Domain Scalping: Scamming Noobs is NOT Good Business

In any given week, I read through hundreds of listings on Flippa — primarily because I’m looking for a good buy. But going through all these listings has two significant additional benefits: I’m able to learn a lot about how other successful online ventures operate, and I’m also able to learn a lot about selling.

It’s fascinating to see the different approaches used to pitch domains and websites for sale (and to see which ones get copied).  Lately, I’ve noticed an influx of a specific style — more particularly a specific phrase — occurring in a lot of .net and .org domain listings.  The phrase is:

Godaddy says SomeRandomThing.com is worth $48,000 and now you can get SomeRandomThing.net for just $1,999!

You can see a few examples of these types of listings here: ebowling.org, insuranceglobe.org, holidayski.org.  Here’s what I think about this tactic:

This is a scam, and it’s BAD for business

The sales “technique” being employed comes from Ryan Deiss’ product Domain Scalping (I refuse to link to it, as I think it’s encouraging the wrong types of business behavior).  The scam, as far as I can tell, is pretty simple:

  • Go to GoDaddy and find a .com domain that someone has listed in GoDaddy’s “premium” listings (ideally at an outrageously high price).
  • Buy the .net or .org version of the same domain.
  • Place it for sale in a marketplace with a lot of uneducated or undereducated buyers (like Flippa).
  • Set the BIN price somewhere below 5% of the .com domain you originally spotted.
  • Hope for a sale.

In fairness, when done properly, this wouldn’t be a terrible tactic.  If you could find TRUE premium .com domains and register their available .net counterparts, you could certainly make a multiple of your registration fee back.  Most of the names reference by these sellers, however, are far from premium.

The real problem, however, is with the representation of GoDaddy-appraised pricing.  None of these names are actually owned by GoDaddy and GoDaddy has no say in how these names are priced.  I know, because I’ve sold domains through GoDaddy’s premium marketplace. It allows the domain owner full discretion over pricing.  In short, GoDaddy doesn’t “say” the name is worth anything — they simply allow the owner to say that he’s willing to sell the name at a specific price.

The worst offenders include statements like, “GoDaddy will be pretty annoyed with me for this,” or “Looks like GoDaddy left its back door open.”  They are very actively promoting the incorrect assumption that GoDaddy is responsible for the .com domain listings and prices.  It’s fraudulent.

An honest listing would require them to look up the owner’s information (and get permission to use his name) and then state:

John Doe says ReallyCrappyDomain.com is worth $37,500…

Naturally, that’s not going to occur because there’s no appearance of authority when you just leverage the domain owner’s name — as opposed to the colossal marketplace.  Still, there needs to be some accountability for truth in advertising.

Why I’m So Upset About this ‘Domain Scalping’ Scam

Experienced domainers and developers aren’t going to fall for this trick.  They’ll look at the listing and instantly see the flaw.  It’s clear, however, that there are a lot of people who will fall prey to this type of scam — they’ll end up “investing” in an asset that has almost no chance at providing a real return… and that’s just not right.

It’s not right for the person getting stuck with the domain, but it’s also not right for the person doing the selling.  Frankly, the margins on these names aren’t high enough to justify selling your reputation.  And it’s a shame that a paid information product would try to convince people otherwise.

  • That does seem like pretty ammaturish tactic…

  • I tend to agree here. The first thing that I thought when going through the sales letter for this course was that this just seems unsustainable, and scammy. Kind of like buying starbucks.com and trying to sell it to them.

    The GoDaddy model to me just doesn’t work. If enough people take to the idea, the market becomes bloated, and as is the nature of arbitrage, the market is dead before it even got warmed up.

  • Biggy Fat

    Man, I swear I ALMOST started to get into the whole thing. I did post domains on Flippa but with domains that I registered away from this technique. But yeah, I am sick of seeing this stupid crap. Domains rarely even sell on Flippa anyhow. It was meant to be for websites.

    By the way, Domain Scalping wasn’t created by Ryan Deiss. It was originally a WSO by Zach Booker, which I bought. Ryan decided to JV with Zach and they repackaged the same product under a new name (I knew when he mentioned Zach in the sales video it was a similar product).

    • Thanks for the history on domain scalping — interesting stuff. For all I know, Ryan Deiss might be a great guy with awesome information in his other products. This technique is extremely shady however.

      I also agree with you that Flippa’s not the ideal marketplace for domain sales, but that makes this tactic work better there. If they did this on a major domain sales platform, they’d get crucified. The problem (for the sellers) is that now there’s such a flood of these types of names, buyers start thinking twice.

      Anyway, thanks again for the inside scoop on Ryan and Zach. Much appreciated.

  • Thank you Eppie for shedding light again on these new scams. I think it is horrible to see that flippa yet again has to endure another shitload of crappy listings…Hopefully, people wake up and see they cant sell these for any profit, or buyers wake up to this scam.

