Can Development Decrease the Value of a Domain Name? | DomainInvesting.com
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Can Development Decrease the Value of a Domain Name?

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My friend Mike is in the middle of building out my newest domain acquisition, and I am getting psyched to launch the website in the coming weeks. I am not ready to reveal the name publicly yet, but I am sure some people might think it’s not great, while others will agree with my opinion that it’s a great name with an obviously workable business plan. I am excited to share – but just not yet.

Within a couple of days after I bought the domain name, I began receiving inquiries. In fact, I received an email from the owner of a similar domain name, just in a country code extension. I told him the domain name is not for sale, and that I am in the process of building it out. He also sent me a Twitter message, and I replied the same.

Last week, I put up a coming soon page with the new logo I had created. In the past week, I have received two additional inquires about this domain name. I receive unsolicited inquiries for my geodomain names on a frequent basis, but I don’t recall getting three for the same one in less than a week. The most recent one was received this morning, and after I said no, I received a follow up asking me if there’s any price at which I’d sell it. Of course, the answer is yes, but that’s simply because everything has a price.

So, that leads me to the question, “can developing a domain name decrease its value?” Would it be possible to make a domain name worth less with true development? Of course if its the source of major spam, spyware, or other thing of the sort, it could potentially have less value, but that wouldn’t be the case here.

I really believe I have a great domain name, solid business plan, and a solid marketing plan that is fairly aggressive but wouldn’t really require additional work from me because I am involved with it almost every day. But the question remains, could my developing this domain name diminish its value?

I also think there are two things at play here.

1) Can the actual developed website hurt its value?

2) Can development make it less likely that a company will want to make an inquiry about a potential sale?


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (25)

    Michael

    I don’t get how developing, unless you do something that a company might not want to be associated with such as porn, could ever diminish the intrinsic value of a domain. You can always take the site down, so unless there’s something unsavory in the Google cache, it wouldn’t make a difference. All you’ll be doing is giving the buyer increased traffic, faster search engine ranking, etc. I doubt they’ll be upset about that and pay less.

    October 24th, 2009 at 12:57 pm

    Elliot

    Would developing a nice looking site turn away potential buyers?

    I know I don’t generally inquire about fully developed names unless there’s a compelling reason to do so.

    October 24th, 2009 at 12:59 pm

    George Pickering

    ……only if development causes your site to get blacklisted with google or yahoo.

    October 24th, 2009 at 1:02 pm

    Aron

    Elliot,

    If your ultimate goal is to sell the name, then YES, development might hinder you from reaching the goal.

    If you DON’T want to sell it, then go for it :)

    I have a great domain (for example) that is on page one of Google and gets thousands of uniques per month, and it’s a PR5, and it’s a top name for the category…

    But it’s developed, and I get very little offers.

    In fact, when I shop the name around to friends/contacts they are apprehensive of buying a site.

    Like you said, if you see a site is developed, you usually don’t offer on the name…

    The offers will be less, but if you don’t care about selling it, then go for it.

    Another thing to consider, if you WANT to sell it:

    Developing and failing might turn people off too. If you developed and it didn’t work, then why should someone else try it?

    Again, this is only if you are looking to sell the name.

    If not, go for it, DONT be afraid to fail and try new ideas and have fun with it :)

    Just my 2 cents.

    Me personally, I’d try to develop it, if selling it wasn’t a major goal soon.

    October 24th, 2009 at 1:10 pm

    wannadevelop.com

    Answer is no… End users will always be far more interested in a domain if it has a site. Even a parked page is much better than for the domain not to resolve.

    That is why we had no problem selling CrimeSceneCleaner.com BailBondService.com and others to end users.. Within a few weeks of throwing up quick “minisites” on them we were able to flip em for a nice profit.

    October 24th, 2009 at 1:10 pm

    Morgan

    I’ve found that websites dramatically increase the price of my domains. If you can show consistent monthly traffic and revenue this will only add to the value.

