domain investing

Domain Investing Guide – Buying and Selling Domain Names for Profit

In this article I set expectations for individuals looking to get into the business of buying and selling domain names.  I provide definitions specific to the industry and a wealth of resources that will help you with your journey.  I will also give you a list of risks with information on how to buy, market, value, and sell domain names.  I will also show you how to connect to the domain investment community.

In June 2019 I went to lunch with a colleague and the topic of domain investing came up.  I wasn’t new to the idea, but I was surprised that he had some success with it.  I had the preconceived notion that the concept seemed too simple to really make money.  After learning he had some success, I thought that I could do it too.  Retrospectively, I can tell you that domain investing is hard work and can be discouraging at times.  I’m pushing onward because I know if I put the right processes in place, I can successfully generate a side-income by buying and selling domain names.

I wish I would’ve had a guide to domain investment from someone who just recently went through all the learning.  Because of that experience, I’m going to pass on all the things I’ve learned over the last few months to anyone interested in investing in domain names.  I do not promise that you will make money fast – domain investing is typically not about making a lot of money fast.  It is about establishing a mindset that will generate revenue in a year or two.  When repeated enough times, you may be able to establish consistent side income.

domain investing 101

Buying and selling domain names is domain investing, with the goal to have a strong return on investment.  Domain name investments are similar to real estate investments – it’s not unlike purchasing a house, building or vacant lot where you think the value may increase in the future.  And just like real estate investing, domain name values will only increase.  Domain investors buy domains for three purposes:

  1. to build a website on
  2. to resell it
  3. to park the domain (generate pay-per-click revenue)

why invest in domain names?

Domain investors who are good at what they do typically aim to sell their domain for 10-15 times the price they purchased the domain name for, which is an excellent Return On Investment.  And just like the housing market, there is only so much cyber-realestate, especially for the premium dot com TLDs.  If you want to purchase a three-letter-dot-com domain today, it will cost you six figures, and there will never be more three-letter-dot-coms.  Simple economics indicates these prices will only increase in the future.  If you own a company you must have an internet presence in 2019.  Most premium dot com domains are already owned by someone, regardless of what you name your company, you are most likely not hand-registering your domain name.  And lastly, buying and selling domain names is a lot of fun!  Participating in auctions, the rush of the purchase and of selling your first domain is an amazing feeling.  It’s a great ride, like life, full of ups and downs, and you won’t want to miss it.

domaining

Risks in Domain Investing

Liquidity

Most domain names are not very liquid, so once you buy it you’re stuck with it for an undetermined amount of time, and you will have to pay the registration renewal fee each year or decide to let the domain name expire.  Like real estate investing, buying and selling domains is a waiting game. There are subsets of domain names that are valuable on the reseller market (i.e. selling to other domain name investors).  These are three and four-letter-dot-com domains. Four letter domains can typically be sold quickly to other domain investors ranging in price from $200-$1000, while three-letter-dot-com domains may fetch $25,000 or more on the reseller market (but typically have six-figure asking prices to end-users).  Even the best domainers sell 2-3 percent of their domain portfolio each year, and many of them own thousands of domains.

Subjectivity

I have many great domain names, but they’re waiting on the right buyer, and that buyer may target multiple domains and settle on one that is not mine.  For example, BluePanda-dot-com is a good domain name that may fetch four figures to an end users, but red-panda-dot-com and black-panda-dot-com are just two similar domain names that may be available for purchase.

new g-TLDS

Dot-com is presently the best TLD of a domain name to own right now.  However, in the last 20 years, there have been about 2000 new general Top Level Domains (gTLDs) added.  As an example, Ford Motor Company owns the domain name ford.com, but there are new players to game like ford.car, ford.cars and ford.auto to name three.  gTLDs are in their infancy, and nobody knows what companies and consumers attitudes or uses will be around these new TLDs.

Legal issues

Most domain name investors are legitimate people or businesses that invest in domain names without infringing on the rights, trademarks, or properties of others.  However, there are some bad players out there. Below are some basic terms to get you familiar with the legalities of domain name investing.

cybersquatting

cybersquattingBuying and selling domain names that infringes on the brand or trademark of an existing company is called cybersquatting, and it is not a legal practice.  Owners of brands, trademarked or otherwise, can file a Uniform Domain-Name Dispute-Resolution Policy, or UDRP.  Alternatively or in addition, they may file a lawsuit to get the rights to the domain name that someone else has registered, and possibly be awarded damages.  The UDRP is a process setup by the Internet Corporation for Assigned Names and Numbers (ICANN), which state:

Under the policy, most types of trademark-based domain-name disputes must be resolved by agreement, court action, or arbitration before a registrar will cancel, suspend, or transfer a domain name. Disputes alleged to arise from abusive registrations of domain names (for example, cybersquatting) may be addressed by expedited administrative proceedings that the holder of trademark rights initiates by filing a complaint with an approved dispute-resolution service provider.

