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By Rikki Kirzner, Contributing Writer The domainer siren song contains success stories such as Yun Ye who reportedly owned 100,000 domain names, earned $20 million annually, and sold his business to Marchex for $164 million in 2004, and Roy Messer who sold vodka.com to Russian Standard Co. for $3 million dollars at the end of 2006. While there are still plenty of great opportunities ahead, it is hard to profit from any speculative venture—especially domaining—unless you avoid making common, and often expensive, mistakes.
Registering or buying insignificant, and, consequently unprofitable, domain names is arguably the biggest mistake novice domainers make. Don’t delude yourself or set unreasonable expectations about a name’s future value. Most experts agree that less than 1% of names available on domain name appraisal forums have any real market value, apart from the overeager, novice domainers.
Frequently a domain name is purchased or registered without taking a critical and objective look at its future revenue earning potential. Common sense tells you if a domain name is reasonable, valuable, usable, and/or memorable. Few people are likely to type or remember names with nonsensical combinations, such as the hystakes-games-poker-xxxvideoes-online.fm sort.
Some experts like Michael Mann, founder of BuyDomains.com, claim there is no more profit buying new domain names. However, almost every other successful domainer fervently disagrees. Jeff Behrendt, founder of Aviva Directory (www.avivadirectory.com) said, “Good domain names will only increase in value over time. The advertising money spent on domains dramatically increases every year, making domains more valuable.”
Jeremiah Johnston COO and General Counsel of Sedo.com, LLC (www.sedo.com) believes the best opportunities for domaining are yet to come, and said, “Domains are valuable commodities for ordinary people with ordinary needs. While most domain names have already been registered, the secondary market is alive, thriving, and servicing the person or business that needs a voice on the internet.”
Some domainers are primarily speculators collecting all the three and four letter .com names they can find in hopes that someday, these names—like stamps, or beanie babies—might have some nostalgic or collector value. However, experienced domainers believe there are better ways to make money as a domainer. They recommend buying fewer and often more expensive, high quality names rather than multiple, inexpensive names of dubious quality.
Jason Drohn, author of The Art of Domaining said, “Domaining is an open-ended, niche market built upon very successful speculation.”
Johnston concurs, “The internet is not a finite resource. There are new opportunities and emerging markets, especially in new countries. Over time there will be new extensions and international domain names for developing nations.”
Look for domain names with genuine commercial value. “Learning how much advertisers pay to be on similar domains in that industry is a good way to judge the commercial or true market value of a domain name,” Drohn said. He also recommends you consider how the domain can be monetized or used before purchasing or registering a name.
Johnston said, “Stick with what you know best. Generic terms can be found anywhere. Every industry has its own language and jargon which can be developed into a very valuable domain name in time.”
Your chances of making a profit improve substantially by creating a self-sustaining business model through advertising, developing the domain and having a clear idea of how it fits into your future plans. These actions help create interest among businesses about your domain’s intrinsic value. Accordingly you must consider whether you have enough time, money, and resources to develop a domain to the point where it can generate sufficient revenue before you acquire, park, and/or develop any name.
That doesn’t imply you have to become a webmaster or programmer. Software developer websites such as www.rentacoder.com, www.elance.com, and similar firms will bid on jobs to develop a domain to your specifications. Monetization, registration, ad sales, and domain management services from www.fabulous.com, www.google.com/adsense, and others help you build up traffic to your domain, generate revenue, and improve ranking placement with little work on your part.
Don’t try to figure everything out on your own. Read and learn everything you can to avoid the mistakes others have made, and understand what makes people successful. It is ok to be skeptical about what you read and the advice of others.
“As in all things in life there are both risks and expenses that come with any kind of entrepreneurial model,” Johnston said. “Domaining is no different and you incur expenses starting with the registration fee.” Johnston recommends finding an established, trusted registrar with reasonable registration fees, because the fee often determines the value of the domain.
Don’t buy anything on a whim without doing your homework.
Avoid becoming a target of email scammers who con you out of your domain and your money. “Don’t trust email when you are selling a domain,” Drohn said. He recommends you thoroughly check out the domain and its owner before buying it and contact the buyer by phone as quickly as possible.
“Avoid scams where someone is asking you to do something that simply isn’t necessary, such as paying for an appraisal using the buyer’s suggested appraisal company,” Johnston cautions. He advises novice domainers to work with a trusted market place where there are mechanisms in place, such as a buyer certification program, to filter out deadbeats and scammers.
Johnston and Behrendt recommend considering an escrow account to complete your transaction. Funds go into escrow until the transfer of ownership is successfully completed.
By avoiding common pitfalls, using common sense, and implementing these suggestions, you are on your way to becoming a successful domainer.
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Rikki Kirzner is a freelance writer and veteran computer industry professional with experience as an analyst and former Research Director for IDC, Gartner Group, and Meta Group and as a Senior Editor with Open Computing Magazine.
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