    That being said if you do get the domain blacklisted with Google it could reduce the value but I’m not sure how a potential buyer would know that.

    In general I think all buyers see value in having the domain already listed in search engines since they know they can put-up a site and not have to wait to be indexed.

    October 24th, 2009 at 1:30 pm

    Mike Maddaloni - @thehotiron

    In general – no.

    Will the fact that a Web site exists at the domain name make it less likely to be sold to those who have inquired already? Possibly, but that depends on their offering price vs. the projected ROI from your business plan.

    The fact that a site exists at a domain gives it a greater likelihood for traffic to it, which would be of more interest than if the site was even popular or not.

    Providing nothing “bad” happens, such as blacklisting as someone previously mentioned, overall developing a site should not decrease its value.

    mp/m

    October 24th, 2009 at 2:03 pm

    Jorge

    I see one downside:

    What if you develop it, but the traffic is still pretty low? For whatever reason.

    Then, it might not look so good if a potential buyer asks about the traffic, and says to herself: “It’s developed and it gets low traffic — I will stay away from this one.”

    Still, I think, based on your abilities, this is a low risk.

    October 24th, 2009 at 2:08 pm

    owen frager

    I don’t think anyone is listening carefuly. This incidence is different than Morgan’s. In general development (unblacklisted) will help sell a site. Parking always hurts.

    People have already make offers without needing to see any site. The value one sees is forwarding his .cctld to a matching name .com. Nothing you can do or say will be more valuable then the visions for this domain that those making offers already have in their minds.

    October 24th, 2009 at 2:09 pm

    Anthony Hanner

    I actually think having a domain parked can be more valuable to an end-user than if a site is developed, but not developed with at least a nice look and feel and solid content.

    I don’t mind mini-sites at all and if the content is targeted and well written…it is great window dressing for an end-user.

    It is no different than a bad house in a great neighborhood. For every buyer that sees the fix up opportunity…another 9 will see a bad house, even though they like the neighborhood.

    I don’t believe developing hurts the value of the domain…unless it isn’t developed well. That doesn’t mean it has to be a full development…just means you should make it look good and provide good content…everybody loves a great house in a great neighborhood…and the end-user will like the great site in the great niche.

    October 24th, 2009 at 2:27 pm

    jp

    It will be with more (unless you make some kind of mistake) however recieve less inquiries. Just because it gets less inquiries does not dictate lower value or or interest in this case. People are still going to you site and checking Whois to see if it’s available, or undeveloped, they just don’t make an offer when they see it’s spoken for. I will be more effort to sell now, but you will be able to charge alot more.

    What would your perception be of the aquiition cost of an empty plot of land vs one with a house on it? You may not make an offer on the built out land when you see the house because you figure, I don’t need that house and the guys going to want more because of it. That doesn’t mean the interest wasn’t there for the land though. Just harder to sell the land now though, if you want the buyer to consider the value of the house. Now you have to find buyers that want to pay for both.

    Now if your website increases traffic on the domain significantly then the domain is obviously more valuable for it, howeve if you want to sell it for top dollar you are still going to hve to find a buyer that cares about the actual website as well.

    October 24th, 2009 at 2:56 pm

    Michael

    “Would developing a nice looking site turn away potential buyers? I know I don’t generally inquire about fully developed names unless there’s a compelling reason to do so.”

    Think about why you don’t make an offer. It’s because you know with a good looking site that it won’t go cheap. Doesn’t that alone mean that it has more value?

    What is value? It is the intersection of what the buyer is willing to spend, and what the seller is willing to let it go for. If the site is well-developed, getting traffic, and making you money, you’re not going to let it go as easy. It’s more valuable.

    Think about when you’re making offers to original registrants, and the site is ugly as sin and the copyright is 2 years out of date. Bingo! Right? You think you can get a bargain, because the worse the site is the less valuable the domain is to the seller.

