What Every Startup Founder Should Know About Buying Domain Names
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Rewind back to five years ago, and I was helping some of the most incredible startups on the planet to find and acquire domain names. Now, as a startup co-founder myself for the past three years, I find that many of my fellow founders still call on me as the former “domain guy” to help them navigate the waters of domain negotiation.
The domain name market is a mercurial one; it’s relatively secretive, however not by choice. When most people approach me about a domain they’re trying to buy I usually hear the same thing, “it looks like a squatter has it, what should I do?”
So I thought it was time to take my experience in buying, selling, and brokering millions of dollars in domain names and share the same advice and step-by-step process that I share with my friends and startup founders around the world. Here it goes.
Step 1 — Determine who owns the domain name
First things first; let’s separate “Cybersquatters” from “Domainers” because they are very different and so is the way in which you approach each. Cybersquatters are people who violate an existing Trademark or buy typos of your brand in order to either extort or damage your brand.
You have the right to get domain names that are legitimately being “squatted” on through a process called the UDRP. You can read more about it here and email me if you want recommendations for great attorneys who can squash squatters and get a domain that should rightfully belong to you.
Domainers (or Domain Investors) are not Cybersquatters, they aren’t breaking any laws, and in fact they tend to be the most reasonable when it comes to selling domains since they have so many and understand the market so well.
The first underlying principal to understand when it comes to domain names is pricing. This one principal is what usually throws everyone off when it comes to domain negotiation, so let me explain it the way I normally do:
The price of a domain name varies dramatically based upon who owns it.
I usually group domain owners into three categories; individuals who bought the domain for personal use, domain investors who bought the domain as an investment, and companies that bought the domain to potentially use one day. The price of the domain is highly dependent on which category the owner falls into. This also means that before you do anything you need to understand who owns the domain that you want to buy.
There are a million WHOIS services out there that can show you who owns a domain name, but I highly recommend using DomainTools.com because it gives you a very valuable piece of information — how many domain names the domain owner has registered in his or her name.
Just looking at the WHOIS information for a domain name will just about instantly tell you which category the owner falls in. Here’s your cheat sheet:
- if the domain owner is listed as a person (without a company name) and owns only a handful of domains, it is very likely to be an individual who bought the domain name for personal use
- if the domain owner is listed as a person who has hundreds, thousands, or tens of thousands of domain names, it is very likely that this is a domain investor
- if the domain owner is listed as a company that you’ve never heard of , Google search it and determine if this is a small business or startup that you just haven’t heard of, or if it is a company that buys, sells or brokers domain names. One simple Google search and you’ll know instantlywhich one it is After this, you’ll know if this domain name is owned by a company or a domain investor.
- if the domain owner is listed as a well-known company, i.e. Google, Facebook, Microsoft, etc. then, no surprises here, it’s owned by a large company
In step three, I’ll detail how determining which category the domain owner falls into plays a role in the negotiation strategy that you should take. First, you need to do a bit more research to build your information advantage.
Step 2 — Do your research
Before reaching-out to the domain owner, you should do some research. All of the research you need to do can be done for free and should take less than five minutes.. There are three things you want to determine:
1) Is the domain already for sale, and, if so, for how much?
2) Is the domain being actively used?
3) How much have similar domains names sold for recently?
Now here’s exactly how to do it:
1) Is the domain name listed for sale on a popular domain marketplace? Check Afternic.com, Flippa.com and Sedo — these are the three primary marketplaces where a domain is likely to be listed for sale. If a domain name is for sale publicly, there’s a 95% chance it’s on one of these three marketplaces.
2) Go to the domain name in a browser and look — is there a blank page? A parking page (i.e. page full of text-link ads)? If so, then nothing is being done with the domain. If you see a blog, company website, etc. then the domain might be actively in-use. Dig deeper if it is. Here are three ways to go deeper:
a. Scroll to the bottom of the site and look for a Copyright mark, if there is one, is it current?
b. Look at the privacy policy and terms of service. Is the year listed current?
c. If the website is a blog, when was the last time a post was published?
3) There are a few places you can quickly reference to find similar domain names. Just like “comps” in real estate, this will give you a point of comparison to both set realistic expectations with yourself and use as ammo in your negotiation.
a. NameBio.com — this site has a searchable database of past sales
b. DNJournal.com — the domain industry’s main source for reporting and tracking recent domain sales
c. Flippa.com — you can see recent domain sales on Flippa
You should now know a few things before reaching-out to a domain owner:
- the price the domain owner has in mind for the domain
- if the domain name is really being actively used
- what similar domain names have historically sold for
Armed with this knowledge you’re now ready to reach-out to the domain owner. This is where understanding which category the owner falls into really matters.
Step 3 — Reach-out to the domain owner directly via email (or phone)
In step one you should have been able to easily locate the domain owners email address and potentially their phone number as well.
Important side note: sometimes you will come across a domain name that is under Privacy Protection. It may initially seem like there’s no way to contact the domain owner. What you probably don’t know is that you can actually email these bizarre-looking email addresses and it will route directly to the owner.
Your strategy for outreach should be different based upon who owns it. Here’s your game plan:
Scenario 1: The domain name you want is owned by an individual
The biggest challenge with individual domain owners is that they typically have given some sentimental value to the domain name, and more importantly, they often aren’t aware of typical domain name resale prices.
