4 Challenges of Investing in Domains | Domain Investing
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4 Challenges of Investing in Domains

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Domain investing can be a lucrative business, but it is not without its challenges. I thought I would put together a short list of four challenges that many domain investors face.

As always, I invite you to share your thoughts on these four challenges, and I also invite you to add additional challenges you face with respect to investing in domain names.

4 challenges of investing in domain names:

Liquidity – I think the greatest challenge for people in the domain investment space is the lack of liquidity. You could own an exceptional domain name, but if you need cash quickly for something, it can be difficult to extract close to its value in a short period of time. Further, if you want a loan to buy a domain name or want to use your undeveloped domain name as collateral, there aren’t many sources to get cash quickly.

No price guide – There is no definitive price guide to reference when you want to find the value of a domain name. Many (perhaps most) major sales are not publicly reported, and every domain name is unique. Without accurate public comparable sales and with even slight nuances causing massive value differences, it is not easy to pinpoint a valuation. This makes it more difficult to be certain about spending money on expensive acquisitions.

Biased resources – There are many great sources of information about domain names. There are blogs, forums, domain consultants, e-books, and other sources of free and paid information. Just about everyone has their own conflicts and biases, and it can be difficult to know who to trust for good information. I do not think there are many people who intentionally want to mislead anyone, but people have certain niches, have made inroads in their own ways, have products / services to sell, or are otherwise biased. The most successful people tend to keep things private, and those who share may do so for a reason (I do it because advertisers pay me!).

Technical aspect – Domain names are intangible “goods” that essentially exist in a massive database. To use a domain name, people need some level of technical knowledge in order to change DNS, update contact information, initiate transfers…etc. Some registrars have great customer service, FAQ / support areas, or have easy to use interfaces, while others are more complicated. There is still a technical component to domain ownership that can make it a bit challenging and can make people apprehensive about buying domain names.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (27)

    Ron

    Reverse hijacking, especially in short, and generic .com

    September 4th, 2015 at 1:09 pm

      Elliot Silver

      Yes – should have thought about that.

      Legal challenges are a major issue. UDRP, C&D letters, and litigation are all big risks and the evaluation of risks is a big challenge for many people.

      Thanks for sharing this one.

      In reply to Ron | September 4th, 2015 at 1:11 pm

      Jeff

      lets not say hijacking for legal terms.. think about it as “holding” a site that you saw on auction and that you would rather hold it and sell it back to them than someone else who would hold it for a much higher price than what you would gladly take

      In reply to Ron | September 8th, 2015 at 2:08 pm

    Frank Schilling

    Solving the first problem, ultimately resolves all the others. We’re working on it. : )

    September 4th, 2015 at 1:09 pm

      Elliot Silver

      I will be all ears!

      In reply to Frank Schilling | September 4th, 2015 at 1:10 pm

      David Gruttadaurio

      As will I!

      In reply to Elliot Silver | September 4th, 2015 at 1:36 pm

      DNSal.es

      @Frank, could you elaborate on how more liquidity will solve other pains? Very interested.

      In reply to Frank Schilling | September 4th, 2015 at 3:27 pm

      Andrea Paladini

      I disagree, IMHO (partially) solving the liquidity issue doesn’t fix neither the “biased resources” problem (conflicts of interest, etc) nor, obviously, the legal risks, among others …

      In reply to Frank Schilling | September 4th, 2015 at 4:32 pm

      Mark

      Frank – What would be a very big help would be if GoDaddy actually opened up ALL gTLD’s for their auctions.

      Despite claiming they sell new gTLD’s on their auction pages, they don’t! The fact that you can not list any of the ‘premium’ names on GoDaddy is absolutely RIDICULOUS.

      Bringing liquidity to the names should be fairly simple. Release them to the largest aftermarket.

      If you can help GoDaddy figure this out every one will benefit.

      In reply to Frank Schilling | September 9th, 2015 at 10:42 am

      Joseph Peterson

      Translation:

      “We’re working on it” = “Trust me and pay me.”

      Nothing more.

      In reply to DNSal.es | September 9th, 2015 at 4:06 pm

    Jeff Edelman

    Difficulty in reaching the decision maker when attempting to sell.

    In most established business fields, it is easy to know where to reach out in an attempt to make a sale. There is an obvious person or department for this. In the domain world, there usually isn’t. I find this to be a huge challenge.

    September 4th, 2015 at 1:31 pm

      Mark

      Agreed. Two of my premium domain names, Design.Center and Learning.Center have been challenging to sell.

      Reaching out to the dozens of “Design Centers” and “Learning Centers” and then actually getting connected with the proper decision maker has been more difficult than one would have thought.

      This is is definitely hard work when done proactively, but ultimately worth the effort.

      In reply to Jeff Edelman | September 8th, 2015 at 10:12 pm

    robb

    How about the spouse who thinks you spend too much on domains or don’t make enough sales? Until you make a sale and everything’s great again. lol

    September 4th, 2015 at 2:03 pm

      Elliot Silver

      Luckily, that is something that I don’t really have to deal with.

