About 12 months ago I purchased progolfer.com for $1750. At the time this was a good price for the seller and they agreed to sell the domain to me. Why was it a good price? It was a good price because that was the price that they were happy to pass on the domain for. It obviously met their business objectives and also mine therefore an accommodation was reached.
Do they now look silly when others have valued the domain at an average of $42,250? No they don't look stupid at all. Does this mean that progolfer.com is worth $1750 plus a little bit of inflation? No way! What this does illustrate that there is a very big difference between a purchase price and valuation.
For instance, let's imagine that I'm an up and coming golf company wanting to expand my brand into the progolfer circuit. A judgment call will be made by the marketing department as to the brandable value of the domain and from the survey on "what people thought the domain was worth" it is likely to be in the order of a couple of hundred thousand dollars (ie. the higher end of the scale). The challenge for me is to identify the potential purchaser of the domain at that price so that I can capitalise on their desire for an acquisition. This is going to be the really hard part.
Now, let's imagine that I'm just wanting to park the domain and hopefully earn a few dollars from the PPC traffic. The $1750 suddenly looks like a 20 year payback and a real steal for the seller.
This means that a domains value really depends upon how the domain will be used and also by whom. The purchase price has nothing to do with the valuation for the market but everything to do with the valuation for the individual.
This means that the previous owner of progolfer.com made a good deal. I hope to make a good deal and so forth as the domain naturally migrates its way up the value chain until it ultimately reaches what I would call the natural owner. Natural owners are those companies that can extract the maximum value from a domain so that there is no further opportunity for anyone else to capitalise from the domain itself.
This is why travel domains ultimately end up in the hands of travel companies, finance domains with banks etc and fashion domains with popular clothing brands. Domains naturally end up in the hands of the company that can best utilise the domain. Of course there are situations where the natural owner has no idea what to do with a domain but that's a completely different discussion.
Here's another issue. If two people come to a private accommodation on price does either party have the right to broadcast that price to the wider community? I personally believe that neither person has any legal responsibility to the other (assuming no NDAs etc) but what about community responsibility?
I would not discuss prices with anyone in a public forum but that's me. I don't think that the previous owner has done anything directly wrong but have they crossed some invisible line that the domain community has established? One of those unwritten rules. As the purchaser of progolfer.com do I think less of them as a person? No, not at all. Am I annoyed? To be quite frank, I'm not really sure. I'd be interested in anyone else's experience in similar circumstances as it's very easy to trip over unwritten rules.
So did the person who sold the domain do a bad deal? No, not at all. They did a good deal for them. I would like to thank them for their efforts in promoting progolfer.com in the various forums as their efforts can only be good for my domain name. Hopefully it can climb up the Google pagerank faster. :-) Afterall, it's always better to look at the positive rather than the negative in any situation.
Source: Posted on WhizzBangsBlog by Michael Gilmour -- Reprinted with permission -- April 15, 2008