Alex Tajirian, CEO at DomainMart in a post on CircleID.com just ripped into the IDNX domain name index backed by Thies Lindenthal and Sedo.
“The index is intended to be a benchmark for domain owners and investors. “
“But it’s out of line with other studies and the common sense of how a market operates. A much better barometer to follow is average prices for groups of domain names with similar characteristics.”
“Using a single index would have dire consequences. ”
“Other problems with Lindenthal’s single price index:
1. It’s based on information taken from just one market, Sedo. But other studies reveal that sale prices for similar names vary across marketplaces.
2. The reported index-price correlation with the NASDAQ 100 is grossly misleading. Why would prices of domain names of large companies move in synch with those of small and backdoor domains! One would expect that different groups of domain names would be correlated with different indexes depending on their risk characteristics.
3. The methodology is not robust to the presence of outliers in domain name price data.
4. The model does not identify risk factors driving domain name prices, such as the number of a domain’s key word searches, the cost per click (CPC) of the key word, the popularity of the key word as shown by uses of it on Web sites, etc.
5. The model ignores evidence of a nonlinear relationship between prices and the explanatory variables.
Of course we have spoken about the inaccuracy of automated models to value domains in the past and feel there is no substitute for someone with a huge amount of experience who at the end of the day has the gut feel for what a domain name is worth.
We saw just the other day that once again basically 50% of all domains that sell at Sedo sell for $500 or less and only 5% sell for $5,000 or more.
Over at MostWantedDomains.com we have a $2,500 stated minimum but in actuality rarely sell a domain for less than $5,000 and our average sale is closer to $20K than to $500.
There are other large portfolio owners like Mr Schilling, Mr Schwartz, the Ham Brothers, and Scott Day just to mention a few who wouldn’t even bother to respond to a $500 offer much less sell a domain name for anything under five figures if not six figures.…