In addition, most of the time domains sold on low multiples of yearly ppc revenue are 'not so good' domains with link/expired traffic. The current owner doesn't want to keep holding the domain because the links/traffic will eventually die down and the domain itself doesn't have much value. It takes a lot of time/money to maintain the old links and not everyone can do that.

Thanks.

I have read the posts and do appreciate the constructive feedback. I'm just astounded that only after 2 years in building my own domain portfolio that I could witness such a huge jump in multiples is all!! Great if you are the guy selling... sucks if you are the guy buying!!

I have spoken in depth with the 'investors' of who all deal in buying & selling property (industrial sites) and will revisit this post again shortly.

atleast all this WAS somewhat interesting to read.

"Try to buy a house or building for 2 years' rental income and see how the owner responds !!!"


The investors have asked me to reply to this post stating that the big difference with investing in property vs. domain names (internet realestate) is that YOU CAN BORROW against property BUT not against domain names.

This fact raises more questions with regards to sellers asking '5-10yrs' revenue and these investors can also borrow up to 90% against 'property' and nothing against domain names. You cannot tell me that internet property is the same as REAL property in this example.

Originally posted by mafia4
"Try to buy a house or building for 2 years' rental income and see how the owner responds !!!"


The investors have asked me to reply to this post stating that the big difference with investing in property vs. domain names (internet realestate) is that YOU CAN BORROW against property BUT not against domain names.

This fact raises more questions with regards to sellers asking '5-10yrs' revenue and these investors can also borrow up to 90% against 'property' and nothing against domain names. You cannot tell me that internet property is the same as REAL property in this example.

Right .
Is better = ZERO Maintenance.

I think I understand mafia
he is saying you can use the house as collateral and can not with domain names.
thats why my house is mine, I own it and never paid a penny for it. it is about 8 years old and its next to a river. didn't have to borrow anything. (people are probably wondering how I got a free house that I don't pay anything at all for that is mine. I got lucky that all)

Annual property tax vs. domain renewal fee

Actually, you CAN borrow against domain names. (good ones anyway.. that is)

See Digipawn.com. It's the first place of it's sort, but I guarantee it won't be the last.

Cheers

DigiPawn operates essentially at pawn shop levels, charging 15% per name borrowed against, PER MONTH!

There's another company that does a more traditional loan against web portfolios or names. I'll dig the name up this weekend from my trip to TRAFFIC SV.

You cannot tell me that internet property is the same as REAL property in this example.

Correct. It's not.
However, nobody drops by my house and pays me dimes, quarters and dollars - every day - for simply owning my house or houses, either.

Originally posted by mafia4
up to 90% against 'property' and nothing against domain names. You cannot tell me that internet property is the same as REAL property in this example.

Right now I'll would prefer to have
$1,000,000 or $10,000,000 or $100,000,000
in domain names then the same amount
of $$ in real estate in Florida.

I agree with Harry. I have recently sold two of my rental properties in South Florida and used the money to buy more domains.

Originally posted by mafia4
You cannot tell me that internet property is the same as REAL property in this example.

And I'm very greatful it's not.

I still owe the bank for my home (= mortage) but all my domains are paid for and will continue to be with ease.

$7 to a home gets me a box of nails, or perhaps some stamps to send out my utility bills and property tax bill.

As domainers the foregoing makes for interesting reading...we all, I am assuming, own domain names and and when we sell we are only interested in max value...but when we buy...the lower the better.

I believe a domains value should be determined thusly:

book value+ (net earnings*multiple) + goodwill

Book Val is the basic upfront acquisition cost for the domain (reg fee)...therefore, as far as I am concerned there is no such thing as a worthless domain...the concept of valuing a domain at $0 because one perceives that finding a buyer is dim is at best spurious....if that was the case then we could logically extend that to any asset (real estate, mv, etc)...from an accountant's stand point, assets have input costs or replacement cost which form a conservative basis of valuation. The same obtains for a domain albeit vitual.

Net Earnings - this is the amt the domain earns mthy from parking etc less mthly recurring maintenance (hosting etc). Bear in mind though that if earnings are expected to rise or fall some form of average growth factor must also be assumed...lets call this F.

Multiple - the number of months or years that net earnings can be sustained...this mystery can be easily solved by looking at the domain in question and the industry category that represents the best fit. The stock market is well developed and can form a basis for the multiples used to value domains. Since the general consensus and actual experience are that domains have increased in value at a much greater pace than stocks, it is not unreasonable for domain multiples to be much higher. Domainers should use the domain sales archives to establish multiples that can be justified.

Goodwill - Even accountants agree that this is a nebulous concept. However, we can agree that this has to do with branding, industry type and growth prospects, seller/buyer perceptions, etc. Additionally the question of the domain's strength is critical (one word, 2 words, easily spelt, easily remembered, etc). For the most part these are the intangibles...they are always open to discussion. So for me the only aspect of a domain's value that should be subject to ongoing discussion is its goodwill...the other aspects we can assign some value, with a certain amt of confidence.

In essence then, if I have a domain that can be categorised with the banking industry and it earns $200 per mth parked with hosting of $10 per mth...my domains value should be:

Base Value - Reg Fee - $9
Net Earnings - 190
Ave Earnings Growth - F
Banking Indus Stock Trading Multiple - 8* net earnings
Banking Indus Domain Trading Multiple - 12* net earnings (this can be refined from historical domain sales)
Goodwill - X


Domain Value = 9 + ((190*12*F) *12) + X

IMO these are the components of a domains value...to price a domain solely on PPC falls short...worse if multiples and annual average growth rate are not taken into consideration. Of course goodwill remains the X factor...which we can debate ad nauseam.

Somebody tap Domey on the shoulder.