Achieving Financial Independence with Domains

Chapter 7: The Domain Name Aftermarket

By October 15, 2019 January 2nd, 2020 No Comments

Ok, so now you understand how domain monetization works. People come to your domain, they click on your ads, and you get paid. There is also another option, which is to buy an existing domain for investment to sell later for a higher price.

You can register a domain for $10 and then hold it hoping that someone will want to buy it from you. Maybe a couple of years pass and then someone contacts you and wants the name for their personal project or business. They send you an offer for $300. With the initial cost, plus the renewal fee you may only have $30 invested into the domain so you decide to sell. You make about $270. Not a bad return over a couple of years and just a few dollars, right?

The domain name aftermarket, or the secondary market as it is also called, is a great way to make some money. It may not make you a recurring income, but it does stand to make you a good windfall when you make a sale. This type of domain investment would be an end-game balloon payment with zero or little money made until the name is purchased from you. Of course, you can “park” the name in the meantime and put advertisements on it, but if you buy it for pure speculation then traffic monetization may not be the deciding factor in your purchase strategy. In fact, in this type of venture, existing traffic may or may not play any factor in the evaluation of the domain’s worth. Instead, its intuitive nature or brandability can be far more valuable. For example, while “green living” and “green homes” are not yet the norm, they may well be on the rise; thus, GreenHomeLoans.com may increase in value. Similarly, buying or registering a domain with a geo-centric element can be a solid strategy if the geographic location targeted is developing.

For example: New Hampshire has a small seacoast (under 18 miles), and wouldn’t you know it, everything there is named Seacoast something or other. By way of example, the domain “SeacoastAirport.com” had been registered far prior to the launch (no pun intended) of Skybus air service. Now there truly is a “Seacoast Airport,” which also means that the domain name went from being a regular domain worth only a few dollars, to being worth a lot more.

You can think of it as buying a patch of land out in the countryside. One day the nearby city may expand and get closer to that patch of land, and a development company may want to buy the land you have been holding so rich folks have a nice place to live in the suburbs. The object would be to buy now, (before major development took place) for the prospect of a bigger return later. In other words,you buy the domain name for the normal registration fee (you register it yourself) or maybe buy it from someone else for pretty cheap, and then hold onto it for a while and then flip it for 30 times more than what you paid. Sounds great, right?

If the above is so easy why doesn’t everyone do it? The majority of the domains that are registered never end up being worth anything because no one else ever wants them; the tipping point to create the speculated event-horizon never occurred. Sometimes people may make offers to buy the name for a given sum, but the seller wants too much for it. In this circumstance it does not make it economically viable for a potential buyer to purchase it. Usually in this situation the registrant ends up holding onto the same domain until he/she gets sick of it and drops it or sells it for far less than the previous, more attractive offer, usually out of desperation.

Keep in mind that if a domain name never sells and you end up keeping it forever and serves no use or return, then all it amounts to is a solid liability instead of an investment. “Internet Swampland” is just what it sounds like, a patch of property that no one wants and will probably become more of a financial burden than a money maker.

In the above case you have to find out exactly when would be the right time to sell. When I sell domains, I gauge it on current market performance, such as what a similar domain name have currently sold for, and I also investigate the person who is interested in buying it. If your domain name has a very small niche market and the biggest player in the industry comes up with a good offer, but you refuse to sell, you may never have another opportunity to liquidate that name at the same price again. Just like stocks there is always a perfect time to sell a domain.

The problem with a lot of Domainers is that they get greedy and then are never able to get another offer of the same caliber. I’ve seen in the forums multiple times where people are selling a name at prices less than previously offered because they need the money. They may have turned down a lot of great offers in the past and now they are in a financial pinch and have to sell immediately for much less.

Another big problem with some Domainers is that they become domain collectors instead of domain investors. A collector just registers a bunch of domains willy-nilly without much research and then expects them to be valuable. A domain investor goes out and finds names that are going to be valuable after he/she does lots of research and studies the current market.

Currently, one big problem I see a lot of budding Domainers getting into is registering 100’s of .info’s just because they are only (currently) 99 cents to register. Just because they are cheap does not mean you should register 100 of them. It would be better to take that $100 and then put it into one solid .info. This does two things: First, your renewal on that good domain is going to be around $10 dollars a year.  But when it comes time to renew those 100 regular .infos the renewal fee will be $10 dollars each.  The first year of registration is what is cheap, not the renewals. Second, it is going to be easier to manage and market one good .info then it is going to be to market 100 no-so-good .info domains.

Now, it’s true that you may be able to swing a few good sales with some of these info’s that you have registered if you play your cards right, but it is going to take more of your time. Keep in mind, it is going to be much better to have one very good name then to have 100 bad ones. Quality domains sell well, and no one wants to buy large quantities of bad ones. Costs aside, managing one good domain is far more efficient than the exhaustive and futile efforts to try and monetize or manage 100 bad ones.

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