    Sure, you might get less random offers, but you’ll be turning away buyers looking for a bargain, not serious buyers looking to drop some serious money. They’ll still go after it.

    October 24th, 2009 at 3:41 pm

    Jon

    The more expensive the domain, the less added value percentage-wise development brings to the sale. The only exception is when the buyer will do exactly what you are doing with that name. Putting big for-sale sign on a good wipo-proof generic domain is the best way to go about selling it.

    October 24th, 2009 at 4:48 pm

    David J Castello

    Yes.
    I have no doubt my reply will come as a surprise to many from someone who made his money solely from developed sites, but there is precedent.

    I won’t name the name, but there is a large US city Geodomain (500,000 pop) that for years was redirected to porn sites. The Geodmain’s reputation was so damaged that the new owner is still having trouble attracting local advertisers (he got the name in 2003!). Worse, anyone who wants to buy the name and does simple due diligence will find this out and try to low ball him.

    October 24th, 2009 at 5:08 pm

    David J Castello

    PS:
    So there is no confusion about what I just wrote, I want to make clear that the Geodomain was developed with a page full of banners and ads for porn. The name was not simply redirected to a porn site.

    October 24th, 2009 at 5:14 pm

    Adam

    It shouldnt hurt you BUT it will likely mean some people won’t inquir.

    If these “end users” think to themselves “this domain isn’t in use” when they inquire about a parked domain, then they’ll think “this domain is in use, nevermind inquiring” with a developed domain. It’s very possible they may see the development as a sign that the domain is far out of their reach because you sunk money in to the site. I’m sure as a domainer who goes out and looks for domains to buy this is something that goes through your mind as well.

    I disagree with people stating that “end users” will always be more interested if a site is developed. There are domains that may be sought for branding purpose which means the potential buyer will just scrap everything you created. So in essence your work/site means nothing at all to them as they’re just going another direction or not even interested in your “mini-site”. The leg-up you have here is that you can justify the higher cost of the domain because of all the coin you put in to developing it.

    I can say that any domain I own that has more than parking on it has drastically reduced the amount of “is this domain for sale” inquiries. This may just provide a nice filter for tire kickers and lowballers.

    October 24th, 2009 at 10:35 pm

    Ed Muller

    Development of a site is always a good thing except when it hurts your bottom line. If you can get offers on this name for 5x what you paid, and development won’t add alot to the price but will add alot of time, then it’s hurtful. Cash in the hand for more acquisitions beats out plans that are good but really are just a means to sell for a given price.

    October 25th, 2009 at 7:29 am

    t

    most Over 5 figure offers have come from inquiries to my undeveloped sites. I don’t blame em, Have you seen my sites ? :) I don’t like to sell domains but sometimes necessity puts us in hard positions.

    If you believe in your idea/site/domain why not test drive it yourself, you may discover unforeseen opportunities/revenue/traffic,.then if you feel the credibility of the site doesn’t match that of the domain, A nice one to three page site explaining the domains positive aspects and how it would benefit its buyer. A video would be nice in connecting on a personal level while explaining the domain names possibilities.

    p.s. don’t have pretty girls like chef patrick which would distract from what your saying, Wait nope I changed my mind you should have more girls and hotter , video in HD, and able to download to your pc so I can watch the girls I mean listen to what you have to say :)

    October 25th, 2009 at 7:53 am

    Tim Davids

    I just remembered a sale I had where I had a logo up and a few lines and mentioned I was working on a larger project for the site while talking to a buyer… he offered to cover what I had spent so far for the development…some peeps understand.

    October 25th, 2009 at 8:57 am

    jblack

    It was often heard that parking a name crippled its future development. That theory always seemed odd and without any real, substantive basis offered by its proponents.

    It seems that a failed developed site (perhaps like the old pets.com, furniture.com, etc), or use as a porn site are far more detrimental to a newly launched developed site than having only been previously used for parking.

