Domaining is the online equivalent of a real estate investor speculating in raw land. Even though it can be one of the most lucrative and the simplest and easiest forms of Internet businesses it doesn’t get that much attention.
My guess about why that is would be that it is too simple. It doesn’t really take a guru to package up a
$150 oops $147 eBook to tell you what to do. You can understand the basic concepts in about 20 minutes; from there it just takes a few tools a bankroll of some kind and you can be up and running in an hour.
In my own experience I once purchased the domain name rivercity.ca for about $10 and sold it 6 months later for $1500. That’s a killer return on investment. If you can do that with any kind of consistency, domaining can be very lucrative.
What is Domaining?
The most basic form of domaining is simply acquiring potentially valuable domain names. These undeveloped domains are then monetized in one of two ways:
- By providing ads to people who visit the domain by typing the domain name directly into a browser (known as “type-in traffic”.) You’re probably thinking that very few people would ever type most domain names directly into a browser, well it happens more than you think and with a domain name costing about $7/year, your domain only has to make about 2 cents a day to give you a positive cash flow. Once you can consistently pick up sites that more than pay for their registration fees, then you now have a money-making machine, requiring no maintenance.
- By reselling the domains once they appreciate. Since it is unlikely that any established niches will have many new and valuable domains that haven’t been registered, domainers look for new ideas and breaking trends and register keyword rich related domain names. From there it is a matter of waiting for your new trend to break big into the popular culture (imaging you registered podcast.com 5 years ago.) Just on the Earth, there is a limited amount of prime Internet real estate (namely short .com names) and serious developers know the value of this real estate and are willing to pay for it.
The ability to understand the concept of type-in traffic and what sorts of domains or words that people type directly into a browser.
The ability to spot new concepts that are emerging in the world and to quickly turn those ideas into keyword rich domain names.
Tips For Buying Domains as Investments
- .com or other top level country domains to a lesser extent (.ca for Canada will receive some type in traffic).
- no hyphens
- no numbers
Often domains are sold in ‘portfolios’ which is a large (often 100s or 1000s) of related domain names. It is best to focus on niches and batch your purchases around your topic rather than buying many unrelated names.
You can buy existing sites that are expiring. If you do, make sure to check whois.sc and Archive.org for the history of the site. It is possible to completely trash a domain name (with black hat spam for example) so badly that it may never get indexed in a search engine again. A site like this might look like a great domain, so will even have a high PageRank, but beware.
The Pros for Domaining as an Internet Business
Low barrier to entry as far as skills go, all you need to do is pay attention to what is new in the world around you and attempt to snap up domains related to these topics.
The Cons for Domaining as an Internet Business
Profit on each individual name can be tiny and equity increases can be hit and miss. Which means that you could need to buy 1000′s of domains to make any type of substantial income or to begin to have a large enough portfolio to stand a decent chance of hitting a home run with a high-demand name.
Lots of competition from serious companies.
Some gray areas around trademarks can lead to being sued a lot. The more aggressive you want to be by cutting into trademarked words or phrases, the more risk you run, but the more potential profit as well.
Build out your Internet Real Estate
Build out your real estate a bit, create a page, or a WordPress blog, point a couple links at it and add AdSense or an affiliate offer to it.
As opposed to simple domaining where you use a monetization service (see resources below) you’ll require hosting (I use Hostgator because it me to host unlimited domains and has one-click WordPress installs for about $10 a month.)
Getting Serious about Domaining
If you are going to get really serious about domaining then you are going to get set up with a registrar, or become one yourself, so that you can practice “domain tasting.”
This procedure, of registering a domain for up to 2 weeks and then canceling the registration if the domain doesn’t receive any type-in traffic, allows the serious domainer to know that any money they spend on domains will result in a positive return on investment. It is a very serious tool for professional domains as it almost guarantees a profitable buy on every name they purchase.
Also, if you are going pro, you can begin to purchase domains that have already appreciated, hoping for further appreciation. In 2003 the domain men.com sold for $1.5 million. It was purchased in 1997 for $15k.
My Case Study – Think Like a Domainer
Here’s an example of the thinking that I go through with domaining. A while ago I was reading my copy of Wired magazine. I do a quick scan of it the day it arrives. I came across a story of a high school student who, at a science fair, was able to create about half the power of a regular AA battery by harnessing the power produced by “magnetic bacteria.” For about 10 seconds, I thought to myself, “wow is that ever cool…that could change the world by reducing the need for fossil fuels.”
Then I IMMEDIATELY RAN TO MY COMPUTER and registered magneticbacteria.com.
That’s the life a domainer. Fun life, get it right and you’ll be rich and it really is almost completely maintenance free business…just don’t forget to renew those domains
- Find trends – trendwatching, WordTracker hot searches, Yahoo Buzz, Wired magazine
- Sedo - learn what domains are selling for and understand why they are valuable. Not recommended as a parking service due to low payouts, but a decent place to list domains for sale.
- Hitfarm – parked domain monetization service.
- SnapNames – for backordering existing domains that are about to expire
- Domain Hunter – domainer’s domain name brainstorming tool
- Ultsearch who sold his domain portfolio for $164 million.
- Domainer Magazine