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Domain Auction: How To Buy Or Sell A Domain Name At Auction

Michael Gargiulo - CEO, VPN.com

By: Michael Gargiulo, CEO at VPN.com

Updated: 9:13 PM ET Mon, January 18th 2021

Graphic representing a domain auction

The primary reason that domain name value appraisal is such a complex practice is that it’s not objective. An expert evaluator relies on a wealth of practical experience every time they assess a domain. Few people have this expertise, which can make selling a domain a complex process, but if you want to sell quickly and easily, then a domain auction may be perfect for you.

Domain Auction Basics

If you’ve ever participated in an auction or used eBay, then you already understand the basics. You post a domain name and a time and date when the auction ends. In the meantime, any parties that are interested in purchasing the domain are free to bid. Once the set time for the auction elapses, the one who placed the highest bid secures the domain name.

Domain auction sellers typically include investors and companies that no longer need an old domain. Investors who poach expiring domains will often turn to auctions, as well. Buyers are generally investors who are interested in the possibility of reselling at a profit in the future. Since an auction operates on a limited-time basis, it’s unlikely for someone seeking a specific domain to find it on auction.

Depending on the precise settings the owner is using to arrange the bid, there can be various exceptions to these rules. For instance, an auction might continue past the normal end time. Additionally, it’s possible for an auction to end with none of the bidders walking away with the domain name. It’s important to choose a domain auction site with the features to support the style of auction that you intend to run.

How Domain Auction Sites Work

Domain auctions at physical auction houses occasionally happen, but they’re by no means the norm. Online auction sites are the primary resource that people looking to sell in an auction turn to. They work by connecting sellers to a community of buyers and providing a platform for the sale to take place.

Many of the best websites will evaluate the value of your domain on their own, which will provide useful insight to guide your sale. In exchange for facilitating an easy, straightforward sale, they charge a commission based on the value of the winning bid. However, domain auction sites usually do not have the means to execute the sale on their own.

When you use an auction site, you’ve simply come to an agreement on a sale price for the domain. You’ll need to contact an attorney or utilize an escrow service to ensure the sale itself goes smoothly. Since your success is in the interest of the auctioneers, they’ll often provide direction to organizations or individuals who can help. Additionally, bidder verification can help ensure you’re only dealing with serious customers who aren’t acting dishonestly. It ultimately hinges on finding a good website to work with.

The Mark Of Good Domain Auction Sites

A good domain auction site will do all that it can to offer security and a good value to sellers. There are numerous ways to do this, and the following features are among the most important.

Complementary Or Affordable Evaluation

Since the auctioneers collect a higher commission when you secure a higher sale, they should help you optimize your auction. One simple way for them to help you and themselves is by evaluating the worth of your domain. While the exact value of your domain isn’t so important in an auction, a rough estimate is important. It helps you develop expectations and set the parameters for a profitable sale.

Reserve Feature

Every auction site allows the seller to set a minimum bid, but this has its drawbacks. A bid that starts from $1 will draw more interest and bids, and this competition is good for you. However, going without a minimum bid leaves you vulnerable to selling your domain at a grossly low value. A reserve feature allows you to have the best of both choices. It allows you to set a hidden value which is your minimum acceptable bid. Then the auction proceeds as if it started without a minimum value, but if the bidding doesn’t reach your minimum then no one wins.

Bidder Verification

Domain names are often incredibly valuable financial assets. Some of the more reliable, respected auction sites will use bidder verification before allowing buyers to make high-value bids. This helps prevent you from wasting time and money due to dishonest actors interfering with your bid.

Reference To Escrow Service

Buyers and sellers both benefit from turning to a reputable escrow service to execute the sale. It isn’t too hard to find such a service, and Escrow.com itself offers domain name services. However, an auction site providing references to a few different options is a good sign and welcome assistance. Having several choices at your fingertips helps you find the one best suited to your needs and streamline the process.

Anti-Auction Sniping Measures

Anyone who’s used eBay for any measure of time will have fond and less-than-fond memories of auction sniping. This is the act of waiting until the very last second to place a bid in hopes of winning at an artificially low price.

In a physical auction, this can’t happen because prospective buyers can challenge any new offer. Auction sniping is disastrous for sellers, so a good auction site will add extra time in response to last-minute bids. This simple addition almost guarantees that you’ll get a higher, more accurate sale price.

How To Auction A Domain Name

Running a successful domain auction is remarkably simple. Once you’ve gained a rough or exact estimate of value, you’ll be able to choose between a minimum bid or reserve. Then you’ll begin the auction and wait for the bidding to start.

Assess Domain Name Value

An adequate, free evaluation is typical among auction sites. However, you can generally understand domain name value through the concept of brandability. Essentially, this is how easy it is to build a brand around a given domain. Three and four-letter domains are extremely valuable, as are one-word and two-word domains. A generic name, such as generic.com, can command a good value. You can compare the brandability of your domain to similarly brandable ones that have sold recently to understand what it can sell for.

Decide Minimum Bid Or Reserve

In general, setting a reserve is going to be a better choice than using a minimum bid. Ultimately, the practical difference between the two is small enough that choosing a minimum bid out of preference is fine. If you have no preference, choose a reserve price.

Now that you’re ready to launch the auction, it’s simply a matter of choosing the right auction site.

VPN.com Premium Domain Brokers

Here at VPN.com, domain names are one of our specialties. If you’re interested in learning more about the industry, you can find out more by reading our site. Additionally, you can consider selling your domain name through our brokerage instead of an auction. We can help you assess which option is best for you moving forward. When you need first-rate domain name expertise, get in touch with us.

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