Domain squatters are like car salesmen

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.