The Problem With Domain Auctions
Ask almost anyone what the biggest impact on the domain aftermarket in 2007 has been, and chances are they will tell you its the emergence of live domain auctions everywhere. Moniker, Snapnames, Godaddy, GreatDomains.com, DomainTools…etc all have announced or held live auctions recently. While this is good news for the most part, I’ve personally noticed it has caused some problems in the aftermarket.
The first problem is that many domain investors aren’t willing to sell their top quality generic domain names other than at auction. They know that top dollar is often found at auction, and they aren’t usually willing to compromise, unless an offer blows them out of the water. While this isn’t unreasonable, it has hampered buying opportunities outside of auctions.
Another problem with domain auctions is that many buyers aren’t buying domain names other than at auctions. Many buyers know that many great names will be up for auction, and they would prefer to make a big splash at auction rather than through a private sale, unless it is a great deal. Buyers may be reluctant to buy a name privately in the event that they need the cash for an auction.
The sheer amount of domain auctions that are going on within the industry is also causing an issue. It is difficult to get all buyers to focus on all auctions. As a result, there may be less competition among bidders, and names may sell for less than they would have if more buyers were present. The auction houses want the market to determine the prices, so they encourage sellers to set reserves as low as possible, but this becomes a difficult task, when the market for certain domain names may not be bidding at a particular auction.
Some owners are struggling to determine the best venue in which to sell their names, as the different auction companies hold auctions at various industry conferences and on their own. Also, listing domain names in an auction often requires exclusivity (before and after the auction), removing names from the market whether or not they sell at auction. Finally, if a name doesn’t sell at auction, an artificial price ceiling is created for that name, even though it might not have sold simply because the right bidders weren’t in attendance.
I know this may sound crazy, but while domain auctions are having a positive impact on the industry as a whole, they are also impacting the industry in other ways. I think the most important things auction houses need to do to grow the industry is to encourage end users to attend the auctions to acquire the best names for their business.
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