With this type of domain name owner it will probably be important to have a solid list of 3–5 similar domain sales ready in case the domain owner has ridiculous price expectations.
To get started, email the domain owner and let them know you’re interested in potentially buying this domain name but you want to know what price they have in mind.
Side note: even if you found the domain for sale on a popular marketplace at a fixed price, still ask the question. You never know what the owner will come back with and the more data you have the better.
If you hear back and the price is in your budget, congratulations. Of course like most things in life, it’s rarely this easy. You will most likely either get radio silence or get an answer like, “I’m not sure, I never thought about selling it” or “I’m not sure, I always planned on developing it myself”
If you can’t get a price out of the owner ask if you can at least get a range. The idea is simple — you don’t want to be the first person to throw out a price unless you absolutely have to.
At some point in the negotiation you’ll probably have to reference those 3–5 similar domain sales you found to educate the domain owner on what the market price is for names like these. Hopefully this, with a bit of the negotiating prowess that you may have as a startup founder (since you already have to negotiate like it’s going out of style, most-likely on a daily basis) will hopefully allow you to reach a price that works for both of you.
Biggest risk with individuals: sentimental or nostalgic value can make a deal untenable with individual domain owners. If the owner absolutely loves their domain name and feels it’s worth $50,000 to them even though similar domains sold in the $5,000 range you might be out of luck.
Scenario 2: The domain name you want is owned by a domain investor
As I always say, this really is your best-case scenario. Unlike individual owners, domain investors tend to have hundreds, thousands, or tens of thousands of domain names — the domain in question is only one of many.
Domain name owners also buy and sell domain names regularly, so they are aware of market value and probably won’t have any sentimental issues or arbitrary price assignments.
The main difference in how you reach out to a domain investor is realizing you’re probably going to need to name a price to get a response. Most investors also know that it’s better to get a price from the other party before he throws out a price. Start by sending an email asking for a price, but be prepared to get nothing back. You can email again to make sure they received the first email, but in many cases you’re going to have to make a reasonable offer.
If you do have to name a price, use the comparable sales as a guide and don’t make an insultingly low offer. You’re not going to be able to buy a monster one-word .COM for $500. The comparable sales you researched should give you a good idea of the price range that you’ll be working in. Sure, you can start at the low end of the range, but don’t go so low that the domain owner doesn’t take you seriously.
Biggest risk with domain investors: domain name investors know fair market value for a domain so if you were hoping to get a domain name that would typically sell for $150,000 for $15,000, think again. It’s not going to happen.
Scenario 3: The domain name you want is owned by a multi-million (or billion) dollar company
I hate to say it, but if the domain owner falls into this category, set your expectations low. Multi-million (or billion) dollar companies are notorious for wanting obscenely high prices for domain names.
I can still remember one particular negotiation that I was a part of years ago. The startup founder had $750,000 for a domain that was clearly worth something in the $500,000 — $750,000 range. The domain was owned by a large company and I was able to get in touch with the decision-maker within the company. To show that we were serious, we started with a $350,000 offer. They countered at $7M and told me there wasn’t a chance they would go a penny lower. Doh!
You probably aren’t going to be able to negotiate with a large company on your own. This is where domain brokers can be incredibly helpful. Domain brokers have a lot of experience negotiating with large companies. Just know that you probably aren’t going to get a broker to help you buy a domain name for $5,000 — $10,000 and a big company probably isn’t going to even consider offers in this low of a range.
Be prepared to pay between 10% — 20% to the broker for closing the deal, but know that you’ll likely save a lot of money (and the deal can actually happen) if you find a domain broker that has worked with the company you are trying to buy from before.
Biggest risk with big companies: like I said above, expect to pay a high premium when buying a domain name from a big company and set your expectations low for the likelihood of the deal going through.
Where to learn more
After reading this you will know enough to be dangerous. Still there are a lot of other resources out there to learn from on how to buy a domain name. My top recommendation for anyone who really wants to get an inside edge in this process is to attend a domain name conference.
The next conference coming up is The Domain Conference (www.thedomainconference.com), an event where the “who’s who” of the domain industry will converge. Just about every industry expert from around the world and the top domain owners, will all be in Florida at the end of September for this conference and you might just meet the domain owner who owns the name you want in-person so you can negotiate right then and there.
Even if the owner isn’t at the conference, the experts that are at the conference can give you incredible advice and it is very likely that someone there will know the person or company who owns the domain and can lend a hand.
If you can’t make it to a conference I would recommend taking a look at a domain name forum. The three most popular forums are DNForum, NamePros, and DomainState. As with any online forum, do your research on who you are getting advice from. Plenty of people will share advice, but make sure you’re getting it from a reliable source. This is another reason why going to a conference really is your best bet.
Last, but certainly not least, is read Domaining Blogs — you can find all the top domain bloggers on Domaining.com which aggregates all the top domain news sources in one place.
No matter what path you take, hopefully this article helps to take the guesswork out of buying domain names. Now comes the hard part — closing the deal.
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Like this article? There’s more like it on my blog at www.morganlinton.com
