Domain Auctions – The Good, The Bad and the Ugly

Domain auctions are something the great majority of domainers participate in frequently. Many domain names that are expiring can be back ordered and won at subsequent auctions at places like Namejet, Snapnames and others. There are domain name auctions ending almost every minute at auction houses like GoDaddy, Sedo, Bido, Flippa, EBAY and many others. There are exciting domain name auctions that take place live at domain conferences like T.R.A.F.F.I.C. Some people like the thrill of being in an auction, whether it be live or just on-line, constantly refreshing the screen as the auction winds down to determine if they are the winner. Many domainers get involved in auctions, but some really have no intention on winning the name. They just want to participate, perhaps to have some insight into the final result. Lately, there are many great names that appear in domain auctions all of the time, making it a real exciting part of being in the domain name business at this time. However, like anything, there are some good things, some bad things and some down right ugly things associated with domain name auctions, depending on whether your a buyer or seller, and they are discussed here from my point of view.

Domain Auctions – The Good, The Bad and the Ugly

GoDaddy recently changed their auction rules by extending the time added to the ending of each auction, anytime there is a bidder in the last 5 minutes of the auction. They have been operating for quite some time with just a two minute time extension and then recently changed it to 10 minutes. Within 24 hours of making that change, due to an outpouring of complaints, they changed it to 5 minutes, where is currently stands now. Many auction houses do this, in hopes of driving up the bidding and perhaps e-mailing those that have been outbid with a warning so that they can revisit and perhaps provide a higher bid. Flippa adds an entire hour each time there is a bid within the last hour. Most buyers hate the time extensions for several reasons. Some domainers like to “snipe” names, providing a last second bid in hopes of winning the name, while not drawing attention to the name. Time extensions really don’t allow for “sniping” in its purest form. Domain buyers are also busy people and time extensions only eat more time that a domainer could be spending on many other things. If they like the name, they need to be active in the auction and if someone else likes it too, you can have a bidding war that can go on for hours. I find it crazy when those that know how the extensions work still wait until the trickling seconds to provide another bid, only wasting valuable time! Like most, as a buyer of domain names, I hate the time extensions for domain name auction bidding. On the other hand, as a seller of domain names, time extensions are awesome, especially when there is a bidding war for your name. Time extensions allow you some time to really hype up the ongoing bidding war by using social media, like Facebook or Twitter. Like I said earlier, many like the thrill of an auction and bidding wars provide the perception of demand, although it’s not really a perception, it’s realty at that point.

Not every auction platform has time extensions. A great example is EBAY. I have sniped many items from EBAY sellers by bidding at the last seconds, but also lost many items to somebody else doing the same thing. The majority of auction houses do have incremental bidding, which means that each bid are provided in certain pre-defined increments, so that someone is not constantly outbid by a penny. If they really want the item, they need to be willing to up the bid to at least next increment, which is always set before the auction begins. My favorite domain name auction feature is proxy bidding, which allows you to place the maximum amount you are willing to bid for a given domain name. The auction platform will then enter a bid on your behalf against other bidders in the smallest required increment and up to your set maximum amount. It is a great feature, especially for a part time domainer like me, because it let’s me do my day job and not have to closely follow the domain auctions as they are happening. I know what I’m willing to pay and I set that amount. If I get the name, I know I got a deal and know I can sell the name for a higher price. While its my favorite feature, I kick myself often, as I’ve lost many domain names by somebody winning the name for one bidding increment above my maximum bid. I always seem to grind my teeth when it happens, but one should always set limits and stick with your guns in the end. I don’t know about you, but I’m in this to make some money. If you watch any of the auction hunter shows out there, they all operate the same way. That’s why they are successful and have their own show! I wonder who will have the first reality domaining show?

A controversial point among domainers with domain name marketplaces like SEDO, 4.cn and others is that once a seller receives an offer on their domain name, they have the option to kick it into public domain auctions, where the bidders offered price is utilized as the reserve price for the domain auctions. After reading several threads on the subject within domain forums, it is apparent that some domainers really despise this practice. On the other hand, there are many sellers who love the idea, as it provides a chance to get the name into a public auction, where there are many more eyes and possibilities for a higher priced sale. A seller does need to be comfortable with the initial offer, however, because the auction results in a sale for at least that initially offered amount.

Another good and bad point about auctions, depending on if you are a buyer or a seller, are the reserves, which we’ve touched upon already. A seller can set a reserve price for their name at most auction houses, thereby insuring that they will get what they want for the domain name (at a minimum), assuming there are bidders for the name. Most auction houses charge an additional fee for setting a reserve and sometimes the fee is dependent on the reserve amount set.

Having participated in many many auctions over the years for a variety of different things, it is very apparent that the most ugly side of auctions is the non-paying high bidder. Nothing is more annoying that a high bidder backing out of the deal and not paying for what they have won, other than a seller not sending the merchandise because they feel the auction did not command enough money from the winning bidder. I’ve experienced both and neither will get you in a good mood. It is a real waste of time for the seller and/or buyer and is always a real loser for the auction house. The domaining industry is a small world and what comes around goes around. As such, think twice before backing out of a deal, whether a buyer or a seller, as your reputation will be tarnished and you’ll have a harder time getting deals done. Many domain forums and blogs have name and Shame posts, whether deadbeat buyers and sellers are called out and identified. You’ll never see me on these lists and I better not see yu either!

Thanks for checking out some of the good, the bad and the ugly associated with domain name auctions!