Why The Cost Of Traffic Domains So High

[datawan]

Ok, i would not consider myself a newbie at this and its nothing new however im at a loss here from a business aspect of why everyone is paying these crazy prices.

Domains with one month of traffic equaling $3/$4 a day in revenue selling for thousands and thousands of dollars.

Am I missing something here in saying that one months worth of traffic is not near enough for me to warrent this type of sale. It seems the standard is to sellf for 12 to 18 months of revenue. How is that even possible to do if the majority of the domains with traffic I see being sold on here do not have that kind of history.

I have seen a few sell in the past weeks in the 10K price range and im just baffled as to what has driven the assumption that domain's with a few months worth of revenue and traffic stats can warrent a year or two worth of revenue pricing.

From a business standpoint, and Im sure there are some exceptions, you dont get invested in or purchased if you show one months profit.

A little curious and confused at this point so please educate me some more guys/gals.

 

[diverge]

It's the landrush mentality, if you ask me. People erroneously assume that revenue is constant, and that link popularity will remain after the sale. Although at $3-$4 per day, 2 years' revenue is still "thousands and thousands" of dollars -- but 10k is a bit extreme. Other reasons for exagerated prices may exist if there is any inherent value to the domain itself, or if the buyer had a vested interest (i.e., competitor) or if they thought they could easily increase revenues through development.

 

[datawan]

I agree that the inherent value of a domain can increase the price, If I saw poker.com go up with not much traffic for whatever reason that domain in itself can be converted into a revenue stream easily.

I just think that to many of these are jump the gun scenarios thus causing the price to keep up higher than it should be.

If someone offered me a domain with a few dollars revenue and had 3-6 months of traffic on it of course I would pay a high premium for this as its sustained. However with 30 days traffic history and thats it, it would be hard to justify taking the risk for a domains that sells as if this traffic would be consistant for the next month, much less the next 12-24.

Of course then you look at the churn rates and get in, make a few bucks then pass it along and make your money back type sale.

 

[Biggie]

it's all a risk, but that's what investors do.

we take risks

i am glad that you are willing to pass on some 30 days worth of stats for 12 > 18 months rev names

that leaves one less speculator

 

[datawan]

it's all a risk, but that's what investors do.

we take risks

i am glad that you are willing to pass on some 30 days worth of stats for 12 > 18 months rev names

that leaves one less speculator

You are right, investing is a risk and some pay off and some done and in the end it all boils down to the basic principal of business....supply and demand , and as long as someone is willing to take that risk someone will be supplying the goods... d

 

[missedcall]

generic, type-in traffic dn making $3-4 daily can easily be sold for 10k
A long term investor will get this money in few years so why NOT pay for it ?

 

[StockDoctor]

Domains with traffic appear to be selling for 2 to 5 year multiples. So a domain making an average of $4 per day would sell up to $7,300. Also depends on the optimization. If a domain making $4 per day ($1,460 per year average) can be optimized better to make $10 a day ($3,650) then it might be worth up to $18,250.

Say you borrow $116,800 on equity in your house, and you pay 9% per year. Simple interest would cost you $10,512. If you then paid 4 years revenue ($5,840) for the above domain making $4 per day ($1,460 per year) and bot 19 more just like it, your revenue would be $29,200 per year - your expense of $10,512 would leave you with a net income (profit) of $18,688.

Of course there are tax considerations, compounding, appreciation, and Internal Rates of Return based on time, but you get the idea.

 

[dotNetKing]

Interesting approach Stocdoctor and I think it's valid, although maybe risky too, to some extent.

To give a slightly different angle, I would hope to make between 50% and 100+% profit in 12 months on money I invest in domains for sale.

If I spend $10k on domains today (which would actually probably be a bit tricky) I would hope to have increased the value of this to at least 15k to 20 k after 12 months and then up to 22.5k to $40k in the following 12 months. etc etc. This would be a far higher return on investment than waiting 2 to 5 years just to get the money back invested with no additional profit during that time.

One of the weak points in this scenario is that it will probably take a lot more hard grind than just sitting on a $10k domain for 5 to 10 years and watching the money come in all by itself after the initial 2-3 year payment period has finished.