REGULATIONS

Each TLD is issued under specific restrictions.  For example, to build a website on a .cat domain, you must be a part of the Catalan Linguistic and Cultural Community.  You can read all about restrictions on TLDs and more by reading How the Domain Name System Works.

buying and selling domain names

How to Buy Domain Names

hand register

You can go to any domain registrar and hand register a new domain name.  Hand registering simply means the domain name is not actively registered by anyone, so the only cost is the cost you pay the domain registrar, typically $1-$15.  Popular registrars include GoDaddy, NameSilo, NameCheap, Dynadot, Moniker, Name.com and PorkBun to name a few.  Here is a full list of ICANN accredited registrars.

expired domain auctions

You can participate in auctions for expired domain names.  Some registrars, like GoDaddy and Dynadot, host their own expired domain auctions.  it is free to view and bid on expired domain names with Dynadot, but with GoDaddy you must pay a small annual fee.

domains listed by other domainers

The list of places to buy domain names seems endless.  In addition to listing domain names for sale through a registrar, you can also list your domain names for sale through various aftermarket sites.

You can also buy domain names from private sellers.  To locate private sellers, you can conduct whois lookups on domains that are registered but aren’t listed for sale anywhere, and contact the owner directly.  Another way is by leveraging domainer forums, such as namepros. Most forums have a dedicated area with domain names listed for sale.

tips to Sell Domain Names

  1. Create a for-sale-landing-page for your domain name.  I am currently leveraging Efty.com and Dan.com for this service.
  2. List your domain name for sale on a variety of aftermarket sites. Those aftermarket sites are listed above.
  3. Publish domains for sale to all the social media platforms.
  4. Do not make your whois contact information private – you want perspective buyers to be able to find your easily.
  5. Do proactive outreach.  Reach out to potential clients who you think may be interested in your domain name.

What Makes a Domain Valuable

selling domains

14 Factors that determine the value of your domain name

  • Top Level Domain – the .com TLD is the most valuable and marketable.
  • Length – the number of characters in your domain name. Most often, shorter is better.  Short, one word domains are the most valuable.
  • Age of the domain – an “aged” domain can be more valuable than a newer domain.
  • Number of extensions already registered – the more extensions for the domain name that are already registered is a plus.  Better, if they have active web pages
  • Brand Association – don’t register or buy a domain name that is trademarked or copyrighted.  However, if you own a domain that later becomes a startup that takes off, then you may do well.
  • Search Engine Rankings – having keywords in your domain name that rank high on Google and Bing.
  • Traffic – domains with established type-in traffic (or have plenty of links to the site) are more valuable.
  • History – if the domain name has been used for nefarious purposes in the past (such as adult content or sending spam) this may turn off some buyers, lowering the estimate of your domain.
  • Negative words – having negative words in your domain name can decrease the value of your domain name.
  • Spelling – owning a domain where the keyword/s have different or confusing spelling may lower the value of your domain.  Domains with typos or misspellings will be devalued.
  • Radio Test – When spoken aloud, humans should be able to understand and spell the domain name.
  • Social Media Availability – this may or may not decrease the value of your domain name, but companies typically want the associated social media accounts and the domain name to be the same.
  • Special characters and numbers – most often, domains with special characters and numbers are valued less.
  • Singular or Plural – depending on the use of the domain, the singular or plural version will be more valuable.

Free Domain Appraisal Services

Here’s a list of websites that will appraise your domain for free based on the website’s algorithm.  These sites valuation very greatly.

How to Determine How Much Your Domain Names Are Worth in three steps

Step 1: Research your domain name 

Starting from the 14 factors stated above, conduct research on your domain name.  You’ll want to know at least all of the information above including Age of the domain, Number of Extensions registered and so on.  You can use the many free online tools (discussed below) available to conduct this research.

Step 2: Research what similar domain names sold for recently

a great resource for domain sales is namebio.com.  You can search past domain name sales by a variety of search criteria, including keywords, extension, pattern, venue, date range and so on.  Below you can see that I am searching for comps for my domain MegaRaces.com by searching for anything ending in races, and is a .com extension.

Domain Name Comparison

Step 3: Determine what is the least your willing to accept for your domain name

Regardless of what your research indicates, you need to determine what you’re going to set the price at.  I suggest keeping a record of the following prices for your domain.