      September 4th, 2015 at 2:04 pm

      Unibrand

      Sounds like a personal problem…personal to anyone who has a wife! ­čśë

      In reply to robb | September 9th, 2015 at 9:59 am

    Acro

    The biggest challenge is the lack of understanding how end users operate.

    You can have the best domain in the world, if you are a bad salesman you will most likely never sell it at its maximum ROI.

    Such experience is acquired with time, effort and by being true to one’s gut feeling.

    September 4th, 2015 at 2:42 pm

    Dayne

    The biggest challenge in domain investing is the competition. Things are getting more competitive by the day and wholesale prices keep rising. It’s getting harder to find good value.

    September 4th, 2015 at 2:54 pm

    Tom T

    I rate the challenges:

    1) Capital
    2) Legal
    3) Negotiations
    4) Technical

    All should be heavily researched before investing.

    September 4th, 2015 at 3:09 pm

    DNSal.es

    As to the second point “No price guide” and few others:

    The believe is that two domains, like two paintings, are never the same. Hence, yes, difficult to price. On one side it is up to the buyer to offer a significant amount to convince the seller. On other hand, if the seller does not want to sell, there is no sale.

    It is a question of demand and supply one may think. In our days, the latter is much greater than a decade ago, especially with influx of new TLDs. The demand grew somewhat too, but not so high as the investors would want it to soar.

    Every day we observe how people are not willing to overpay for premium names and venture our into short, yet unknown zones.

    Liquidity will always be of an issue, because, there is, hypnotically, unlimited supply.

    There are plenty of resources on historic data, DNPric.es being the largest known one.

    Ultimately, except for few niches, say L/LL/LLL dot-coms and top keywords, the buyer always has a choice and a budget.

    Master these two, make the mechanism tick, and you will make a decent living.

    30% to 40% of domain names are not renewed. Many of them are premium. This part of the market is quite liquid as there are enough of speculators willing to take part in the game and buy with the intention to resell.

    Those who have money for a name and an idea for it, typically have guys in the team to take care about the technicalities.

    How many words an average man uses? Square the number and you will come at the pool of premiums. The rest … do we really care about the rest?

    Thus the bottom line: it is all about liquidity. In particular about the demand.

    September 4th, 2015 at 3:41 pm

    Mark

    Domain Names are not marketed correctly to attract Retail Investors. Most people I talk to do not even know what a Domain Name is, which is the reason why I picked DomainsareNames.com to market my Domains. The average person needs to be educated more about Domains.

    The Domain Name Industry needs a central marketing department to promote domains.
    Domain Name companies also need to promote their business better to the average person.

    September 4th, 2015 at 6:00 pm

      Bob

      Exactly agree with you! That’s why I have recently set up my own site ‘Top Poster Domains’ (www.posterdomains.com) in conjunction with my own names so that the average person is able to view all these awesome Google Images which are much easier or quicker to follow rather than spend all time reading all unwanted or pointless web contents or information.

      In reply to Mark | September 5th, 2015 at 3:23 am

      Jeff

      what is funny is that people ask me, if you buy a name at auction and it was someones… what prevents them from making a new domain name for their company? and my response is, TRAFFIC. ALl the traffic that goes to your former site now goes to someone else. Wouldnt you like the traffic to come back to you? besides, the website is on all your business cards and letterheads

      In reply to Mark | September 8th, 2015 at 2:12 pm

    J

    The biggest challenge with investing in domain names is taking a risk with money you need to survive. Once you accumulate a large portfolio, you need to pay renewal fees annually. If you don’t sell, you are bleeding money. Then, you may lose your best domain names to prevent the bottom from falling under you. In the end, you lose everything.

    It is important to make money parking domains at the right location. Make smart purchases. Know how to empower these domains to earn you money so are you’re not desperate to make sales. Sit on these domains, protecting your very best names. Know how the value of these domains for branding and SEO purposes. Understand the marketing side of domains. Know how end-users play the game.

    Lastly, don’t rely on domains as your day job unless you are Frank, Rick, Mike and other domain all-star performers who can afford to wait many years. Most domain investors need that lucky sale. It doesn’t happen often, especially right now. At one time, it was much easier to make a domain sale. These domains actually helped the end-user become successful. Times have changed.

    Don’t always rely on domain blogs. Eventually, they get frustrated dealing with your questions and tell you to hire a consultant.

    September 7th, 2015 at 12:35 am

      Elliot Silver

      Lots of good advice given.

      In reply to J | September 7th, 2015 at 7:51 am

      DNSal.es

      So the best way is indeed to build up the cash flow coming out of the portfolio indeed. One of the best strategies is to lease the domain names.

      In reply to Elliot Silver | September 7th, 2015 at 8:33 am

      Haroon

      J! Hats of to you. Your thoughts are excellent and that is what everyone needs to know before becoming a full time domain name trader or investor. Thank you very much. YOU ARE VERY PRACTICAL INDEED.

      In reply to J | September 8th, 2015 at 2:40 pm

    Douglas

    Most of us are probably geared up for the waiting game, as with most things waiting for the buyer to come to you gets you the most value. Reaching out and flipping like the examples mentioned only works if you have great names that have a wide use, it seems the more narrow the target niche the less the chance of a quick flip, that is only from what I have experienced though.

    September 8th, 2015 at 12:30 pm

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