- Part 3: Domain Name Auctions
Domain Name Auctions
Ever since the rise or eBay, online auctions have become the place to go when you want to buy and sell anything, including domain names. In fact, hundreds of domain names are for sale on eBay at any given time. Just like a real life auction, online auctions for domain names start low and work their way to higher prices as people begin to compete for the sale. The more people who want the domain name, the higher the price will go.
This can be both good and bad. If you are the seller, of course you want lots of people involved in bidding. This will push the names higher. However, if you are a buyer, you may need to stop and re-evaluate how much the domain name is actually worth. If you plan to resell it, will you be able to do so? The simple answer is no if you pay too much, and then you’re stuck with a domain name that you have to develop in order to make money. Developing takes time—I’m not saying that you shouldn’t do it, but if you want to make the most money possible in the shortest amount of time, you should try to catch and release fairly quickly.
Auctions also have a bad rap because of the people ready to scam you on this market. Sometimes, the seller will put what is called a reserve price on the auction, which you can’t see. The reserve price is the lowest price they are willing to accept for the item. However, they can choose to start the bidding much lower. In some cases, the seller will put the reserve price extremely high. That way they can gauge the bidding wars that will occur for their domain name without having to actually pay the auction site or domain name broker for selling the name. After the auction ends without anyone reaching the reserve price, the seller will either contact the higher bidder to sell it without the commission or advertise that the site is still for sale and release contact information for buying the site. Basically, they use the auction as cheap advertising. In either case, this is dishonest because it not only cheats the auction company or broker out of the commission, but it also wastes days or even weeks of your time.
Another way sellers use auctions dishonestly is by generating bidding wars. Because of the anonymity of the Internet, a single person can have multiple screen names and can bid on his or her own domain name to drive up the price. Alternatively, the seller can work with friends to do the same thing. As a buyer, there’s not much you can do to stop this. It is up to the auction company to pursue any complaints received about fake bids.
However, what you can do in any option is use common sense. Before you bid on a domain name, take a moment to calculate how much you believe the name truly to be worth, based on its qualities like marketability, spelling, and extension. Set a budget for yourself and stick to that. If bidding goes higher, don’t compromise—just back off. Joining a bidding frenzy for a domain name that you didn’t think was worth much in the first place is usually a bad idea. Stick to what you know to be true and don’t second-guess yourself just because other people are willing to bid higher.
