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02|22|2008 02:17 am EDT

Keep Playing the Music . . . Really, The Ship’s Not Sinking

by Adam Strong in Categories: Editorial

titanic sinkingI received an email, right after I posted about the TRAFFIC auction results. “Don’t sound the alarm ! The ship is not sinking.” Seriously though. No. It wasn’t that dramatic but it did remind me of the scene from the Titanic movie, where the band keeps playing. The email referred me immediately to Michael Berken’s post on his blog about his take on the auction.

Given that my previous post about the auction simply stated “Making comparisons to past results and using the data we gathered, the results of this auction aren’t very impressive,” I was admittedly surprised at this quick damage control by the sender. So, I took a little time to read Mike’s post and a few others across the web and add my further commentary below (and after the jump). Berkens points out several factors that contributed to the eventual results of the TRAFFIC auction and seems to be unfazed overall. . . .

1. Timing with DomainFest stealing some of the TRAFFIC thunder and sales. – While I can sympathize with this argument, TRAFFIC has never been without a little competition. Sedo/Greatdomains conducts online auctions ending around the same time as the events, which takes away domains and bidders wallets. Domain Roundtable also introduced competition ($3.8 million on their first live event) that should have taken away some thunder as well.

I suppose I can see how you would take the 2 events and combine them, but I think in all fairness since the domains were being submitted months in advance Moniker/TRAFFIC had a good inventory and a perfect opportunity to make some more record breaking sales. The other problems may be more to blame . . . but let’s talk about those too.

2. More high priced domains – sure this is a top heavy auction but that’s the reputation that TRAFFIC/Moniker has built out of this auction. For the results not to produce more sales in this caliber, one has to be a bit unimpressed. The TRAFFIC auction has a reputation for 7 figures sales doesn’t it ?

3. High reserves – This is like a skipping record. It’s always about the prices though. Auction companies need to pick better priced domains. Domains that will sell and that are priced right. This is as basic as it gets and there’s no time for laziness in this department. DomainFest had a similar problem. I did a short exercise before this auction to find domains I thought were priced right. My list was very reflective of the results of the auction. I found around 50 and I’m a tightwad. The auction produced around 80 sales.

I can assure you that many names that sold at past TRAFFIC auctions had high reserve prices and still sold or still received bids. I know because I’ve bought at least one. It’s nothing new to have bloated prices. Sellers are accustomed to getting a little more out of their domains at TRAFFIC but the high reserves aren’t working out in this climate apparently.

All in all, I think Mike makes some good points, but people expect more out of TRAFFIC, regardless of competition, regardless of high priced reserves. I think even Monte expected better. Mid-way through the auction, when antidepressant.com was brought up on the block, Monte proclaimed “someone needs to bid or I’m going to need some of this”. We all could use one possibly.

Elliot Silver speculates on his site that the market is at rest. Can we call this a plateau? Ron Jackson agrees with Mike and stated on his site the “overall domain market which remains strong.” Ron never would say anything negative would he ? He’s way too nice ! Even Andrew Alleman reports his view of that “If tonight’s domain name auction was a barometer for the domain industry, we know nothing more than we did before the auction began. The results were, well, mediocre.” There isn’t anyone in this space writing about it who wants to sound any alarms. Myself included. Why would we? We’re all heavily invested in the space and want for it to continue. Before the auction, many people I spoke with, among them the top domainers, commented that this was one of the most important auctions yet. If it was so important, what did we learn from the results ?

[image source]

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13 Comments

Andrew @ Domain Name Wire

February 22, 2008 @ 9:41 am EDT

Adam, this is a great summary of the auction. Well done.

RG

February 22, 2008 @ 10:28 am EDT

Great analysis here on the auction.

Keep up the great work – can’t get enough of this type of anaylsis and coverage in the domain industry.

Liz

February 22, 2008 @ 2:27 pm EDT

I’m new to this business and it really helps to hear a point of view assessing the state of the industry. It’s difficult to find information that is not part hype since the domain world seems to be built on speculation.

Steve

February 23, 2008 @ 1:49 am EDT

Well; while I believe the secondary domain market is actually doing just fine (which I suspect the total reported dollar volume on DN Journal was for 2/07 vs 2/08 would show); as for #3 above, I’d take another look at what Rick earlier this month shared on his blog:
http://www.ricksblog.com/my_weblog/2008/02/valuation-is-in.html#comments

What this wide divergence in valuation opinions also does–in addition to Rick’s point about raising serious questions concerning the value of “professional” “appraisals”– is to act as an excellent indicator and strong evidence that (hard as it may be for us all to accept) that the various auctions are by and large … already doing the best they can in working with their sellers to set the reserves/ price ranges.

Valuing domains is a long, long way from valuing real estate. Two domains cannot be compared to each other like two houses, or two commercial buildings, or two pieces of land can; because each and every domain is completely and totally unique.

We all regularly see domains that some of us believe sold for far more than they were worth (iReport, anyone?) … and others that were real steals.

But to who? You? Me? The seller? The buyer? An auction company? Someone else?

Fact is, disagreements over value are never going to go away. Ever.

And the auctions are never going to produce a list of reserves/valuations that we all agree are “correct.” Ever.

The best thing to do about this state of affairs?

Stop complaining and just accept it … while taking advantage of the myriad opportunities that such a wonderfully imperfect, forever fractured marketplace offers each and every one of us.

Jeff

February 23, 2008 @ 10:41 am EDT

Very thoughtful analysis – thanks. But ultimately, the buyers at TRAFFIC are mostly domainers, not end users. It is what the end users do that is going to decide whether the ship sinks or not.

Adam Strong

February 23, 2008 @ 11:53 am EDT

imho TRAFFIC makes for a very good barometer of market conditions because of what you point out. Domainer purchases represent a large majority of the reported buys in this market, thus when domainers slowdown buying it should be noted. . . End users are still buying domains don’t get me wrong, and it’s a hard market to gauge because of so many unreported/NDA sales, but what should be said when domainers slow down in their buying?

Andrew Allemann

February 23, 2008 @ 1:01 pm EDT

Adam – The latest Sedo market report for 2007 talked about the % of domain sales they can’t disclose. For .de domains it was something like 90%. For .com it was less, but still substantial.

Also, I think the argument made by some that you should combine this auction with DOMAINfest’s auction is flawed. After all, there were twice as many domains up for grabs.

Johnny Rotten

February 23, 2008 @ 11:35 pm EDT

I think this auction has very little bearing on the actual domain name marketplace. I think most domains are sold privately, not through actions. As stated above, only those in the business partcipate in these things…and all that can be taken from this is a greater degree of understanding of the appraisal process: Domainers have a much better feel of a domains value than the public.

tim davids

February 24, 2008 @ 11:02 am EDT

auctions carry a different psychology than day to day domaining…IMO sellers are looking for that “lightning strike”…they post in the forums “I got accepted” like their ship has just come in. I offer 2k for a name privately…saw it at an auction with a 25-50k reserve last fall, I just bought it for $1995. Summary, dont read too much into the auction scene.

Sol

April 1, 2008 @ 9:39 am EDT

I did a short exercise before this auction to find domains I thought were priced right.

Yusuf

September 30, 2008 @ 11:11 am EDT

Hi
DO you sell books of the Titanic.

Frank Michlick

September 30, 2008 @ 9:09 pm EDT

@Yusuf, no we don’t, this is just an image we used. Try Amazon.com ;-)

Taylar_marshall :3

April 29, 2012 @ 10:50 pm EDT

i love the Titanic!

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