  • Great post Eppie. I’ve noticed what you’ve been writing but I think you articulated it well. I too also look for good buys and have noticed how these domain scammers keep placing absolute crap with their “slick” one liners.
    However I must say that whilst what their doing is wrong, it is still the responsibility of the potential buyer to do their due diligence. I would suggest that anyone with half a brain would actually see through the nonsense that is being thrown up. Anyway, just my 2 cents worth.

    • I agree about buyer responsibility — if you start buying stuff without studying up on the market first, you kind of get what you deserve. That said, even an uneducated noobie shouldn’t have to deal with intentionally misleading info.

  • Rob

    Any suggestions on how to come up with a proper value for a domain or is it a case of a domain being worth what the market will pay?

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  • Hi Eppie,

    Thanks for the post, ive seen these exact auctions pop up on Flippa and know to steer cleer of them.

    Im actually trying to steer cleer of any auction descriptions that read as “Sales Letters”. As i find it hard to trust the seller.

    All i want to know is the facts about the auction !

    • @Swiftace — Glad you found the post to be helpful. I agree that I prefer more facts and less hype in a listing. I also enjoy getting some background narrative, but it’s bad news when it reads like a sales letter.

  • Nice post, Eppie. Flippa thrives on scams like these.

    In the early days they came to my forum to sound the experienced buyers there on what would make for a quality marketplace. They got a lot of ideas – in fact many of the ideas were subsequently implemented. One of the more popular suggestions among people in the know was to restrict the fluff, slick sales patter and outrageous lies in listings. As it’s impossibly subjective to differentiate between this and honest descriptions, we came up with a solution: Do not allow opinions. Sellers can state as many facts as they want, but no opinions. Every claim stated must be a fact. That’s a lot easier to moderate and any seller making a fake claim could be censured or banned.

    Flippa chickened out of that one because they realised just what a huge impact it would make on their bottom line if they curtailed those who choose to exploit naive buyers. In fact, they went the whole hog to create more naive buyers for these sellers to flog sites to!

    • Clearly, Flippa has a conflict of interest here (as long as they remain short-sighted). If they do what’s right for their buyers, they limit the number of listings (@ $19 each) they get. If they allow the listings but require less unsubstantiated hype, they run the risk of reduced final sales prices (for which they also take a cut).

      In the long-run, however, they’re well served to provide a reliable, successful sales platform. It wards off potential competitors before they are able to get a start — if you already have a perfect marketplace, why would anyone go to the upstart competition?

      I’m sure we’ll see changes at Flippa that are good for the whole community (not just Flippa) when there’s a legitimate threat to their supremacy. Suddenly you’ll see tighter listing requirements (or at least a “report a problem with this listing” flag), an affiliate program, and Flippa advertising on industry blogs.

      Justin @ FlipFilter is 2 great articles into a series (not sure when the other 2 are coming) about what a new marketplace would need to do in order to compete with Flippa. It’s a daunting challenge, but if someone gets it right, they could do very well for themselves.

    • By the way — great to see you commenting over here. I’m thoroughly enjoying your forum and appreciate all the hard work you put into it.

  • I think Barack needs to set up a ‘Guru Regulatory Board’ …actually, maybe not a great idea as they’ll all move to somewhere less regulated…like England 🙂

    All jokes aside, many of these guys generally speak a lot of sense, but lately there seems to be a trend in people with a lot of loyal followers / readers advising people to do really crappy things. In the end, everybody in the industry seems to suffer.

    J

    • Justin,

      Glad to see you commenting on this post — I know it’s an issue that matters to you from reading your blog posts and your input at (the incredibly valuable forum) http://www.experienced-people.net

      The shame of it, I agree, is that many of these “gurus” are good guys who give decent advice most of the time. It’s just a shame when you see them promote such patently awful tactics.

  • Hmm, that’s a valid observation Eppie, indeed uneducated potential buyers would ‘buy’ into the sales pitch used? As a formidable marketplace, in all honesty Flippa has a responsibility to clean out scammers from their platform. This in the long run will harm their brand once a buy discovers that they’ve wasted their hard earned cash into buying worthless properties ‘disguised’ has investments…they’ll not use Flippa again and can even spread their bad experience to potential new Flippa users.

    • Muzi — thanks for the comment and the RT. I couldn’t agree with you more about the long-term damage done to Flippa’s brand by allowing scams to exist in their marketplace. It’s the same reason Google AdWords implemented a quality score and why their search algorithm keeps changing (to get smarter). If you provide a bad user experience, people will search out a competitor who provides a superior one.

      Right now Flippa’s the king of the mountain when it comes to website sales marketplaces — until they have a viable competitor, I don’t know that they’ll have much reason to change. Like Justin @ FlipFilter says “Flippa needs a David” (http://www.flipfilter.com/blog/2010/03/22/our-industry-needs-a-hero-%E2%80%93-flippa-needs-a-david/).

      • I so glad that I came across your site as I was going to buy the Zack Domain Scalping course, until I read your honest review.
        Can your recommend a course for ethical domain flipping?