  • the lowest possible price you will accept from an end user
  • a price that will make you happy to sell to an end user
  • the lowest possible price you will accept to a reseller (another domain investor)
  • a price that will make you happy to sell to a reseller

Should you receive an offer on any of your domains, you can refer to this document and won’t have to make an emotional decision.  For me, I think I can repeat selling domains over and over again, I’m not holding out for the highest possible return, but I’m also not giving away domain names.  Investing in domains takes too much of my time and money, and I assume quite a bit of risk – my patience, investment, time and willingness to accept risk is not free, I expect to make a sizable profit.  I also realize that, like real property, good domain names will only become harder to come by as time goes by, so I think time and the market is on my side.  If you own good dot com domain names they are probably worth what you are asking as long as you understand the market and are willing to wait.

What Tools Do You Need To Become a Successful investing in domain names

There are many great tools and resources available to domain investors – I’m months in and am still learning.  I suggest you take time to read everything you can, listen to podcasts, conduct research online, and use trial and error.  It’s okay to make mistakes.  Here is a small list of resources that will help guide you on your journey in buying and selling domains names.  That page has links to blogs, forums, domain registrars, marketplaes, email tools, escrow services, backordering and expiring services, brokerages, freelance resources, hosting companies, legal resources, research tools, seo tools and website builders.  Even still, it’s just a start, there are more resources than that for individuals who are trying to get into the business of buying and selling domain names.

How Do I Get Involved in the Domain Investment Community

FORUMS

Forums are a great place to learn about buying and selling domains by domain investors.  Easily the largest domain name forum is NamePros, however there are others, including DNForum, Domain Boardroom and Domain State.  Disclaimer, NamePros is the only forum I visit regularly, but that’s only because I haven’t made time to explore the other forums.  I’m sure they’re great, and encourage you to check them out.  A bit of warning, I really like technology and work in lots of it each day – many of the resources, forums, and websites designed for people like you and I who buy and sell domain names are stylistically very old.  If you loved the internet of the late 90’s, you should be right at home – otherwise, enjoy all the great information in-spite of the poor user experience.

trade-shows and conferences

NamesCon Global is an annual conference that was founded in 2013, but was acquired by WorldHostingDays in 2016. The event now benefits from the combination of the domain name industry, hosting and cloud industry.

NamesCon strives to bring you rich and actionable insights into the complex domain market, so you can find and act upon new opportunities. NamesCon Global is our flagship event, bringing together the people who build and grow the domain-name industry. This is the place to build the strong relationships and strategic partnerships that drive this person-to-person business.

Asheville Professional Domain Investors Meetup

In 2019, conference led by “domain king” Rick Schwartz, held it’s first ever “unconference”.  This event was designed to put investors who are buying and selling domain names in the forefront and the sponsors in the back seat.

This is a show by Domain Investors for Domain Investors. It’s not a show where all these companies get stage time to push their wares or new gTLD’s and domains, and domainers are pushed aside. If we have any sponsors at all (and it looks like we will), it will be to help us not sell us. And also lower the financial burden on attendees. I want to get it as close to free as possible! On the other hand, you will have expenses for lodging and travel. But if all goes well, the food and entertainment will be an incredible bargain as will the deals, relationships and progress made.

podcasts

Domain Name Wire Podcast

The domain name wire podcast is my favorite podcast to listen to about buying and selling domain names.  In the last few months, I’ve managed to listen to most of their podcasts dating back to at least 2015.  The host of the show, Andrew Allemann, masterfully interviews the top names in the industry on topics that are relevant to every domain name investor.  Here’s a link to their podcast on iTunes, though you can find it on everywhere else podcasts are available.

Domain Sherpa Podcast

Tess Diaz is the hostess of the show, and quite frankly, I don’t like her on-air personality very much – however, the show provides great content, interviews leaders from the industry.  The podcast often features a group of “domain sherpas” who discuss buying and selling domain names they brokered, bought or sold privately or as part of their business.  They also will review listener submitted domain name portfolios.  The show is really entertaining, but I think they condescend to the run-of-the-mill domain investor.  So if you’re just getting started and want to hear how bad you’re at it (and you should want to) then tune this show in on iTunes.

Domain Investing with Jason Of Florida

This is a shameless plug – the bad news is my show about buying and selling domain names is not great (yet) as I released episode 1 in September 2019. This was my first ever podcast, and there was a lot to learn. The good news is that I’m working diligently to get better, and what better way to learn how to begin domain investing but through a beginner? You won’t hear anything from beginners like myself on those other shows.  You can view and listen to my podcast from this website, iTunes, Google Play, Spotify, Stitcher and just about anywhere else podcasts can be found.

If you have further questions or comments, please comment below!  As always, if you enjoyed this content please follow JasonOfFlorida on TwitterFacebookLinkedIn, or Instagram.  For further reading, I recommend you read my article on how to prevent you domain names from being stolen.

 

 

 

 

Husband, Dad to 4 boys, #SoftwareTester, #domainInvestor, #WebEntrepreneur, and has-been runner.

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