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How to adquire a domain name from a reseller – Brute Force vs Negotiation

Recently I acquired the domain GRUMO.COM from a domain name reseller.

Here I share my experiences doing so and some useful advice and recommendations that may benefit anyone also contemplating the purchase of a domain directly from a reseller.

DISCLAIMER: Please, before you implement any of the following advice do consult an experienced lawyer in domain name acquisition and disputes.

Why most good domains are already taken?

Most domain resellers buy domains in bulk by the hundreds or even thousands with the intention to eventually resell them for a hefty profit.
Unfortunately, it is a very common practice which has made most 4 to 6 letter common word domains unaffordable to most people.

I am not going to go into the morality of domain speculation but in general I am against it because in the end makes for a worse Internet as most interesting domains are serving no value to the Internet community as a whole.

This means that unless you own a trademark similar to the desired domain, you will have to bite the bullet and pay hundreds or even thousands times more than its original market value (typically around $10 US a year).

How to enforce your trademark to get a domain

If you happen to own a trademark identical or very similar to the domain you want, you may be able to submit an UDRP claim which will force the domain owner to transfer the domain to you.

However, you will still have to pay around $1200 to $3000 to the ICANN approved UDRP service provider to process your claim.
(Here is a list with a full list of approved UDRP service providers -> http://www.icann.org/en/dndr/udrp/approved-providers.htm)

Your chances of winning a UDRP arbitration will be the highest if you own a well known trademark which was registered and in use previous to the domain registration by the reseller.

In my case, GRUMO.COM was registered 9 years before I obtained a US trademark for GRUMO so my chances of winning such claim would have been quite slim unless I was able to prove the domain owner registered the domain in "bad faith".

The interpretation of "bad faith" as stated by the UDRP Policy really depends on the panelists involved in your claim.

There have been a few cases (about 1%) in which the Claimant has been awarded the domain even if the domain was registered previous to the trademark.

However, it is almost impossible to prove "bad faith" registration if the Claimant does not have evidence supporting that the domain owner was aware of the trademark at the time of registration (*See footnote).

I found that the most common reason for denied claims was the Claimant's inability to prove "bad faith" at the time of registration.

In conclusion, before you agree to pay a exorbitant amount for a domain, make sure you find out whether you may be able to obtain the domain through a UDRP claim.

If you have any doubts you should consult a lawyer with expertise in domain disputes before submitting a UDRP claim.
And if you have the time and interest you can read over thousands of public cases at http://www.wipo.int/amc/en/domains/casesx/all.html

Negotiating a reasonable price for a domain

So what if you don't have a trademark or any grounds to win the domain via a UDRP claim?
Then it is time to contact the domain owner and start a negotiation.

Negotiating the price from an experienced domain re-seller can be tricky business and you should proceed with extreme care to avoid paying thousands or even hundreds of thousands dollars extra.

(If you want to avoid dealing with the reseller directly, there are some companies like Sedo that for a fee will deal with the domain owner on your behalf.)

Domain transfer negotiations can get very complicated and I am not going to attempt to cover all possible scenarios since I don't have enough experience to provide thorough advice.

However, I will share with you the approach I followed to adquire GRUMO.COM contacting the domain reseller directly.

Here are the steps I took and you may want to consider when dealing directly with a domain reseller:

1. Find as much as you can about the domain reseller in advance: do a WhoIs search to find when the domain was registered, where it is registered and more importantly the email address of the person or entity that registered your desired domain. If the domain was registered after you got your trademark you may have a good case to win a UDRP arbitration.

2. Contact the reseller via email: send a short and to the point email to the domain reseller stating that you are interested in obtaining the domain.
- Avoid sounding forceful or demanding or the reseller may simply ignore your request.
- Avoid sounding like a lawyer and making any unsupported demands or the reseller may assume you have a lot of money to hire a lawyer and demand a high price for the domain. (Needless to say, you should never pretend you are lawyer if you are not)
- Always be friendly and respectful no matter how much you hate the owner when you find they are running a greedy domain squatting business.
The goal in your first contact is to find out if the domain is for sale and if so what is its current value.
NEVER mention an amount in the first email or you may shoot yourself in the foot!

