Do you Trust Reported Domain and Website Sales Data?

Lately I’ve been finding some incredible sales on Flippa and in the domain space that don’t make sense to me. I’ve found plenty of legitimate sales and even posted about one I thought was legitimate last night. Many of my readers cast doubt on the sale and I’ve spent some time investigating it to try to figure it out myself. Every time this happens I ask myself the same question…how do we know the sales data we’re looking at is valid?

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For those who really know me you know I’m a data guy. What does that mean? It means that if you just tell me something is selling well or a trend is really hot I usually respond by saying, “That’s great – now show me the data!” I use the DNJournal Sales list as my main source of domain sales data and the Flippa “Just Sold” list as my main source of website sales data. Heck – these are both considered the most reliable and top resources for their respective sales category. Here’s the magic question, How do we know if a reported sale price is real?

Last Tuesday Free-Counter.com sold for $61,000 – there were 15 bids…but all those bids took place between two bidders. Also a long history of sales data is not provided in the auction. Sounds sketchy doesn’t it? I didn’t pick it up at first but my readers dug in and I think revealed a fraud here. So what happens?

free-counter-scam

If this was a house or a car it would be a HUGE fraud case and the police would most likely get involved. However with virtual property be it a domain or a website we never really know what happened. At least with a website data you can use tools like compete, alexa and Google Pagerank to get an estimate of the real traffic a domain name is getting. With a domain sale you oftentimes don’t even know who the buyer and seller are (or if they’re the same person) if the name goes from one whois privacy account to another.

There are plenty of Flippa auctions that go-into the five-figure range oftentimes with over ten different unique bidders…how do we know which of these is fake? Private domain sales happen every day, what’s to stop the buyer and seller from agreeing on saying it sold for a higher price than it did? Since we’re talking about virtual property there’s no blue book value and no rules when it comes to sales.

Could you imagine selling a $500,000 house without paperwork being a legal requirement. Of course most people selling domains in the five, six, and seven figure range use contracts…but they don’t have to, there are no rules. When you buy a house a legal document is created, you can’t say you sold the house for $500,000 if you really sold it for $120,000…but with a domain or website what’s stopping anyone?

So my question to all of you is how can you trust sales data? How do we really know what the average .com sales price was in 2010? Are we looking at reliable data?

Now please understand by no means am I pointing the finger at DNJournal or Flippa or anyone that reports domain or website sales. What I am asking is how can we trust this data if there is no way to ever know if the buyer and seller were in collusion? I’m an honest person and hate to see people get scammed, I also hate getting scammed myself…but spotting these scams can be next to impossible if you never know what a domain or website really sold for.

Domain auctions, especially live auctions I think offer a reliable way to really see what a domain or website sells for in the open. It would be interesting to compare the average sale price of a .com in a live auction vs. general reported sales. Domain sales services that leave it up to the buyer and seller to simply check a box when the transaction has been completed could be generating erroneous sales data. What is done to really make sure that a sales transaction ever took place? So, I’ll ask the question again, how can you trust sales data? Comment and let your voice be heard!

P.S. Not trying to be a conspiracy theorist here but I do think this is an important topic. Thanks to all my readers yesterday who picked-apart that Flippa sale and exposed what I now think is a $61,000 FRAUD!

{ 10 comments… add one }

  • Luc January 23, 2011, 1:29 pm

    Morgan,

    As always, great article. I’ve been paying close attention to your flippa related articles as well as the recent sales. After doing some homework, I noticed that the same sites keep on appearing on flippa even though they have supposedly sold already.

    It seems that a lot of sales on that site fall through, I’d say 95% of the 5-6 figure sales are shill bidders. Either to boost flippas popularity or to boost the popularity of the site being sold.

    There are also a lot of scammers on flippa, trying to sell domains+sites that are less than a month old with tens of thousands in revenue.

    As is always the case, it’s good to use common sense. If a sale looks too good to be true ,it usually is.

