Advice From the Most Successful Domain Owners of All Time - Part 2 | DomainInvesting.com

Advice From the Most Successful Domain Owners of All Time – Part 2

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This is part two of a series of five with one piece of advice from some of the most successful domain investors, domain developers, domain monetizers, and others involved in the domain industry. I asked them for one piece of advice they would give to a part-time domain investor looking to build his business. I believe there are quite a few people who are part time domain investors, and I also believe just about anyone involved in the industry can apply some of this advice to their own business models.

I really appreciate all of the contributions from the industry leaders who contributed, and I hope the advice contained within is helpful to you now – or will be helpful to the growth of your business in the future. As an FYI, I intentionally did not put these posts in any particular order.

If you haven’t read it yet, I recommend viewing part one, and part three will be posted on Monday.

Rick Schwartz, RicksBlog.com:

Don’t quit your day job.

Don’t buy crap.

Don’t settle for trading low quality domains.

Don’t buy to double your money. Buy to make 10x minimum. If the domain you are buying is not worth 10x what you paid, don’t buy it.

People lie, numbers don’t.

Rick London, National A1 Advertising:

Try and buy the best. Instead of buying 20 domains for 1K each try and purchase one for 20K.

JBlack

Vince Lombardi, arguably the most successful football coach of all time, placed constant emphasis on fundamentals, not complex strategies. There is a reason why he started off with the opening line, “Gentleman, this is a football” in the movie. That line stresses the point of fundamentals, to start from the beginning. He knew intuitively that basics, honed to precision by relentless emphasis, then applied win over all other methods. Today, our world is full of distractions like never before in history. But when one filters the noise and examines successful companies and individuals the common denominator always is the persistent application of fundamental principles.

In that vein, if I had to offer a single piece of advice it would be define in precise terms where you want to be. I see this basic necessity, this fundamental, being ignored almost across the board. Many jump into domains with no end state planned. Its my view that one has to write the objective down, be specific, and describe it in sufficient detail as to provide a navigable roadmap to the destination. When you take the time write your plans down you start to become serious rather than a dabbler. When you become serious you learn and apply proper business applications like incorporation, intellectual property, law etc. Only when the objective is written out do the holes and assumptions make themselves apparent.

Writing compels one to think, to fill those holes and address the assumptions with plans and action. (The planning method also greatly helps select which domains should be bought and which domain names should be sold or advanced well beyond parking or notional development.) The detailed, written goal that includes a final valuation figure provides the tangible anchor point which almost prohibits one to veer off course with endeavors that do not lead to the singular goal. (“Gentleman, this is your goal”.)

Most seem to start in domains with an ill-defined but implied objective of “being successful” or to “make a lot of money”. Ok, but how successful, by what measure, by what date, by what final net value? Without these questions being adequately answered one does not just risk but is guaranteed to end up exactly where they planned, in an undefined, unfulfilled, lost place.

Michael Sumner, MiniSites.com:

I think the best piece of advice for someone starting out is to learn how to appraise a domain before investing a dime. People should read DNJournal sales reports from start to finish every week, and go through NameBio.com data on a daily basis to get a feel for what domains sell for, this should help fine-tune their instincts. Until they have good instincts, they should check exact search volume using the Adwords Keyword Tool, check CPC using the little-known Adwords Traffic Estimator Sandbox, look for businesses who might be interested in the domain, check comparable sales at NameBio, etc.

I have found that if you’re really good at appraising a domain, you rarely get yourself into trouble, and when you do get into trouble the damage is minimal. That was the approach I took for the first four months after I found domaining, I read everything I could get my hands on trying to figure out how to value domains and rarely bought anything. Then I jumped in head-first with a friend of mine flipping relatively high-value domains, and within our first year we had sold almost $350k  in domains and only lost money on one deal, and the loss was very small.

Fred Mercaldo, Scottsdale.com:

Although I own over 300 generic domain names, I am primarily a geodomain .com investor and developer. When looking at a potential purchase, numerous things come to mind: in my opinion, is this domain undervalued? Even if it is not undervalued, what can I do with it? If properly developed, what is the conservative potential for monthly/yearly income? Is there an end user out there that can benefit from this name? My main goal is to monetize the domain on a yearly basis for what I have purchased it for, after development.