3. Negotiating the best possible price: this is the hardest part and possible a whole science in itself.
Here are some recommendations:

a) Appear as genuine and small as possible:
The first thing the reseller is going to do is research 2 things.
1. How big are you, and 2. how big is the domain you are trying to adquire.
One possible approach is to disclose the least information about yourself as possible. This will make it difficult to the reseller to determine your company size and hopefully deter him/her from using any knowledge to leverage a higher value for the domain.

One way, could be by sending an inquiry from a generic email service as Hotmail or Google.
You may want to go as far as to open an new account just to deal with this negotiation so they cannot ascertain your real identity by doing a simple Google search of your email address.

You may think this is not an honest approach but unfortunately a lot of domain squatters are not very open about their identities either and hide their real identities behind fake names or by using WhoIs protection services.

There are several reasons why domain owners may hide their real identities. One is that they may have a history of domain-squatting and since most UDRP cases are publicly available it would be easy to find out if they were involved in UDRP disputes which could used to support they may have registered the domain in "bad faith".
Having a history of cybersquatting can be detrimental to a domain owner in the case of a UDRP dispute.

Another reason is that they know they are engaging in an activity of dubious morality and don't want their real names revealed.

In my case, I stayed true to my values and used my real identity from the beginning of the negotiation.
Also, I clearly stated I owned a trademark for the mark GRUMO which I hoped would deter the owner from asking an outrageous amount since if savvy, the domain owner knows that a trademark owner has considerably higher chances to win a UDRP claim against him/her.

Note: To appear small may be difficult if your email ends in something like "@google.com" or "@microsoft.com".
This article is not addressed for people working for large organizations as such companies usually have legal departments in place that deal exclusively with domain acquisition and trademark enforcement.
If you belong to a large organization and the domain is short (4 letters or less) be ready to be asked for hundreds of thousands of dollars. (Common 3 letter words like "sex" are worth millions dollars).

b) Make a reasonable offer: but what is reasonable?
Determining the value of a domain is a black art.
Typically the shorter and the more common the word the more expensive it gets.
One way to determine its value is based on how many search results Google has for that domain.
If you get many millions of results you are dealing with a pretty common word (or sets of words) and the reseller will use that to justify a high price.

My first offer was based on how many years the reseller owned the domain plus an amount to cover the time and effort to perform the transfer plus some profit for the whole transaction.

In the case of GRUMO.COM the math went like this:
Domain owned about 10 years times $10 per year registration fee = $100
$200 for time and effort to perform the transaction.
$200 extra to ensure profit on the transaction.
The total was $500.

I truly believe that to be a reasonably offer to someone that has done nothing of value with the domain except keeping it registered and having an sponsored link page pointing to it.

c) Begin the bargaining process:

In my case the reseller counter offered $4,000.
Never accept the first offer however final the reseller may say it is!

Now it is your time to counter-offer and this can go on forever.
But typically you would counter-offer half of that $2000, which I did.

At this point you can expect for the reseller to settle mid way at $3000. You can keep going back and forth if you want to save a few hundred dollars so it is up to you and how much you enjoy this process.

What if you cannot agree to a reasonable amount for the domain?

If own a trademark and still think that you cannot get the domain for a reasonably amount you may want to try your luck at filing a UDRP complaint.
It will still cost you a minimum of $1200 plus all the headaches of preparing a convincing claim but if you really think you have rights over the domain and think you can win, good luck my friend!

Also note that the UDRP policy states that a domain owner is not allowed to sell the domain to the trademark owner for more than out-of-pocket costs (UDRP Section 4b(i)) and the fact that by now you have evidence that the reseller asked for way more can constitute valuable evidence in favor of your case.

Using Escrow to transfer a domain

Once you have agreed to an amount for the trasnfer of the domain, it's time to complete the transaction and obtain the domain of your dreams.

