Undeveloped .com Domain Name Prices vs SEO Service Prices vs Business Prices

Jun 23rd

It is easy to appreciate how under-priced some SEO services are when you look at what people are willing to pay for other traffic sources. $11 million in domains changed hands at the recent TRAFFIC conference, and $52 million more would have if the owners will willing to let them go! Once domains get properly developed their value quickly increases. Business.com was claimed to be overpriced in 1999 for 7.5 million, but now is up at auction for $300 million plus. Business.com is not much more than a thin arbitrage play, with a great name, great branding, and great marketing, all funded by the power of search.

To appreciate how much marketing and sales they do, consider that they only employ 6 editors to run the entire directory, while having around 100 employees. Without SEO/SEM that domain would not have the leverage needed to get syndication distribution partnerships, have strong revenues, custom ad deals with Google, or command such a high multiple.

I have spent $10,000+ buying a non-type-in domain name that someone paid $8 for. I have done it more than once in the last month. Why? Synergistic value in branding, associated perceived trust, and market differentiation...which are all important in a crowded marketplace.

Are domains overpriced? If you pay retail and don't have a plan for them, maybe. If you have a good plan and develop them (or buy below retail in a growing market) you should do well. As ad dollars continue to move online almost all markets are growing markets.

Sure a lot of people think you are at the mercy of Google as an SEO, but in certain markets people EXPECT to find certain sites. Google has to rely on showing some partners in their organic results to sell paid search ads against. If you look at Google's personalized homepage tabs they also offer a I'm Feeling Lucky button that adds the most popular items to that tab. If you create a tab for your keywords does Google push your feed? If you get the right name and market the hell out of it, I think your rankings, traffic, and business model are at least as defensible as type in traffic or just about any other business model.

As SEOs we tend to undervalue some of our assets because the work we do for clients is so valuable relative to the rates we charge. After a few hours of work you can offer most clients strategies that increase their non brand traffic by at least 10 to 20%. But when you hear that Business.com might get $350 million for something making $15 million a year, it makes it easy to want to heavily reinvest into creating a real brand of your own, instead of working on a group of smaller projects.

If you get a scalable business site up to $30,000 a month in free cash flow, then reinvest all of that into marketing and branding for a couple years, it is possible to build something that generates at least a few million a year and sells for at least 8 figures. At that point you can retire if you want to, but I will be 30 in a few years, so I need to start pushing harder. :)

Published: June 23, 2007

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Comments

Bulbboy
June 24, 2007 - 2:40am

Does that mean I'm over the hill at 31?

Way to make a guy feel old.

;-)

Mack
June 24, 2007 - 4:12am

It amazes me sometimes to see some of these domains being built up and sold again. Sticker shock we will call it for now. I believe buying domains with a good start and building them into profitable sells is something we will see a lot more of.

jeff - From Web...
June 24, 2007 - 9:37am

Love to know your readers view point if you purchased a domain ... example PurpleWidgets.com and secured the
toll free number 1 800 PurpleWidgets , Did vanity phone numbers play a part in Traffic auction...

ipvestors - Amir
June 24, 2007 - 7:07pm

Domaining seems to be growing and investing in domain names and the internet continues to outrank other forms of investments many times. Internet investing continues to place many people into retirement. What I would like to see is an article or book written by the likes of Aaron describing a long term sound strategic plan for investing on the net. This can be an e-book and can contain a discussion forum and a market place etc.

Amir

Sumbini
June 25, 2007 - 1:05am

Great blog post! It seems that SEO can work for any domain (ex., google.com, hotmail.com, ebay.com) But when done with a "generic" domain (ex., cars.com, homes.com loans.com) it also benefits from relevant market recognition and on-going, no-cost "type-in" traffic.

I'm not an SEO or Web Design guy but I do have a generic domain that I made a site for and that I would like to implement some SEO into... Tortillas.com

Any help would be appreciated.

Sumbini

Will Scott
June 25, 2007 - 5:33am

I think as long as Google continues to give value to [keyword][keyword].com there's value in buying them.

The unfortunate part is that real companies for whom the key phrase accurately describes their business either have to make up nonsense names or have to settle for a lesser TLD and suffer the user confusion inherent in that choice.

But, if they really have value to the business they're worth 10K just as quickly as they're worth $8.99.

I'm all for prospecting, but I'm much more a fan of building value.

Rob
June 25, 2007 - 2:18pm

If a domain name is priced at say $10,000 - that is $1k a year for 10 years.

Likewise $100k name... $1k a month for 8 years.

Breaking down the figures makes domain names look quite undervalued to me.

Paul
June 25, 2007 - 5:50pm

Would this website be number 1 in Google and Yahoo for SEO book if it didn't have the domain seobook.com or seobook.tld.

June 25, 2007 - 6:40pm

Hi Paul
Perhaps around a million inbound links and lots of usage data.

Chris Nielsen
June 25, 2007 - 8:32pm

So you are plowing your SEOBOOK profits into domain names eh? Just remember to diversify your portfolio with bond domains, mutual fund domains, real estate domains, etc... :-)

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