The Background On Domain Name Investing
If you are fairly new to the online marketing world, you might not realize that domain names (ie. www.chocolate.com) potentially have significant value attached to them. If a domain is more memorable, brand-able, short, catchy, or has literal meaning … then it has a higher dollar value. For example, www.chocolate.com is significantly more valuable than www.chocolatestoreonline.com. It’s shorter, easier to remember, and it probably get’s a lot of type-in traffic where people type the domain name directly in their browser address bar. Truly great domains have often sold for hundreds of thousands of dollars and even several millions. According to Wikipedia, the most expensive domain name to be ever sold is Insurance.com for $35.6 million. You can view a full list here of the most expensive domain names to be bought/sold ever! The numbers are truly mind-blowing.
The Early Days Of Domain Investing
Back in the early 90s, there were guys who had enough foresight to see the potential value of a domain name and risk-appetite to spend a lot of money in acquiring them. One of these guys, Kevin Ham, acquired a ton of domains to make money by placing ads on them from the influx of direct type-in traffic and also to resell them at a higher price. From what I can remember, I believe at his peak, he was making like $XX,XXX-$XXX,XXX in advertising revenue – per day! You can check out this article by CNN Money that goes in-depth into this insane business.
Realizing The Insane Potential Of Domain Names
Reading articles like these opened my eyes to the tremendous opportunity and value in domain names. The only problem is that I discovered this in like that late 2000s. Anything that had significant value in the hundreds of thousands of dollars has already been snapped by the more establishers players in the game or “domainers” as they are called. This is not to say that that there are no more opportunities available, but truly good gems are very rare to acquire at dirt-cheap prices.
Deciding To Jump In
So I thought about how I wanted to approach this domaining business that will let me find domain names that are fairly good and have a high probability of me being able to resell it at a higher price. Since good .com domains were almost all taken, I decided to focus on geography specific domain extensions such as .ca for Canada. Although I have now limited my market to essentially one country, I would have a much better chance of finding quality domain names that will appeal to Canadian businesses and organizations.
Deciding On My Plan Of Attack
The next step was to think about what domains to register. I tried to brainstorm and check the availabilities of hundreds of generic word domains, but they were all taken! Shortly afterwards, I discovered “TBR (to-be-released) domains” and domain name auctions. Domain names are registered and renewed for a minimum period of 1 year. Often times, domain names expire and “released” for new buyers because either the previous registrant forgot or chose not to renew. In the case where the registrant forgets to renew, you can find high quality domain names. So I tried this approach and started watching the TBR domain list at Sibername.com (a Canadian domain registrar).
Domain Name Investing Is A Game Of Numbers
You need to have a decent amount of capital to get in the game and a healthy appetite for risk as well. When you register a domain straight from the registrar, you are paying roughly $15/year per domain name. If you register a domain via an auction like at Sibername, the auction STARTS at $15 per domain name for the 1st year registration fee, but realistically you are spending $35/domain minimum. You might be saying to yourself, $35+/domain/year is not too bad, but what the domain investor realizes is that he/she would need to buy atleast 50 domains in order to properly test the business. If there is a high quality domain name, other auction bidders will be competing against you and when it’s all said and done, you are looking at spending a minimum of a few hundred dollars for a quality domain name.
The reason why I say you would need to buy atleast 50 domains is because if you’re going to treat domain investing as a business, you can’t expect to buy 10 domains, try to resell it, and give up on the business when nobody buys any of your domains. From my experience, even if you have a decent sized domain portfolio, you will have only a few domains that can fetch prices for outsized gains, the “homeruns”. Almost other names will result in much lesser or no value in the return on investment. The larger your portfolio size and the better the quality of the domains, then the greater the chance of you landing a homerun domain name sale. If you only have a handful of domains to invest in and resell, it’s not worth the time to learn about domaining, setup the sales system and operate the business.
Building My Domain Portfolio
I decided to proceed with this domain investing business as a side business to test the waters and see if there is a real opportunity here. After spending several hours over the span of a few weeks, I managed to get a hold of over 100 domain names which I thought had good potential and spent about $8700 CAD. The most expensive domain name purchase was $2050 for a 3-letter domain name that was an actual word and not simply an acronym.
Building My Sales Team and Process
Sales in general is a time consuming and labor intensive process and domain name sales prospecting is no different. Basically, you need to contact a lot of potential buyers relevant to the domain name you are looking to sell. I always like to do things efficiently and effectively, so prospecting by email seemed the best route to go versus cold-calling. To minimize costs while maximizing output, I built up a team of student interns whom I offered sales/marketing training and job reference in exchange for their help in gathering a list of prospective buyers and emailing them.
As expected, after sending out hundreds of emails, there were a few companies that were interested in acquiring some of the domain names. The prices fetched were 10x to 20x to cost but the overall sales figure barely broke even with the total investment. Such is the nature of the game. You might get super lucky and get a home run sale, but for me, I came out roughly even. I could have continued pushing for more prospecting, more follow-ups, etc. but I decided to pause things when I saw the current and potential ROI to not be worth the continued effort. I had other projects and businesses to work on at the time, so I figured to allocate my resources where I could maximize my ROI.
The Interesting Domain Name Sale
Going back to my blog post title, the biggest domain name sale happened to be also the most interesting one. This sale offers a very valuable lesson for when buying or selling anything! The domain I had sold was in the health supplements niche. A team member had contacted a potential buyer offering our domain name for sale. We didn’t mention a price but asked if they were interested and then we would try to find out what they were willing to offer. Domain name values can be subjective and difficult to put a specific value on, so I avoided going in with a set price. I let the buyer offer a price, and if it’s too low, I can always counter to what I think the right value should be. In my Google Spreadsheet, I have a list of all the domain names in the portfolio along with columns of data for cost, when it was purchased, key metrics, potential sales value, etc.
In this specific instance, the interested buyer SHOULD have first expressed interested in buying THEN ask how much we were willing to sell for. We would either say we are taking offers or at the time, we were actually just going to say $1500 is the Buy-It-Now price. To my surprise and benefit, the buyer straight out offered to buy the domain for $4500. I immediately said yes and proceeded to close the sale.
In my opinion, whenever you are buying/selling, you should not reveal your hand/intent so quickly. You should try and see what the other party is willing to do first. Listen first. Then talk. Had the buyer simply sent one more email seeking the asking price, he could have saved $3000. This same logic applies to when buying a car for example. If you express too much interest, desire, your good financial position, etc. to the car sales person. He/she would then try to maximize the car price to squeeze every single dollar from you. Go in reserved and be willing to walk away if your requirements are not met, and you will have a better chance of getting a good deal in whatever you are buying.
If you are interested in buying your own domain names, I personally use and recommend the following domain registrars:
- Namecheap – I like their user interface and renewal prices are reasonable
- Godaddy – you can find good initial registration coupon codes, but their renewals are getting pricy
- Netfirms – good for .ca domains, just $10/year
If you are interested in learning more about domain investing, check out: