The Biggest Myths in Domaining
Note: Longer Read – 10 Minutes
# 1 You Can Make Money by “Buying” Domain Names (i.e. Acquiring)
So I’ve fallen prey to this many times, so its time to get real. I’ve said it before, domaining can be a delusional business sometimes because you can buy a domain name, tell yourself you bought it at a discount to its true value, and go home that day booking mental profits, thinking you made money. Walking tall, feeling good. Your Up!
So you wanted to feel good and have a sale, you kept buying up until 1000 to see your first “Your name just sold” email. You thought you could rest and stop compulsively buying. But no, because now your looking $8000 a year in renewals next year. But when you were ramping up, were you being selective enough, or did you cave and buy buy buy.
# 2 They Told Me I Would Sell 1-2% a Year
So you hear you sell 1 % a year, so buy buy buy, You race to get up to 100 names. But nothing is selling..in your first week. So you go to 500 or 1000 domains. So 1% of that number (1000) is selling 10 a year. But a year is 12 months, so to sell a name now, this month – you need to buy 1000 names. You can easily start out in domain name investing and not have a sale until you buy 1000 names.
The thought that you can sell 1-2% a year for me comes from Dan Warner, who ran a portfolio at Fabulous in mid 2000’s acquired in bulk from an investor who bought at registration fee in certain groups. So they used an assumption they would sell certain of their “stock” each year, while they were also earning traffic income. But once they bought the quality they bought, how could it be that the next group of investors could buy something that would have the same sales likelihood.
But every e-book and domain course has picked up that number as if it were gospel.
I believe most investors have a group of names that will sell for sure, if they price them low enough. And for that group domaining is really waiting and evaluating offers. And they own some names that may not sell, but if they do they will have some nice margins.
However, many beginning investors have too many names that will never sell. If your doing registration fee or closeout domaining your goal is to buy names that over time, or a change in the market, will become like the first group: have some liquid value and your job is to evaluate offers and merchandise your portfolio.
You make money buying and selling domain names, and hopefully selling for more than you paid to buy, both in the case of each name – and in total. I’d ask you to please don’t forget in total. When you drop names or stop renewing, are you counting that cost against your profits? You should. Be real. You also need to make a certain amount to make up for bad purchases, renewals and time spent searching, and bidding on names you didn’t win. Lastly, Pay yourself. Don’t work for free, did you make enough money domaining to pay for new names and yourself?
Now if your just blowing money for fun. I understand. Like playing poker you dip in, buy see if they sell and if not, hey it didn’t break me. Its entertainment. And I had a chance. You look on each buy as a lottery ticket, an expense, and you can afford it.
BUT, what if you could buy some better names, get a sale that multiplies your money, and you can go spend that on more fun, more stuff. Or better yet, buy more names with house money.
Anyone Can Buy More Domains
But the temptation when your starting out, and the offers aren’t coming in….. is to Buy More. You need money, you’ve got to make some net worth in domains, and what do we do…. we buy. Your in domaining a month, a year, 7 years.. You wake up and say what have I done? Why do I own so many names, no one wants my names. Or even worse, you run out of money, give up and let em all go. But the one thing you probably wont do is stop buying, you still buy even in desperation.
So I will be doing a 10 part series on what to do, and how to do it. Join me on a journey I apply to my own portfolio. But first lets cover what not to do. Series starts Nov 4, comment at the end to let me know your coming along, and choose the option to get updates when posts come out.
Resist the Temptation – What Not to Do in Domain Investing
If you think like I have, the easiest thing to do is buy more new names. If I could just buy a name today that I could sell I would make money. Your tempted to go after the most liquid names (LLL and LLLL). But unless you have a “honey hole” where your buying below wholesale, in scale; you have to outbid the wholesale market to get a name, and then discount it to sell right back to that market. In wholesale domain flipping you need the market to move up to make your buy valuable. That happens over time, you want the love now.
So again, what to do when you need cash? The easy answer is buy more names. We make lists and end up buying everything on the lists. Your treating names like lottery tickets, maybe someone will email me tomorrow and buy my name. And if I don’t sell my name this week, I need to buy more. As I’ve said above, you find yourself buying 1000 names just to have the odds work and you sell 1.
