equally about scaling. It comes to a point in time for a company that they just cannot scale.
- Chris mentioned that Googles changes its algorithm, Facebook changed their add platform, and next thing you know the model that you built is firm but then you go back to the drawing board and ask “what do we do?”
- Chris said that one of his blogs in media options, he gave a range because he would like to redefine this and fine tune this.
- Chris said that he lived in Hawaii for how many years and he knows how to sure.
- Small business hobbyist is going to pay any #3k or $7k on a domain name. Some won’t really need the domain.
- The pretender vs the producer syndrome.
- It’s like a side project to get his moment on what he is doing. And, if it turns out to something, he could’ve made it.
- Chris is passionate about healthy vitamins and he would’ve made his passion profitable.
- When you look at a small business, they do not really need amazing domain. An example of this is Eureka plumbing in Eureka Arkansas. They are the only plumbing store in town so they really do not need an amazing domain. If you have a regional small business like a furniture store that has location is several different cities, the peak that they would spend is $50k on the domain.
- Chris then compared this to bell curve – there are outliers.
- Top scale companies would spend $250k or 7 figures on their domains because they understand what they can do when they plug it into their machines.
QUESTION OF THE DAY
“What does this really mean to my company?”
QUOTE OF THE DAY
“Make your passion profitable.”