Why Using a Single Sale to Evaluate a Domain Can Be DangerousPosted: February 22, 2012
One of the hot news items in the domain industry today was an enormous reported domain sale, PrivateJet.com for $30.18 million. If taken at face value, it would be by far the largest domain-only sale ever, surpassing Sex.com at $13 million.
However, the sale may not be what it seems. Herein lies the problem when using a single large sale to make a case for domain value. Someone may see the headline about this domain sale and run out and buy private jet related domains for their business or for investment or resale. They may end up drastically overpaying for the domain or domains they buy and may not realize it for quite some time.
We’ve touched upon this subject before in our article Why Using Domain Sales to Evaluate Domains Can Be Flawed, mentioning outlier sales in particular. PrivateJet.com is certainly an outlier sale, but the difference here is that there are many red flags about the sale that may make it worthless to consider for evaluation purposes.
What are the red flags about the PrivateJet.com sale?
1. It was reported in a press release
Obviously, if a private transaction gets published anywhere, it’s because the seller or buyer gives the details. In that regard, private transactions in general could be taken with a grain of salt if there’s no means of verifying the details.
In this case, it wasn’t just a private transaction, but the sale itself was publicized in a press release. Numerous such publicized sales in the past were unable to be independently verified, which could indicate the sale price indicated may not be true or there may be undisclosed terms of the deal that allow for far less money to change hands.
2. Per the press release, it was cash + stock
The press release indicates the sale was a cash plus stock transaction, not indicating how much of each was involved. Based on their wording, it could be $1 in cash + $30,179,999 in stock.
What’s the difference? The stock may not be worth anything close to what the company evaluates it at. They may place that value on it but again that can be a marketing ploy to build up the sale price and help the press release gain more attention.
3. The press release contains a hard-to-believe statement about offers received
Per the company that sold the domain: “After many seven and eight figure offers for PrivateJet.com, it took the vision and experience that Kenneth Starnes brings to the table to convince myself and our board of directors to more forward with the disposition of this asset”
Given the domain itself was parked and therefore the only reason to purchase it is purely on name quality, it’s very hard to believe that they received “many seven and eight figure offers” prior to this sale and didn’t accept any of them.
That said, there are many legitimate and verifiable outlier sales that happen, and given that, anything is certainly possible. What this company describes however is very highly unlikely for a domain like that given similar sales and prices of similar domains on the market.
4. Despite the sale publicized via press release, the domain is under private registration
Often, one only needs to look at the whois history to verify that a domain has changed hands, which gives a reported sale at least some credence. In this case, the domain is under private registration, hence being unable to verify the owner. In other words, there is absolutely no way to verify the domain even changed hands.
It’s also not very likely that a company having spent $30 million on a domain (regardless of the cash/stock split) would use a private registration on the domain. Very few companies in high dollar industries would use private registration on their primary domain.
What would it mean if the domain sale actually didn’t happen at all? The seller would have basically spent the cost of a press release to generate a huge amount of unwarranted buzz. Such things have happened in the past. One such occurrence was the supposed sale of Beauty.cc for $1 million.
5. The supposed buyer was a brand new company with no established web presence
The company who bought the domain, Nations Luxury Transportation, LLC, shows as having been created in October 4, 2011. They had no web presence at all – not even a holding page, which would generally be the case with a company purchasing a domain not matching their name. In fact, the domains matching their name weren’t even registered at the time of the press release.
6. The seller is not very established and their page simply has an email signup
If the press release about this sale turns out to be highly inaccurate, my belief is that it is to both build press and links to the domain itself (privatejet.com) and to build press for the seller. The seller, Don’t Look Media, seems to only have had a web presence since 2010 and that presence consists of only an email newsletter signup.
Especially if the domain didn’t change hands, the press release would be a low-cost way to both secure links to the domain and get many email signups from curious visitors to Don’t Look Media’s website.
There’s no way to really confirm whether the press release on this sale is accurate or not. However, even assuming it happened exactly as described, the broad indication of a “cash and stock transaction” leaves a wide range of the actual cash cost of the domain. On top of that, it would still be an outlier sale and an extreme one at that. Jets.com for instance sold on Sedo in 2009 for $375,000.
When you are buying your company domain and trying to evaluate options, take into account that an outlier, even if 100% verified and a 100% cash transaction, is still not a good sole basis for the value of a similar domain. We have many posts here about evaluating domains. Looking up similar sales is still a good idea, but focus on the whole picture.