The most typical way of buying a domain is by using a service called Escrow.

Escrow ensures that both the buyer and seller are protected in such transactions by only releasing the buyer funds once the buyer agrees that the domain transfer has been completed successfully.

I found the Escrow process quite straightforward but was not very happy with the amount they charged (in my case $159 US).

How to snatch an expiring domain

Alternatively, if you believe the current owner has no interest in the domain you may try to be the first to register the domain when it expires.

This approach can save you thousands of dollars if you don't mind losing the domain to someone also interested on the same domain and if you don't mind waiting until the domain expires (this could be years ahead!).

What you can do is "back order" the domain through a company like Snapnames.com, Enom.com, and Pool.com which have advance systems in place to ensure a high success ratio adquiring expiring domains.
(You can learn more about the fascinating world of domain back ordering in this article http://www.mikeindustries.com/blog/archive/2005/03/how-to-snatch-an-expiring-domain )

Conclusion

I find very disheartening that most great domains are taken by greedy companies and individuals with no real interest in building valuable services around them.

Many startups cannot afford buying domains for outrageous amounts and are forced to settle with second rate domains or weird spelled ones.

Luckily, in the end, the domain will have little or nothing to do with the success of the startup.
I believe that if people find a service valuable they will go to it regardless of the domain however bizzarre it is.

I hope one day, organizations like ICANN can impose some control over the indiscriminate registration of thousands of domains for pure speculative purposes.

Here is an stament made a UDRP panel addressing this unfortunate sate of affairs in The Procter & Gamble Company vs Names2000.com (WIPO Case No:D2010-0357):

In this Panel's view, domain names whose sites have no raison d'être other than domain monetization are the Internet equivalent of a public nuisance and can never in and of themselves be considered good faith noncommercial conduct. Their utility to the site or domain name owner relies entirely on visitors having been attracted there by use of a domain name that is identical or confusingly similar either to someone else's trademark or to a domain name which points to a legitimate site, or to the site acting as a faux portal. This Panel considers it tantamount to hijacking of the Domain Name System. Similarly, search engines that list such sites are doing a disservice to the Internet community as the sites have no intrinsic value and are highly unlikely to be relevant to any search that a user may have conducted. If domain parking pages and domain monetization sites were removed from search retrieval lists or relegated to the end of any search results listing the commercial incentive for the majority of cybersquatting would very likely be removed. In an ideal world this is an area that ICANN might usefully explore, but the power of vested interests probably makes that an unlikely course.

I could not agree more with the above mentioned Panel's opinion.
However, as the panel points out, "vested interests" will make very unlikely the creation of regulation against domain registering abuse as the domain speculation industry is certainly a multi-billion one.

I hope you find my experience and advice useful and please do share your own experiences acquiring domains in the comments so other readers can be better prepared when they face a similar situation.


*The UDRP policy clearly states in section 4a(iii) that the domain "has to be registered and being used in bad faith" for the claim to be successful. This has posed several disputes among panelists since it may potentially exonerate anyone using a domain to damage a trademark owner's image simply because at the time of registration they did not have any bad intentions.
There is a great UDRP case discussing this issue in Jappy GmbH v. Satoshi Shimoshita (WIPO Case No. D2010-1001)

Related Posts:
Grumo gets a US Trademark
Running an animation studio - Behind the scenes of Grumo Media
Why every website needs a great explanatory video
Step by step guide to produce a promo video
How to create an Awesome demo video
How much a typical promo video costs?
The Story behind the name Grumo

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  • Anonymous

    This is great Miguel! Thanks for sharing. Definitely handy for anyone building their online presence. Great to hear that there’s Grumo for a long time :)

    Gotta tell, and this I had few days back in my head (weird!), that your business related stuff and startup journey has been of my fav blog posts to read. Very inspirational amigo!

    Many thanks

    • http://grumomedia.com Miguel Hernandez

      My pleasure Lenny, I really appreciate your loyalty as a Grumo fan. Looking forward to provide valuable content for many years to come!