Domain Acquisition – A Tale of Two Strategies
The desired domain was listed with a minimum offer price on a well-known registrar’s auction website. In submitting the initial offer, dialog with the representative broker ensued. The counter was six times the minimum offer, landing the seller’s asking price close to 6-figures. After a bit of negotiation, there remained a $50,000 difference between what the seller’s price & the buyer’s offer. Offering an explanation, the broker said that in his familiarity with this seller, the seller tended to be rather firm on price & particularly difficult in negotiations. Disappointed but already at their maximum spend, the buyer walked away.
Having recently applied for the trademark, they were unsure if their lack of anonymity may have been a factor in the failed negotiations. In consulting with counsel, they were referred to us as the “GO TO” when clients seek to acquire a domain name.
After receiving the referral introduction, we had an initial consult call to explain how we operate with acquisitions. In discussing their prior experience with the domain broker, the utter disappointment as they endeavored to align their rebranding with a new URL was easy to understand and a situation with which we were very familiar. Plus, there was the potential layer of a domain broker.
While we negotiate with domain brokers on occasion, it is only after all other avenues are exhausted. If it is not possible to identify the domain owner because the target domain is newly registered and inactive or parked with a private registration, we are often left with few options. Beyond all the challenges that come with negotiating through a broker, the added component is the commission structure of any deal. Brokers could make between 10 – 25% on the purchase price. The higher the sales price, the larger commission. What is a broker’s motivation to negotiate the best possible price? When we represent our clients, the sales price of the domain is the price our client pays. We spend the money like it is ours and want to strike the best deal possible – while being effective with our time and that of the potential seller.
Fortunately, in this case, the domain owner was readily identifiable and determined to be a seasoned player in the domain buy/sell business. After contacting the seller directly using a suitable approach (and our established undercover entity), we found the seller to be a reasonable businessperson. Given the seller’s knowledge of the domain industry, we leveraged this to our advantage, negotiating the price down based on comparable domain valuation, our research on the seller’s abundant inventory of inactive domains and the desire for a fair deal for both sides. While we are skilled with acquisitions, the broker’s misrepresentation of the seller seemed apparent (or maybe the seller does not like dealing with brokers either?).
Ultimately, we were able to successfully secure the desired domain for a palpable price. While the purchase price ended up slightly higher their original max, it was over $40,000 less than what the domain broker ‘negotiated.’
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