Hello, happy Monday, and welcome to Domaining MBA Monday here on MorganLinton.com. Today I want to talk about a topic that often gets new investors into trouble. What I’m talking about is the herd mentality that comes with domain auctions. You see a domain you like, it jumps from $30 to $500 and you’re still bidding strong, the thinking goes something like:
As long as people are still bidding on the name it must be below market value.
Wrong. In an auction you can easily spend far more than most people would pay for the domain. In many cases if you take the time to look at who you’re bidding against you’ll notice it’s just one other person. If this other person is a brand-new Domainer that also thinks they are below market value since you keep bidding on it, then you could both easily bring the price way above market value.
Remember. Most expired domains are someone else’s trash. While you can sometimes find diamonds in the rough and I think there are plenty of diamonds out there to be discovered, you’ll have to wade through a lot of trash and avoid the names that may look “hot” because so many people are bidding on them because you can easily end-up paying a lot more than you should.
So here’s the question you’re probably asking. How do you know when you’re going too high?
I like to have a number in my head at the beginning of the auction, what do I think the domain is worth, or better put, what would I pay for the domain? This usually isn’t a completely arbitrary value and tools like NameBio.com are particularly useful but good old life experience from past sales can help a lot. If you’ve never sold a domain before this could be hard to determine, in that case ask a few people you trust and see what they come back with.
This happens to be one of my favorite features in the DomainNameSales.com app. When I get an offer on a name I’ll often ask my friends on DNS what they think it’s worth and after getting 3-5 responses I have a good idea of what other people peg the domain’s value at.
When you’re first getting started in the domain industry you need to be comfortable asking other people for help and advice. Domaining is hard stuff and understanding domain value, particularly end-user resale value and liquidity takes time to master. Once you have a few solid sales under your belt you’ll be able to better assign values to domains and like the old sayings says, know when to hold them and know when to fold them.
Just remember, more bids does not mean more value, in fact in many cases you’ll find more bids means less profit for you if and when you sell the domain. Keep a value in your mind and don’t be afraid to let the other bidder win because in auctions sometimes letting the other guy (or gal) have it is actually the winning move.