    If a brand new whitehouse.com site based on either the vinegar brand or politics was launched next week would its success be better if it had been parked all these prior years rather than having been tainted by its porn reputation of years past? Seems that answer is pretty obvious.

    Given the long odds against succeeding with a developed site it may be safer, more prudent, and at least equally profitable considering time too to keep parking a name until one is properly prepared for the larger developed venture.

    October 25th, 2009 at 12:04 pm

    Walter

    Yes, but only if you sell subscriptions or some type of service commitment which potential buyers have to honor. Often a buyer cannot simply purchase a domain and jettison the site (assuming they have other plans for the domain).

    Furthermore, if the site is a complex application it can be difficult to take over unless the buyer is willing to hire the developer.

    An undeveloped domain is always free of such concerns.

    October 25th, 2009 at 12:26 pm

    Danny Pryor

    In the world of the domainer, if a site is developed with a large-scale platform, it is going to appear to anyone interested in the name as though the potential for acquisition is lower. In other words, seeing a fully-developed site on a domain could impede your effort to sell the name, if selling the domain is your goal.

    The reason is simple: a domain investor interested in the name may believe the value of the domain, after acquisition, would decline unless he purchases the website with it. The cost of a fully functional website could equal the cost of a small or medium or large business.

    The trick is to find a happy medium where a domain, purchased as a growth-fund investment, could be developed just enough to increase its value without alienating potential buyers, buyers who might see a well-developed site as an indicator of a larger scale business operating online. If investors or curious domainers see that, the potential of selling the domain could, feasibly, decline.

    Now, as I’m a developer, this would cost me business in lieu of selling a pie-in-the-sky development project … but then we end up with egg on our face, in the end!

    The purpose of development must be ascertained before committing the resources. That’s the upshot of this post, I suppose.

    October 25th, 2009 at 12:39 pm

    Sergio Igartua

    Interesting arguments. I believe that a serious investor –someone seriously interested in the URL for whatever reason– could care less if you develop it or not. They’re after the real estate.

    In the case of damaged domains (which is not the case here) the majority may pass by an ugly house or neighborhood and not see the value in the land because of what is (or has been) in plain sight all along. However, a developer with the right forward vision will see something completely different, like proximity and commuter time (traffic, etc) and will buy that real estate, tear it all down and build something like a stadium or mall, or business complex where nobody had ever thought of it before.

    It seems time is on your side on this one. Whether you develop it or not, if someone wants and needs it, they will come.

    The inquiries will be less on a developed site because it will no longer be as obvious that it may be for sale. But for a real buyer, this will not matter at all.

    October 25th, 2009 at 3:37 pm

    jj

    Developing a domain means it is far less likely to receive offers IMO, so the chances of selling are far less. I would say the main group of people who buy developed sites are SEOs, and in general they don’t expect to pay end-user prices. Most end-users will assume a domain is not for sale if it is a developed site, which is fair enough as over 90% of developed sites are not for sale.

    October 25th, 2009 at 8:51 pm

    Mr Computer Repair

    I think that in the vast majority of cases development will not hurt.

    However, I have personal experience that proves it -might- hurt sometimes. Had a domain that I had developed (poorly, as in basic HTML). Got an inquiry and the person could not get over the fact the website was not what they had in mind. This was for the same industry, but mine was more of a splash page with a single graphic and a little text.

    The (potential) buyer was going to develop something much much more complex. They kept trying to drive me down on price and keep mentioning the fact that the basic site that was up probably turned people off to the domain.

    I just told them the facts that the basic site had been up for years and told them the type in traffic numbers. They still passed.

    Now maybe their price was never going to match mine, but I got the feeling this particular end user (who was not very domain or development knowledgeable) just really was bugged by what I had up.

    I took the page down and later sold the domain (I think that I sold it while it didn’t even resolve).

    October 26th, 2009 at 4:36 pm

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