Domain squatters are like car salesmen

Posted by on May 7, 2007 in Blog | Tags: , | 3 Comments

Much to my surprise, one of the hardest things I’ve had to do while starting a new company is come up with a name for my product. Naming things isn’t one of my strengths, but the domain squatters have made this task much, much harder.

The biggest problem is that you can sit down and come up with a list of dozens of potential names, and then find that only a handful aren’t already registered by someone. The ones left are generally not very good. 37Signals says not to worry about getting the perfect domain, but I’m not yet convinced that you can ignore word-of-mouth (people literally speaking your domain name to their friends).

So if most “good” names are taken, that means buying one from a squatter. This brings me to my main point: negotiating with a domain squatter for a name is a lot like dealing with a car salesman. Usually, when you buy a car, the first offer or two from the salesman is outrageously high. He just hopes you haven’t done your research and that you’ll bite. Even armed with research, sometimes they won’t deal. The best thing to do is to get up and walk away. If they really want to sell a car, they’ll blink.

This is what happened to me. I made the lowest possible offer to start negotiations for a name I mostly liked, but wasn’t in love with. The reply was $800. Within two weeks, and mostly because I stopped responding to his offers, he came down to $150. I walked away, and he blinked.

The problem for squatters is that most domain names aren’t really worth anything at all on the open market. They’re only worth something to someone who has an idea or a partially finished application and needs a name. If the price is outrageous enough, we’ll just come up with something better. That gives us tremendous leverage: when the market for buyers is just a handful of people in the world, it’s essentially impossible to get them into a bidding war. So really what we’re trying to do is figure out the absolute lowest price the squatter will sell at and not hold on to that domain out of spite.

Unfortunately, even at $150, that means he can hold 14 or so other names that never sell and still break even, so this problem isn’t likely to go away any time soon.

3 Comments

  1. Akson
    February 14, 2008

    Got to this page thru google.
    A domain squatter is asking me 5k for a site where the budget for my project/site is altogether $3k but i want the .com name badly 🙁 im thinking of telling him i can pay $200. any other suggestions on how to negotiate?

  2. Steve
    February 14, 2008

    Akson, the only additional advice I can offer you is to reconsider the need for a .com domain. If you really need or want the .com, and your squatter friend won’t negotiate, your only remaining options are to come up with a different name or use a different TLD.

    Starting out at $200 sounds like a fine idea as long as you’re willing to come up at least 2-3x your initial bid. Good faith negotiation goes both ways: you can’t expect the other guy to lower his price if you’re not willing to raise yours. $5000 is a lot for a domain, so unless it’s a common word, he’s probably used one of those domain appraisal sites (which are a joke) to get that figure. It’s only worth what someone is willing to pay and you’re not likely to have competition to buy it.

    Here’s a glimpse into traffic to my site over the past month: 40% direct traffic (bookmarks or referrer-blocking), 22.75% from Google (and of that, 17.65% of searches were on my product’s name), the rest referrals from various sites.

    I don’t think the .com is terribly important. Get links to your site and the word out. People will follow the links or find you in Google, then they’ll bookmark you and send the URL to their friends.

  3. Akson
    February 20, 2008

    Thanks Steve for the reply, good points those.
    so far he hasnt replied back since 10 days (which Im guessing is part of his strategy) Yea i could go for the .net name, which is my backup plan if he doesnt come down