Domain Name Sales Price Gouging – The Truth

Share This Article!

It’s been a crazy 30 days!

We went from being busy at work to getting flooded in Hurricane Harvey and losing everything, to being price gouged at Avis/Budget car rentals.

It’s price gouging I want to talk about today since there are some misunderstandings in the domain industry by consumers looking to secure a domain for their brand.

First, let’s talk about how I got priced gouged trying to rent a car and then I’ll do some comparisons in the domain industry to see if we can clear a few misconceptions up.

Avis/Budget rental car price gouging in Houston, Texas

A couple days ago my wife and I decided to rent a car from our favorite rental agency (Avis/Budget). We’ve been renting cars from them for years so I figured, why not. Our last rental was for a round trip drive to Las Vegas from Houston (and back again). We generally pay $275 per week with unlimited miles for an economy class car.

It’s been pretty consistent, year after year at that rate. Well, until the other day that is when we realize all the car rental agencies were sold out except a few select locations that had a couple cars left.

As we started the process to rent one of the last economy cars available in the entire city of Houston, we were informed we would have to pay $479 per week for the same economy class car we have always rented. Obviously, I questioned the representative at Avis/Budget about the inflated rate and reminded them that in the state of Texas it is illegal to price gouge during a disaster (Hurricane Harvey flooding was definitely a disaster).

The Avis/Budget representative quicky passed the question to his manager and came back with an answer.

Are you ready for what he said?

Here it goes:  “I can assure you that we are not price gouging sir. We raised the rates as per our corporate office’s instructions due to limited supply, as well as flood damage and insurance concerns. Our corporate office is not located in Texas and thus Texas law does not apply.”

Needless to say, I was not happy with his answer regarding them raising rates during a disaster with limited supply to meet demands and we will never rent a car from Avis/Budget again. For those of you in Houston, Texas it was the Avis/Budget at Hwy 6 N. and Park Row location.

Domain Name Price Gouging

Now that you have a basic understanding of what price gouging is, let’s apply the same principle to the domain industry.

  • Limited supply to meet demands – This doesn’t really apply when it comes to domains since there are a plethora of different extensions that you can register to develop your brand on (E.g. .com, .net, .us, .info, .org, .web, .work, etc.). The supply is there, even though the extension your brand is available in may not be the most ideal for you.
  • Raising prices during a disaster – Since there technically isn’t a limited supply due to various extensions (Even if you don’t feel the extensions available are ideal), it’s not considered price gouging, but might fall under questionable ethics.
  • Raising prices in a particular domain extension – A good example of this would be the .com extension. As most veteran domain investors/resellers know, the .com extension is considered the cream of the crop and the best choice for any business looking to develop their brand online. Due to there only being one available in .com for a companies unique brand name (E.g. ScorpionAgency.com) it’s common for a domain investor/reseller to raise the price of the unique domain/property just like real property values go up in areas that are more developed, near high traffic intersections, and have a higher demand to build a business on.
  • Charging different prices based on a buyers background – Sometimes we find that a domain investor/reseller charges different prices based on research data they gathered on the individual or company inquiring about one of their domain assets. Where yesterday they quoted $400 to a small mom & pop shop that only had a $150 budget and couldn’t buy it, today they quoted $4,000 to a larger company with a $2,500 budget for the same domain name. While this may seem like price gouging, it’s actually not. Once again, there are a plethora of alternative extensions a company can pay a registration fee for and they are not limited to the one being sold by the investor/reseller. However, this may fall under “questionable ethics”.
  • Intentionally cyber squatting a brands domain regardless of extension – These types of cases have many gray areas that don’t always infringe on a brands trademarks (Consult with an attorney), however, it’s pretty common for cases to be won by brand owners when intent to profit off their specific brand is present. For example: If ToyotaEcho.com was available to register and not owned by Toyota and a domain investor not only purchased ToyotaEcho.com as an investment but also generated revenue by confusing consumers to think they were Toyota, it would be a pretty blatant infringement of the Toyota brand. Another example would be if the investor bought ToyotaEcho.shop and approached Toyota directly with an inflated rate over registration fee’s with an intent to make a profit off their brand, it could also be considered infringement of the Toyota brand as well as potential price gouging.

While I’m sure there are more examples and case studies out there, I think the above gives a pretty good idea about domains and price gouging. There really aren’t many cases where price gouging applies to the domain industry unless there is also a trademark/intellectual property issue present.

A domain investor/reseller can pretty much ask any amount of money they want for their domain investment (Sometimes, ethics may be questionable). Obviously, nobody will buy it if the price is too high or out-weighs the potential return/benefits. Because of this (gouging and ethics aside), it’s important that domain investors/resellers and consumers looking to acquire a specific brand name domain have the domain appraised properly so that both: the buyer and seller feel like they made a good deal on the domain.

 

It’s important to note that automated online appraisals are rarely (if ever accurate) and most (not all) manually paid appraisals are a scam. Do all your own research to formulate a value that works best for you and your business.

What’s a domain name worth to you?

Think about it!

Happy business building everyone!

———————————————————

Like what you’re reading? You can subscribe for instant notifications as soon as a new article is published in the top right of this page. If you are on a mobile device, you can scroll down and subscribe below.

Share This Article!

Eric Lyon

Entrepreneur, Freelancer, Domain Investor/Developer, Brand Designer, Brand Manager, Founder of Scorpion Agency™, Community Administrator at NamePros, And A Father.

Since 1996, Eric has managed companies with 240+ employees, online communities with over 1 million members, attended numerous industry related events/conventions and has personally worked with start-ups, personalities, small mom and pop businesses, corporations, freelancers, news outlets, and a variety of domain investors one-on-one from all over the world. That equates to a lot of years behind the scenes with his fingers firmly on the pulse of multiple industries.

LinkedIn: Profile/Resume - FaceBook: Profile/Social

Eric Lyon

Entrepreneur, Freelancer, Domain Investor/Developer, Brand Designer, Brand Manager, Founder of Scorpion Agency™, Community Administrator at NamePros, And A Father. Since 1996, Eric has managed companies with 240+ employees, online communities with over 1 million members, attended numerous industry related events/conventions and has personally worked with start-ups, personalities, small mom and pop businesses, corporations, freelancers, news outlets, and a variety of domain investors one-on-one from all over the world. That equates to a lot of years behind the scenes with his fingers firmly on the pulse of multiple industries. LinkedIn: Profile/Resume - FaceBook: Profile/Social