Want to Invest in Domains? Here Are The 7 Golden Rules

This is a guest post by Andrei. If you want to guest post on this blog, check out the guidelines here.

Look, the Internet itself is still in its infancy and out of all online industries, the domain name industry is definitely the one which resembles the wild west the most. You see a domain being sold for hundreds of thousands of dollars today, and the next day a similar domain is being sold for 4 figures.

iReport.com, remember that one? You know, the domain CNN.com uses? If you don’t remember the domain name deal, let me ask you this: how much do you think the domain sold for? Maybe it sold for $15,000? Maybe even for something like $30k?

Nope, It Sold for $750,000!

Yes, 750 grand. And you know what’s funny? Most of the people who invest in domain names have at least a handful of domains which are obviously a lot better than iReport.com. And again, it’s not Report.com that sold for $750,000, it’s iReport.com (it’s not a typo, “Report” followed by dot com and with an “i” in front of it sold for $750,000).

It seems that the Web has been around for ages but, in fact, it’s only about 20 years old! There are practically no rules yet, most domain name owners would have taken $15,000 or even less than that for iReport.com without even blinking. In this case, however, the domain was owned by an investor who was sitting on a lot of cash (Rick Schwartz) and who was in a great position to negotiate with CNN. Rick Schwartz is one of the people who has managed to retire early thanks to his domain name investments. Do you want to follow in his footsteps? Here are 7 golden rules which might just help:
1. Quality over Quantity

Domains are cheap so if you want to, you can hand register over 1,000 domains for less than $10,000. Would that make you happy? Would you consider yourself a “big shot domainer” if you were to own 1,000 domains? Wake up!

Most of the people who are just starting out as domain name investors make the mistake of hand registering worthless domains. For example, lots of people thought they would make it big by hand registering as many five letter domains as they could afford. Needless to say, practically all of them ended up learning a fairly expensive lesson. If you want to invest $10,000, buy a handful of domains which are actually worth it for 2 simple reasons:

a) A domain with inherent value will always be in demand
b) If you own about 1,000 domains, you’ll end up having to pay around $10,000 yearly in registration fees. If you own 10, you’ll only have to pay roughly 100 bucks per year in order to keep them all.
2. Stay Away from Over-Hyped Extensions

Do a bit of research and you’ll understand why. Dot mobi domains are one of the best examples: people have initially paid a lot of money for them but as time went by, these domains started losing more and more value for one reason: the fundamentals just aren’t there, dot mobi is an extension which has been over-hyped and nothing more.

The rule of thumb? .com is king.
3. Avoid 4 Letter Dot Coms, 5 Letter Dot Coms etc.

At a certain point, 4 letter dot coms were available for registration and at the beginning, a lot of people started to register domains live mego.com, tevo.com and so on. In other words, domains which were extremely easily pronounceable. Personally, I’m not a huge fan of domains like those even if the fact that they are easily pronounceable does give them at least some inherent value, nobody can deny that.

After a certain point, most of the 4 letter dot coms which are actually worth it have been registered but there were a lot of people who wanted in on the action. Since the good domains were all taken, they started to register the remaining 4 letter dot coms, domains which are anything but pronounceable. Seriously, try it yourself: pronounce FYQV.com, now say it ten times and faster. Needless to say, as soon as renewal dates got closer and closer, people who owned awful 4 letter dot coms started becoming desperate. Some of the sold them in bulk for like a dollar or two per domain, some have simply let them expire and the same principle is valid when it comes to five letter domains.
4. Always Go with Reputable Registrars

Remember what happened with registerfly? If you want to avoid situations such as those, stick with companies which have proven themselves and understand that if something seems too good to be true, it probably is.

Personally, since I own lots of extremely valuable domains, I prefer to stick with Moniker (the safest domain name registration company in my opinion). Even if I have to pay a bit more, I know that my valuable domains are in good hands and it’s definitely more than worth it.
5. Sell to End Users

You can buy lots of amazing domains on the cheap through domain name auctions and sell them for 10-20 times more to end users. Buy domains through auctions, sell them to end users: this is a strategy which works for quite a few people.

A lot of times, you will have to explain why domains are valuable in the first place, so you need to understand that being patient is extremely important. Even if it seems that some of the questions end users usually ask are ridiculous, don’t lose your temper and calmly guide them through the process. A lot of times, an end users who does initially not understand why you ask for so much will end up reaching for his wallet after understanding why the domain name is valuable.
6. Take Advantage of Type-In Traffic

Most decent domains have at least some type-in traffic, so don’t just let them stand there and do nothing. Park your domains and if possible, make sure to also include a “this domain name is for sale” message on the parking page.

Most parking companies offer something like this and it’s definitely worth it. Some domains will generate more than others via parking but why not squeeze as much money out of them as possible?
7. Develop A Strong Position to Negotiate

If you rely on domain sales in order to put food on the table, you’ll never be in a great position to negotiate. Remember the iReport.com deal (the domain Rick Schwartz sold to CNN for $750,000) I told you about at the beginning of this article?

Well, he managed to obtain $750,000 for the domain because he was in a great position to negotiate (he already had a lot of money, so putting food on the table was definitely not something he had to worry about) and as I’ve mentioned previously, most domainers would have accepted $15,000 or less for that domain with a smile on their face.

Develop some websites at the beginning, offer some services online at the beginning or if you have a day job when you’re just starting out, don’t quit it just yet. A person who has to worry about paying off the mortgage and things like that is NOT in a good position to negotiate, be sure to keep that in mind.

Andrei owns dozens of top notch domains, and he is organizing a domain name auction which will end on Tuesday (tomorrow), together with Moniker and SnapNames.



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