The original domain investing concept where you register a domain name and sell it later to a client seems relatively simple, but once you get involved you will see there is a lot more going on.
Domain investing means buying domain names and then selling them for more than what they cost you (purchase, registration renewal … etc.).
Trading directly with the end-users means you sell the domains people who want to use the domains for a website and usually this kind of trade equals highest profits, but sometimes you will sell to other domain investors.
How to get domains that are worth the investment?
In order to sell, you will need to buy or register domains, but these domains need to be of good quality so you actually can sell them later. There are a few sources you can turn to for valuable domains.
Expired domains are the ones being dropped by domain traders who are looking to trim their domain portfolio or companies that did not make the renewal, but they can potentially be very valuable. Millions of domain names expire every month and are returned to their registry operator.
Fact is, domain traders and brokers, monitor these valuable domains as they expire, and they try to get them using drop-catching technology. Anyone can make a backorder for a domain and try to acquire it, once it becomes available for registration.
Most backorder services charge a minimum fee to acquire a domain when it expires. If there’s more than one person interested in a name, then it is auctioned off to the highest bidder.
Direct domain purchase straight from the domain owners can be time-consuming as both parties will try to negotiate the best deal that is in their favor, as it is an opportunity to buy or sell a domain name at a very good price.
At the expired domain auctions, all of the domains can easily be obtained, provided buyer is ready to offer the highest bid. When you buy domains at expired domain auctions you are competing against many other domain investors.
Other ways to get domains are:
- Domain marketplace websites, such as Sedo or Flippa, offer millions of domain names with the domains at fixed prices.
- Live domain auctions, which may be quite entertaining but rarely offer good deals.
- Hand registrations are the cheapest way to fill your domain portfolio, where a domain trader will choose a domain registrar and register several available domains.
Note that hand registering valuable domains is not an easy task and is the best choice for up-and-coming terms and search keywords that are gaining popularity and might provide higher value in the future.
Domain investment value
A domain value is similar to real estate because depending on many factors value can be higher or lower. Many real estate and equity investors are more than happy to get a 10% or 20% return on their investments while 100% is rare and incredible.
Domain investors typically sell their domains for up to ten times more than the original domain purchase price, although the final domain price must be evaluated and for the most valuable domains, it can be a five or even six figures number.
Why is there such a large discrepancy between aftermarket domain prices?
On one hand, domain names are an inefficient market and this kind of market gives rise to big profit opportunities. On the other hand, domain investors will hold large domain portfolios and most of these domains will remain illiquid.
Because domain investors need to hold onto their domain portfolio for a long time without selling, and by selling a small portion of their inventory every year they need to finance domain registration renewal as well as new domain purchase.
Consequently, domain investors must remain economically profitable, so their gains also must be outsized to stay at a profitable level.
Selling and making a profit from these domains
There are several ways that can be utilized to sell domains, that are very similar to the means of getting the domains in the first place, but now the table positions are turned:
- By listing domains for sale on marketplace websites (Afternick, Sedo, Flippa …) you can provide online visibility to your domain portfolio. Domains sold through these websites are most often ones that have low-to-medium value. Marketplaces provide an option to set a definite price for a domain or let the interested parties make an offer.
- Have a “For Sale” notification on a specific domain website. Some domain registrars offer free “parking” for a domain, meaning you will get a free landing page with a custom message that can notify visitors the domain is for sale.
- Research potential clients and make a direct sale. This kind of sale direct to end-user demands a lot of work. Usually, it means researching the right business niche and finding many companies that might be interested in buying the domain. As with all sales, after you contact all of them, many will reject the offer. The best advice, in this case, is to do your research well and prepare a presentation for why that particular company should buy your domain.
You may employ all three for all of for specific domains. Direct sales are the most demanding technique but it provides the highest profits as you do not have to pay any commission or fee to an intermediary.
You sold your first domain, what now? Continue domain investing!
After making a few successful domain sales you will have a better perspective of how this trading industry works.
Remember that domain investing is not a one-time thing and similarly to investing in real estate, it’s important to continually refresh your inventory.
Depending on your domain portfolio quality you employ varying philosophies about selling domains. Some domain traders hold out for top dollar and sell very few domains, while others focus on a large volume of sales and continually reinvest profits in more domains.
All domain traders will agree on one thing, that domain trading can be addicting as there is a huge excitement when you sell a domain for a big profit.