Dutch Auction For Selling Websites: Motion Invest’s Process Explained

At Motion Invest, we use a Dutch Auction model for selling websites. My name is Ryan Gunn and I am the Seller Representative for Motion Invest. In this article, I am going to explain how we use this formula to sell sites. I am also going to answer some frequently asked questions about the process and more. The goal is to help you better understand the way that we sell sites and why. 

What Is A Dutch Auction?

Let’s start with the basics. Here is the definition of ‘Dutch Auction’ from Merriam-Webster:

“The public offer of property at a high price and then at gradually lowering prices until someone buys it”. 

How Motion Invest Uses A Dutch Auction To Sell Your Website

When you sell your website on our marketplace, we list it using a dutch auction model. So we will start by listing your site at a higher price, which is called the ‘Listing Price’. If it doesn’t sell in two days, we decrease the price by x amount. This continues every two days until the site sells or hits its “Reserve Price’. This reserve is the lowest price that it can possibly drop to.

I will give you an example. Let’s say that your site has an earnings average of $100 over the past 6 months. Let’s say that our team has sent you an offer for a listing price of 38x and a reserve price of 34x. 

$100 (the earnings average) x 38 (aka the ‘listing price’ multiple) = $3,800. This means that $3,800 would be the starting listing price on our dutch auction. So the price would be listed at $3,800 on the first day that it hits the marketplace. 

$100 (the earnings average) x 34 (aka the ‘reserve price’ multiple) = $3,400. This means that $3,400 would be the reserve price on our dutch auction. So if it doesn’t sell in a month, it would be listed at $3,400 on day 31.

We also take these two numbers and subtract them by each other to determine how much to decrease the price by every two days. $3,800 – $3,400 = $400. Then we take that number ($400) and divide it by 15. We have a month-long exclusivity at Motion Invest, so we decrease our dutch auction prices every two days. So $400 divided by 15 = $26.66666 (we round it up to $27). That is the amount of money that the price will decrease by every two days.

In the above example, the site would start on our marketplace at $3,800. If it doesn’t sell in two days, we would decrease the price by $27, so the price would drop to $3,773. If it doesn’t sell in another two days, the price would drop to $3,746. This continues until the site sells or reaches its reserve price of $3,400.

If you are still confused, here is a visual example of the price drop:

  • Day 1: $3,800 (Listing Price)
  • Day 3: $3,773
  • Day 5: $3,746
  • Day 7: $3,719
  • Day 9: $3,692
  • Day 11: $3,665
  • Day 13: $3,638
  • Day 15: $3,611
  • Day 17: $3,584
  • Day 19: $3,557
  • Day 21: $3,530
  • Day 23: $3,503
  • Day 25: $3,476
  • Day 27: $3,449
  • Day 29: $3,420
  • Day 31: $3,400 (Reserve Price)

Note: In this case, the final price drop is less than $27 because the original number was rounded up from $26.66666 to $27.

Why Do You List Sites Using This Model?

So why do we do it like this? The simple answer is we have found this to be a great way to sell websites. We have used it to sell hundreds of sites, at all different price ranges.

Buyers like it because they can evaluate sites and pounce on them quickly if they really like them. There is no waiting for an auction to end in 30 days to see if they get it. They can evaluate the site and buy it if the price makes sense for them. 

Sellers like it because they know their site will sell for a specific price and they will get the value they are looking for. In traditional auctions, buyers are usually looking to get sites for as cheap as they can, instead of paying for a site’s actual value. In some cases, a bidding war can start for a site in a regular auction, with the seller getting more than what they were asking for. In most cases though, people are trying to get sites for the lowest bid possible, which leads to a lot of wasted time. 

Wouldn’t Buyers Just Wait Until A Site Gets To The Lowest Price And Then Buy It?

Yes, buyers are technically able to wait until a site has dropped to its lowest price before buying it. There is risk associated with that though, because it could be gone if they wait too long. 

We have had sites of all price ranges sell within a few minutes of being listed. Some take a few weeks to sell and some take longer than 30 days. It all depends on the individual site. There is no guarantee that the site that you are interested in is still going to be available in an hour, week or month from now. 

As a seller, you decide if you feel comfortable with the price range that we have provided you. So if you aren’t going to be okay with selling for a reserve price of say 34x, you would pass on listing or ask if we could bump up the reserve price. We will either agree or tell you this is the highest that we would go. If you aren’t comfortable with the price, you wouldn’t list your site. 

What About Offers?

At any time during the dutch auction, buyers can submit offers for the site. For example, if the site is listed for $3,800, we might have someone come to us on day 5 and say I would pay $3,000 for this site right now, would you see if the seller accepts it? In this scenario, we would reach out to you (the seller) and say we have received an offer. You can choose to accept, decline, or counter that offer. 

Some sellers just want to take an offer and get the site sold as quickly as possible. Others will say that they think it will sell for a higher price and decline the offer. It is up to the seller to decide if they want to accept an offer or not. We won’t sell your site for lower than the reserve price unless you accept an offer. 

What Happens If My Site Hits Its Reserve Price & Doesn’t Sell?

A popular question from sellers is what happens if the site doesn’t sell and reaches its reserve price. Our goal is always to sell the sites that we list on our marketplace as quickly as possible. Unfortunately, there are going to be some sites that don’t sell after the month and hit their reserve prices. This could be for various reasons like traffic/ income drops, or the buying pool feeling like it is overvalued. 

If the site doesn’t sell after a month, we have some options. 

1) We can leave it listed at the reserve price and just take offers on it. So the price won’t drop anymore and we would just wait for someone to come in and purchase it. We will also take offers on it. So someone can come in and say I would give you x amount for the site, would you take it? You will have the choice to accept or decline that offer.

2) We can leave the site listed and drop the price. Let’s say that it didn’t sell for its reserve price of $20,000. You can tell us to drop the price to say $18,000 and see if it sells at that price decrease. 

3) You are free to tell us to remove your site from our marketplace.

Can I Set My Own Price?

Another popular question that we get is if sellers can choose their own listing and reserve prices. Our team will send you an offer with where we think the site is valued and where it would sell at. You can definitely give us your feelings on the price beforehand and you can also negotiate with us. 

At the end of the day, our team is only going to list a site for what we feel comfortable at. If we send you an offer at 38x and you say list my site for 50x, chances are we are going to pass. If you say that you would be more comfortable at say 40x, we would consider bumping up the offer. 

Conclusion

If you are interested in selling your site, please fill out the valuation tool on our website to get started. You can also reach out to me directly at ryan@motioninvest.com