I hope I don't sound as if I'm raining on a parade of great ideas but I do believe that there will be more mileage (and all important sales) in the Domains for Sale process than in wholesale modelling amendments to the AMA.
Not at all - I'm just excited that there is some behind the scene action.
A lot of things on the agenda at the moment - not least of which putting a lot more love into the Catalogue (Domains for Sale) area of the site.
When the catalogue sales make up 30% of sales revenue but are only 3% of sales volumes - makes sense to me - I know I'd love to be selling more domains via the catalogue.
1. support the .au market and
2. to make money.
I think it's more important that you guys:
1. make money
2. support the AU market.
The industry can't afford to have NF not make enough money to justify continuing to operate.
We find that more and more, both the BUY NOW prices and the reserve prices set are out of sync with the market.Unless this is really addressed, we could change the AMA model until the cows came home but at the end of the day, domains will only sell for the price at which the market is willing to pay.
I think it's important to be careful about what is defined as a "market" price and when it's implied that sellers need to "meet the market".
AMA and Snapper aren't "market" prices - they are "wholesale" price.
Any rational seller of domains would be crazy to list their domains for sale on the catalogue at "wholesale" prices.
Domains aren't like typical consumer or commodity items - you can only sell them once, therefore domainers attempt to maximise profits on one time sales given that they can't scale up or increase volumes.
And even if they did increase their volume of sales to end users ultimately they are just hastening the destruction of their own market given that there only a finite number of premium domains that can be economically sold.
It's also important to realise that unlike most "dealer" based businesses a domainer's stock doesn't depreciate in the value over time (if anything historically it's appreciated).
Ie if a car dealer buys a car today and still has it in their yard a year later it is worth 10 - 20% less. Therefore he has a strong incentive to sell quickly as well as maximise margin.
So the converse is true for a domainer - he has an incentive to sell slowly and wait for the right buyer to come along.
So pressuring domainers to "meet the market" is unlikely to be unfruitful compared to educating buyers on the value of domains.
If you look at the last couple of catalogue sales:
pestinspectors.com.au - $460
CommercialKitchenEquipment.com.au - $1,700
Security-Guards.com.au - $300
modernfurniture.com.au - $2,600
LoanComparison.net.au - $440
CarpetRepair.com.au - $950
If you own a business in any of these fields - it would only take 1 or 2 sales to make 100% of your money back AND you still own the asset that produced those sales!
So I look at those prices from a business owner's perspective and think that domainers are definitely meeting the market from a value perspective - if anything they selling domains at firesale rates.
What's really required is buyer education. And I think this is something NetFleet could do much more of.
Eg, I hand regged a nice two word keyword rich domain for a client back in 2008 and threw up a 5 page minisite on it. Over the next 5 years with no maintenance of the site it brought in at least $100,000 of business each year!
So now that business owner doesn't even flinch at the idea of spending a couple thousand for a decent domain because he can see he is paying the "market price" of $2000 for something that brings in $100,000 and is an asset that gives him a sustainable competitive advantage!
Now he is more paranoid about the competition owning any decent domains in his field and even has "domain acquisitions" segment built into his annual marketing budget so his marketing team don't even need to ask his permission to acquire domains under a certain value.
This is a buyer "who has been educated" and "has experience" - but 90% of businesses still aren't "educated" on the value of domains and 97% of them have "no experience" of utilising them.
So expecting buyers to pay $1000+ for a domain is unrealistic if sellers aren't able to ensure that buyers at least are properly educated.
And with NetFleet being the primary seller of domains (selling over 500 domains a month) it has always amazed why there wasn't a video on every page of the site explaining the instinct value of domains.
The only reason domainers sell domains for pennies on dollar of intrinsic value is because we are scared that the "educated and experienced" buyer will never come along unless we get out there and actively contact prospects and educate buyers - which defeats the purpose of using NetFleet as a broker if that is our strategy...
The other limitation with the AMA model is that it always relies on two interested parties. Again, unless there are two interested parties, an auction model will always fail. I certainly don't object to the theory of the "guaranteed to sell" button however even this requires a minimum of two bidders to be successful.
An auction doesn't need two parties if the seller is able to have a reserve...
Obviously the AMA model isn't working because the prices the domains sold with noreserve are poor - and the domains with reserves don't attract buyers because they know they are wasting their time bidding 95% of the time and even when they do bother to bid they rarely reach reserve.
The truth is the "guarantee to sell" still isn't ideal because there is still a very high risk that the seller won't achieve a great result - and it actually defeats the purpose of having a reserve at all - but it's guaranteed to be better system for sellers than the current one.
The idea would work something like this:
Let say I have a domain that I think has a retail value of $2000 and I think a fair reserve is $1500 and there are four buyers that regularly attend NetFleet auctions that would be interested, Buyer1 and Buyer2 regularly bid on both Snapper and AMA domains and Buyer3 and Buyer4 only bid on domains on the front page of Snapper.
Here the Buyers valuations of the domain - B1:$100, B2:$350, B3:$200 and B4:$1000.
Under the current system if the sellers puts a reserve on the at $1500 the the auction with pass in at $350 which is B2's bid given that B4 won't see because its not on the front page.
It would have reached $1000 if B4 had bid - but it still would pass in.
If this domain is sent to no reserve auction under the current system B4 would win the auction at $351 ($1 above B2's bid) WAY below the $1500 the seller has as their minimum.
Under the "guaranteed to sell" system the domain would start on the front page, but with a reserve of $1500.
So the auction would finish with B4's bid of $1000, and normally it would pass in, but because the seller had a "guarantee to sell" commitment the domain would sell for $1000.
The seller might not be happy it didn't fetch their desired $1500 - but $1000 is a hell of a lot better than the $350 he would have achieved under the current system.
Most importantly if B4 was the only buyer to turn up on the day the domain would still sell for $1000 rather than the $10 it would currently sell for with the noreserve AMA system.
The "guarantee" in itself doesn't instill excitement or auction frenzy - at the end of the day - it is only 2+ people in the auction that will create this real buzz.
The guarantee to sell is only meant to improve outcomes for sellers and close more deals...
It's not meant to be the solution for bringing more buyers to the market.
If NetFleet has 7 - 10 bidders on every domain there would be no shortage of domain auctions achieving good results, but unfortunately that's not the present reality, nor do I suspect that will change anytime soon.
We are also working (as early as this week) on streamlining and improving the offer / counter offer communications to allow (still anonymous) but more fluent and advanced communication between buyer and seller.
Great to hear.