For example, I purchased www.nofeecreditcard.com for $3300, and am only making $300 per year; however I have simply used a second party provider and we did not develop it internally….I believe we will develop it in-house in the coming year. I purchased www.FountainHills.com for $14,000 and we are making $60,000 per year on it; these are 2 examples of the “so-so” return versus the “home run” return.

I look at domains as potential “businesses” rather than just names, and here is why….and let’s take a hypothetical example….Domain “A” purchased for $30,000…..spent $10,000 developing it….presently making $30,000 per year. I now have a “package”…meaning “domain name PLUS yearly income” that is arguably worth 3 to 7 times income…plus the inherent value of the domain name itself…meaning I can sell Domain “A” for anywhere between $90,000 to $210,000…a great return on my original investment, however I had to develop it properly, and obtain advertising partners to monetize it.

I firmly believe an end user or investor will pay $200,000 for a domain that is bringing in $30,000 per year presently than pay $80,000 for the same domain name that is both undeveloped and non performing. Why? Because it a proven entity and already has a financial return attached.

As you can see, my strategy is completely based upon buying, developing and monetizing, and not just buying and reselling. My advice for the new domain investor? You need to decide on a specific strategy and become an expert at it. Like real estate, where there are many kinds of specialties…shopping center investors, land speculators, residential development, commercial development, apartment developers…all of these real estate specialists have different skill sets and talents; same in our industry. The person that buys and develops is so different than the investor that buys and flips, and so on. Decide on 1 or 2 strategies and stick to it; don’t try to do a little bit of everything. I would also recommend quality over volume….one good name is better than 100 mediocre names.

Mike Cohen, WannaDevelop.com:

Do not register all those unnecessary gTLD’s and ccTLD’s in addition to your primary domain(s)!! If you are into domain investment, you gotta be careful with what types of domains you acquire during bulk purchases because the fees can quickly add up to large sums before you realize this. If you want to be successful in this business, you need to be real picky and not carry any extras or duplicates, in other words real long shots that aren‘t going to make you a whole lot of money no matter what angle you look at it.

Forget buying the .net, .org, .info, .biz and all those other second tier names if you have a .com domain because they are simply worthless for the most part. Domain registrars such as GoDaddy will always try to upsell you all those gTLD’s and ccTLD’s in addition because that is how they make their profits but do not fall for it even if they have offer special discounts. Register only one domain per topic / idea… Because if you register 5 or 10 identical keyword domains, but in various other extensions… You will end up getting stuck with them all. Instead you should diversify x5 or x10 different other topics / ideas. It’s a numbers game… ;)

Patrick Ruddell, ChefPatrick.com:

My number one piece of advice is to buy niche domain names. I’ve been able to take my personal real estate experiences and register hundreds of good domains. On top of the “insider” information I had for registering domain names of quality I also had a source to sell them. Now, if the new investor is not lucky enough to have the already established connections then they should still pick a niche. Having a single niche makes it easier to create those contacts (buyers list) and give potential buyers options. Make yourself the authority in a niche like dental domain names. If you create a ton of contacts in the dental industry (example) then other domain professionals would be wise to broker the name with your help.

Craig Rowe, WhyPark.com:

Focus on quality over quantity. Too many new domainers get caught up on building a large portfolio. For the same cost, focus on buying a few good names from auctions or drop catching services and set clear goals for each of those names (development, ongoing revenue, flipping, etc.) After achieving those original goals, buy more quality names or go after a small number of even better quality names. Owning a smaller portfolio will be easier to acquire, manage and ultimately sell or develop. There is no lack of bargains out there these days, so it’s the perfect time to work on building a quality portfolio.

Howard Neu, World Association of Domain Name Developers:

Best advice I can give – get a category-killer domain and develop it.


About The Author: Elliot Silver is an Internet entrepreneur and his company earns revenue from domain names. Elliot is President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Elliot is the publisher of DomainInvesting.com. Read this blog's disclaimer for information about the publisher, comment policy, disclosures, and conflicts.

