Just made a 100K offer for a domain. Am I crazy?

When you buy a domain, you're buying a business on that domain. Like any business you have to appraise its value and also its potential value less the cost to realize that value.

So, if the domain is serving $2,000 of ads every year, it's worth $2k using a common estimation model. You don't want to buy it because it's priced at its value. Yes, you would have a good ROI if you held it, but the ad revenue isn't guaranteed, you have transaction costs, annual costs, etc.

If you know you can double the ad revenue to $4k by changing to another provider or using a proven method of placement, then it's worth $4k to you. If the seller is still offering $2k, then you have a good deal and you should buy. If the seller realizes this and raises the price, then you have to decide how much beneath $4k you need to go to make it worthwhile for you.

If you want to build a business on the domain, then you're pricing the value of each visitor. Let's say each visitor brings on average half a cent in revenue: 400,000 visitors brings $2,000. How well will your business convert these visitors? Say you can convince .05% of them to purchase software at an average lifetime value of $100 -- that's $20,000 per year in revenue. Of course you'll need to build a sales site and the product itself. If that takes $15,000, then the domain is worth about $5,000. It might be worth more since the product and the site could be transferred to another domain, so possibly you could pay up to $10,000 or $15,000 for the domain.

These are just considerations - I don't know the numbers for your business or for the domain you're considering. You would certainly want to choose at least two domains and play the sellers off of each other. Your math might tell you that you'd pay $100,000, but market pressure might bring it down to $50,000 anyway.

P.S. If you are buying for the value of the name as a brand, then I think for that money you should just buy an actual brand.

100K is a lot of money for a domain! The name can really build the brand of the company though. If you're solving a painful problem that people are willing to pay for, the name in my opinion is irrelevant. If not, the name can be make or break the business for a unique company. Some of the startups that I've came across in the past I wonder how they get the domain in the first place and how much they paid for it. One that really stuck out today was branch.com. I wonder how much they paid.