    Thanks Morgan,
    Luc

    Reply
  • Owen frager January 23, 2011, 2:14 pm

    Great article. Flippa seems suspect. Also suspect are bloggers with no known identities that hype it up. Much to my chagrin anyone can go to Google and see what I paid for my house and who I bought it from and what he paid from who. Imagine if one could do that with domain sales.

    Reply
  • Morgan January 23, 2011, 2:49 pm

    Thanks @Luc – good feedback. If this is happening in the Flippaverse how do we know it’s not happening in the Domainerverse?

    Wouldn’t a buyer want to have the price reported higher than they actually paid for it so they could flip it for a higher price? Seems like this problem has to exist outside of just Flippa…right?

    Reply
  • Rich January 23, 2011, 2:50 pm

    The short answer to your questions Morgan, is no I do not trust the sales figures. The only way to know for sure is to look at tax returns where sales have to be reported. This is how the FB.com sale to Facebook was discovered. The Farm Bureau had to reveal it in their legal reporting.

    I use a lot of unreliable commonsense when I look at sales figures. Who is the buyer? What kind of domain is it? Do the traffic and sales figures make sense? Does the whole buying/selling process make sense?

    Unfortunately, in most cases, the legal documentation for a sale is not available and probably most major sales are not publicly reported. So buyers and sellers are left guessing. The domain market is less like real estate and more like a coin hobby marketplace. There is very little transparency (I have no idea what brokers do behind the scene) and almost no legal oversight. I believe this is the primary obstacle to the development of what could be a very lucrative industry.

    Reply
  • teendomainer January 23, 2011, 5:47 pm

    Most domain sales at major venues I trust but with private sales and sites with flippa it really is anyones guess. There should be some better way to verify sales, one day when the industry decides to grow up there will be.

    Reply
  • Rich January 23, 2011, 7:34 pm

    One thing to keep in mind, and to the credit of Flippa, is that it discloses information – enough information so that other bidders can make some determination about about the nature of the sale. Other marketplaces disclose little or no information, which makes discovery almost impossible.

    Reply
  • Andrew (Flippa) January 24, 2011, 9:53 pm

    Our Just Sold tab is a list of all auctions that have ended above the required reserve – much in the same way that your local masthead may report on the weekend’s real-estate auction results (even though some of those may ultimately fall through). For the absolute majority of auctions on Flippa, this results in a successful sale and transfer of website/domain ownership. There are a few occasions where one of the parties is unable to complete the sale, at which point the seller typically relists following our dispute process. Unless a strong reason is provided, we will suspend the offending account and use a range of measures to ensure they do not rejoin the Flippa marketplace.

    We similarly have a range of measures in place to identify fake/shill bidding. If discovered, both the buyer and seller accounts are immediately suspended. I’d be surprised if buyers and sellers ever colluded to report that a site sold for more than it did as this typically incurs a higher success fee. As much as this might be great for Flippa – I’m not clear on what the benefit would be to the buyer/seller.

    Disappointingly, it would indeed seem that the free-counter.com sale will not go through. The reasons for this will be managed confidentially by our disputes team but I can put to rest any suggestion that the bidders or sellers were clearly colluding. All accounts have a long term record of unrelated activity on Flippa and our significant fraud measures have not provided any indication that the users are in any way related.

    So can you trust our Website Sales Data? Absolutely. So long as readers are aware that there may be a few cases where the post-sale activity falls through.

    Reply
    • Morgan January 25, 2011, 12:03 pm

      Thank you very much @Andrew for following-up on this post. It’s great to know that you guys are paying attention to this and taking these issues seriously. As you know I’m a big Flippa fan and I really appreciate you reaching out!

      Reply
  • ValueDrops.com January 28, 2011, 3:26 pm

    I agree, some of these sales just don’t make sense. If flippa is really innocent, they should do what other big auction houses do, they should broker the sale, ask for cc and large deposit and maybe copy of ID before allowing bidding above a certain amount. This should clear out all fake bids. But why would they do it, big headlines makes them more popular.

    Reply
  • alaiy August 15, 2020, 1:57 am

    Reply

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