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Sedo Now In the Domain Regsitration Business

September 14, 2010

Could Sedo’s new search tool lead to a decrease in aftermarket domain sales?

Perhaps you’ve noticed Sedo’s new ajax-driven domain search functionality by now.  Forget whatever you’ve heard about making it easier to find domains (though I’m sure it does that).  If you’re someone who makes a livelihood from selling domain names, here’s what matters:

Sedo has now entered the domain registration business through a partnership with domain registrar 1and1.com.

Sedo is no longer strictly an aftermarket domain sales channel. They’ve opened up their channel to new domain registrations.  What exactly does this mean to the thousands of domain sellers who’ve helped build Sedo’s business over the past decade?

Although I won’t go so far as to say that Sedo is “throwing domainers under the bus” as some other domain blogs we know have sensationalized in the past, I will say that the new search tool does clearly have a negative implication for those of us who sell domains.

In the image below, I’ve performed a search for the keywords of a domain name which I own.  Take notice that along with my listed domain, Sedo now alerts buyers to the fact that the alternate extensions .net, .org, and .us are available to register.

New Sedo domain search tool

What's wrong with this picture??

I can only infer that this will lead to a decrease in .com aftermarket sales.  The buyer, after all,  is now being confronted with a decision that wasn’t there before – buy the dot com for $2500, or the dot net for $8.

In reality that decision was always there, so long as we grant that the buyer is aware that alternate domain extensions exist, and that they take the initiative to search their availability.  The real difference here is that Sedo is now actively presenting this alternative at the point of sale, in essence providing the buyer with an additional objection: “why should I pay for the dot com?”

How much can Sedo possibly improve its revenue potential by diverting buyers away from its core business?  After all, even domain registrars run on razor thin margins when it comes to new domain registrations, making the bulk of their profit on value-add services such as web hosting, SSL certificates, and such.

Perhaps Sedo is earning a commission on the total value of their 1and1 customer referrals (including all the value-add stuff.)  Yet Sedo’s Q2 2010 Sales Report shows that the average price paid for a dot com was $2401. This works out to a Sedo sales commission of $240.  Sedo therefore must be expecting to earn more than this on the life of a 1and1 referral.

However the situation doesn”t seem to favor domain sellers in the least.  It will certainly be curious to see if and how this decision effects Q4 aftermarket sales..

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