26 Oct

Straight talk on Premium Domains

Personally, I don’t believe in paying a domain registry extra for premium domains in almost any situation.  Coming from someone who happens to be in the domain registration business, I guess in order to explain that statement, but in order to do that I need to tell a little back story….

A couple years ago I helped facilitate a transaction on an extremely short and clever “domain hack” type domain for a friend’s online business.  Similar to Twitter and their “t.co” domain, this domain, while ‘cool and short’, would be of little other value by itself.  The domain was currently still sitting with the TLD registry.  From what we could tell they had reserved out all the single and dual character domains when the TLD went live, and did a whole marketing blitz about how the ‘best and brightest of .TLD would be auctioned off… but from what we could see, the one my friend wanted for their business was still unregistered, so clearly nobody else was that interested in this particular ‘best and brightest’.

I reached out via email to the registry, and was told that “Yes, it was still for auction, but they would require at-least three people to be interested in the domain before they could possibly start the auction.”  I acknowledged my interest, told my friend what I discovered, and moved on with life, quickly forgetting about what I figured was a waste of time in the first place.

A few months later, my friend hit me up and said that he had never heard anything from the registry, and he was more frantic than ever that he just had to have the exact domain in question.  Wanting to see if the whole ‘auction’ thing was even legit, I might have sent off an email from a random throw away email address just to see what would happen now that I knew they had at-least three interested parties (me and my alter-ego being 2 of them, my friend being the third)

Lo and behold, the very next business day, I had two emails waiting.  Someone from the registry was letting me know that “The auction for XX.XXX is beginning!  Please submit your best bids by 5pm Friday!”.   Intrigued, I called my friend up at lunch to see how we could best work this to obtain the best outcome, you know, the one where he pays as little as possible for the domain.

“I already sent off a bid for $5K!” he told me excitedly.

“You did what?” I responded, our conversation pretty much going downhill from there.  My friend had, in my mind, failed the first rule of negotiation, he gave them a starting number that was (in my mind) absurdly high.  To at-least see this whole mess through, I tossed out some low ball bids from my real email and from the ‘shadow’ bidder with no intention of derailing my friend’s $5K bid… Both bids I sent were below $1,000… more in the ‘couple hundred bucks’ range to be honest.  I figured maybe the two datapoints I provided would encourage the registry to take his $5k offer and run… and I let him know what I had done.

But no, it’s never that easy.  A day or so later, I got two emails stating the current high bid was $8K, and that if I wanted to exceed it, I could send in my new bid.  I called my friend and told him that because I knew he had gone with that ridiculous offer, that they were apparently lying to everyone (he too had received the most recent email) about a phony $8K bid and that he should run away from the entire thing as quick as possible.  There was no doubt in my mind that, barring a very strange coincidence and the one in a million sudden appearance of true 4th bidder, they were simply pretending there was a higher bid out there just to convince my friend to part with yet more cash.  I mean, he already started the race at $5K, and we all know everyone leads with a lower number than they’re really willing to pay for something.

Long twisted story short, after a furious back and forth bidding war with a bidder that didn’t exist… my friend ended up getting that domain for his business, entirely against my best judgement and guidance that week.   The price in the end was, well, enough to buy a new car.  Not like a Honda Fit type of car, no, no, a decent car, like, an entry level BWM.    My friend was convinced he got a ‘deal’, because he got a 10 year registration for his trouble, and he beat “that other guy” he was bidding against who he was battling it out with all week long bid by bid.

I, to this day, still believe he was swindled, plain and simple.  That mysterious fourth bidder didn’t exist.

So anyway, I’m naturally suspect of “Premium Domains” being sold by registries.  It just feels a bit used-car-sales-ish to me.  The registry, who controls the whole thing, pulls aside domains they believe to be “premium” before even opening the TLD up to the public, and then either auctions them off on the side, or simply sticks a price tag they make up on them and sells them as unique and special domains.

So we’ve never dealt in premium domains.   A few weeks ago however, we had a situation that put premium registrations back onto the radar.  The topic came back up internally, with there being some question of if we shouldn’t re-enable them from a purely financial perspective.

After all, as we’ve been pretty transparent about, our domain pricing is based on a very straight forward “flat percentage profit margin” across the board.  And if someone really wants baltimore.rent so much they’re willing to pay $2500/year for it, our profit from that registration is going to be significantly more than our take of say, “baltimore4.rent” at $63 and some change a year… (*)

From a strictly business profit standpoint, there’s a compelling argument to be made, clearly.

Except I can’t do it.  The arbitrary model of how they are chosen and priced just turns me off to the point that it’s just not worth it.

The irony being, a few weeks after this was debated, one of the largest marketers of ‘premium domains’ announced they’d be slashing prices on a huge swath of the names they’d been holding out on, and even ‘un-premiuming’ a number of them and putting them back into the regular name pool.

So maybe there’s hope that this business model hasn’t worked out to be quite as profitable as they hoped.  Maybe folks have become wise to the premium domain sham.


(*) The baltimore.rent vs baltimore4.rent is a true and valid comparison of two domains currently available in the .rent TLD as of right now to show the ridiculousness that is “Premium Domains” and how they are priced.