mike031 said:
i don't think they do this as a hobby... it's a business.
Heck Mike anything can be called "business" these days. My aunt Peg that sells her soiled panties on eBay is also in "business". What I am trying to say it's not true hobby, but it's not a true business either. While they do have some "true business" traits (vanity, ego, impulse decisions) true businesses will never have such high tolerance for risky spending. For many of the so called big players these are nothing more than speculative investments disquised as "online business". How else can you possibly rationalize people who pay thousands on drops for names like ButtholeLintGadgets.com and similar? In fact I would not be surprised to hear that some of them have negative annual flows. The reason being for this kind of reckless behavior is that some of them are relative latecomers forced to start from scratch. And so in order to be taken seriously by the "industry" they have to bulk up their holdings by being on constant massive spending binges. The goal is to try and amass huge portfolios which they hope to sell to bigger money holders down the road.
Another reason why "big players" overpay for crappy names is for tax purposes (notwithstanding that many of them are on the run from their respective tax authorities). I am by no means an expert on this issue but I know enough to tell you that domain purchases can be claimed as tax deductible "business expenses" and what have you.
But keep in mind they don't look for any names. The kind of names they are happy to overpay are so called generic Ovt. searched names (even without extension) because those numbers are indicators of potential traffic and thus "supposed" value. So any term that has over 1,000 monthly searches (without extension) no matter how stupid it sounds and how far-fetched it is will attract bids between $2,000 and $5,000+. For example just recently somebody bid almost $5,000 ($4,588 to be precise) for MonogramTowels.com at Snapnames. Actually, this is an example of seemingly "decent generic name" consisting of two descriptive words, so one is inclined to feel "good about it", yet when you scratch beyond the surface you will realize that this is an obviously overpaid domain for several reasons. First, realistically speaking how big is the "monogram towel" industry? Or more precisely, how big and interested in "generic online presence" are the "monogram towel" dealers/merchants/purveyors who will be willing to buy this name for several thousands more than what the speculator paid? (cause for sure he ain't sell this name for $6,000). Second, a brief Overture check reveals that this term was searched less than 500 times last month, which in reality means that this domain is lucky if it gets, I don't know, maybe two unique visitors per day. That also means that it will probably take this speculator the rest of their lives using ppc pages before they recoup their "investment".
So why are they doing it you are asking yourself?
Why are they paying $5,000 at drops for names that will not sell here on this board for even $50.
Well here's the deal:
"MonogramTowels.com" in itself is shit, but sheer arithmetic/marketing probability tells us that portfolio consisting of 100,000 faceless generic terms like "MonogramTowels.com" and "ButtholeLintGadgets.com" will bound to have a few that will attract some end-user prices. Never mind the ppc "income" on names like this, if you do the math you will see that even if they only sell 0.1% of their names at end-user prices (that is only 100 domains at say 10k each, out of portfolio of 100,000) they will make a "decent living" out of it. And this is even without taking into account dividents they get from ppc aggregators, and tax breaks for legally wasting their money at Snapname drops, so in reality when they pay 5,000 for a shit name, they really paid "only" if half that.
And this is the kind of game they "play" while pursuing their ultimate goals and that is to pull "Ult" and sell their portfolios to "even bigger players".