Other domainers and folks like me on podcasts will say we don’t like your names. You can get defensive; well, you say, “I’ll show them” and buy some more. Because your right, any name could sell today or tomorrow for $5000 to $5 million. So your right, but are you Correct? Are you Correct in your assessment. Will it come to pass?
Your trying to pick where lightning will strike during a storm. And if your doing reg fee or closeout domaining your adding names to the 50,000,000 or more that are owned and not developed or selling every month. A roulette wheel has odds because a little ball has to fall into one slot. In domaining, imagine a wheel turning with 50,000,000 spots, and the ball doesn’t really have to land in one at all.
Prestige Domains are Different
Now buying premium names with built in value is different. I’m more talking to those looking build value in domain names, start with almost nothing and build a portfolio. And if what your doing is working, as I’ve said keep at it. But if not, manage your existing portfolio to preserve value, L-E-A-R-N and then when you have some repeatable strategies, pour in more money. But don’t just buy, exhaust your capital and only learn what you truly want to do when the money runs out.
And if its hard to resist the temptation, share with me and others when your tempted. Lets get through this together. If you need money now in domaining, sell names for others. There no quicker way to make money and learn what your in for, when you have your own names, then to have conversations with buyers, learn what they want and think. If no one will let you sell their names, email me – I hire outbound brokers all the time.
But buying is easier, so we buy. Where to buy? You look where you “can” buy, because no one else is. So that could be good, nice names with no competition, yes do that.
But if your the only one shopping and buying a trend, or getting everything you want in a minor marketplace, because the names aren’t worth it, you have no wholesale backup value, and it will take more time than you think for buyers to exhaust the supply of available names to the point where they will buy yours.
Hey what about new names coming out, the IPO’s of new top level domains. There is usually no line, step right up. So we, (yes me too) buy new tlds. We buy the latest trendy cctlds. But mostly we buy drops, we buy premiums, we buy off newsletters, BUY BUY BUY BUY…and then we “hope” we sell. You pay-up when you buy if you think you NEED to have more names. Right at the moment you place another bid “above your self imposed limit”, you tell yourself “I’ll just to a quick outbound campaign”, and at least get my money back on this one. But do you?
NO. Then the thrill of the buy is gone. We tell ourselves we will do that selling work later. Why? Because I need to buy something else tonite. So here the facts, the only way to flip is to sell wholesale. Wholesale buyers want to pay 1-10% of retail. So you have to buy at 20-50% of that wholesale to flip to another investor. And those same buyers at wholesale for your names had the same chance to buy the name. When I need liquidity, I know I have to sell low low at my threads on namepros.
Wholesale Domain Flipping
So you may be looking at wholesale selling to make a quick buck. What works against you is the psychology of domainer to domainer sales. Unless the buyer just matches up name and price (smart), they think why is this other domainer selling. I don’t want him to profit. So sales can stall. So then you price lower and you haven’t really “made” any money.
To flip wholesale, the pricing is simple, you need to price where you would buy it, its gonna hurt but that is where there is liquidity. That is where names sell on the DN.BIZ newsletter and on forums.
But we still buy. Its like we are in a grocery store. We act as if the grocery store will empty out, and we throw everything in the cart, check out and then see what we have. Why be selective, I’ve got to my cart full. We say its ok if I make a couple mistakes, my big sales will make up for them. Why be selective? Just get it all,its easier.
Or, you see a new trend, buy 40 names you thought up in 15 minutes. Some nets and org. You tell yourself this will be your salvation. Wait! wait, are you sure? Just buy the best one. Take a breath, walk around the office, block, coffeehouse. Come back, do you still love them? If you had bought them, and could return them would you? So try to not buy too many spec names when you think you need money.
But how to be a better smart buyer is for another series. Keep following us for that update soon. But first we will look at what you do have. What you should do that cost no money.
Are you at this point starting out? Are you 2-3 years in and its just not working. Stay with me here on dn.biz and let me show you what I have learned, the good and the bad from buying, selling and dropping over 50,000 names over the past 15 years. Email me at email@example.com if there is something specific I can help you with in these posts, that also may help others.