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Comments (34)

    Aaron

    Elliot- this is definitely one of my favorite posts so far. I particularly like Rick Schwartz’s advice.

    October 9th, 2009 at 1:16 pm

    Grina

    So far there has been a wealth of useful information presented by some of the most respected professionals in this industry and this is only Part 2. I can’t wait for Parts 3, 4 and 5!

    October 9th, 2009 at 1:31 pm

    Jim Holleran

    Elliot,

    Great post and this is something I am going to refer back.

    One thing does surprise me is nobody has mentioned the spanish market yet, something I been buying spanish domains in since 1999. Spanish market fastest growing on internet (along with Chinese marketing, and fastest growing by far in the United States both online and offline. By far, the best move in my life and the payoff have been great.

    Maybe one of your experts will talk more about it since I was not invited as an expert of that :) (L0L)

    Thanks , Jim Holleran
    ForclosedHomes.com

    October 9th, 2009 at 1:49 pm

    Tony

    Regarding using DNJournal.com, which a few mentioned, it’s fine to use it as a guideline to sell your domains but not to buy. You will go broke buying domains at prices comparable to DNJournal’s sales prices.

    There is no single roadmap to success as seen by all the different opinions. But it helps to have guideposts along the way which is what these are.

    October 9th, 2009 at 1:53 pm

    Anthony Hanner

    Great series here, Elliot.

    A solid piece of advice from Fred Mercaldo…good stuff.

    October 9th, 2009 at 2:09 pm

    Mojito

    I know Compete.com isn’t totally accurate, but in my experience it is in the ballpark.

    It shows FountainHills.com having between 200 and 1000 unique visitors per month.

    Fred, I enjoyed your input. I must say you are extracting some SERIOUS value/dollars out of a relatively small audience. Do you have any tips in regards to generating revenue on geographical domains, specifically with FountainHills.com?

    October 9th, 2009 at 2:16 pm

    Product Domains

    Even better than the 1st post, going to be a great series for new and experienced people in the industry.

    October 9th, 2009 at 2:44 pm

    Soundly Reasoned

    Who is JBlack?

    October 9th, 2009 at 3:00 pm

      Elliot

      Someone who asked to remain anonymous.

      October 9th, 2009 at 3:01 pm

    Gazzip

    Fantastic posts, I especially enjoyed the GEO related post by Fred.

    Can’t wait to read the next installments :)

    Many thanks to all for sharing

    October 9th, 2009 at 3:27 pm

    BullS

    Again and again, buy dot com , buy dot com—so why are people putting money on other extensions?
    Please humor me….

    October 9th, 2009 at 3:49 pm

    TF

    Elliott,

    C’mon man….you include these 2 morons in your 2nd post of “Advice From the Most Successful Domain Owners of All Time”???

    ‘Chef” Patrick Rudell and Mike Cohen???

    Are you kidding me??….

    “Chump” Patrick hasn’t even been in the game for more than 1 year…..and Mike Cohen is the biggest BS’itter around!

    October 9th, 2009 at 4:50 pm

    Jason

    Honing your skills at evaluating domains at a glance is great, but they won’t flip as easily. You also need dev skills and/or sales skills. Or, like Rick says, don’t quit your day job and -hold- your names, but make sure they’re worth holding!

    October 9th, 2009 at 5:07 pm

    owen frager

    Sounds like all your subjects have a lot in common with the world’s top business leaders: The Power of Passion
    http://rohitbhargava.typepad.com/weblog/2009/10/trendspot-the-world-business-forum-highlights-the-power-of-passion.html

    October 9th, 2009 at 5:14 pm

    Michael Sumner

    Jason, what I was getting at is knowing what a domain is worth so you know a bargain when you see it. That is important regardless of your strategy, whether you are a long term holder, a reseller, or developer. I have personally had many experiences where I saw a domain for sale on an auction and knew it was being undervalued, and was able to flip it within days to resellers on the forums for substantial profit, no sales skills required. You can’t buy low and sell high successfully if you don’t know with a high degree of confidence what low is.

    For example, there was an auction for HFP.com on Sedo, I happened to notice it was closing in a few minutes while waiting for my food at a restaurant. I won the auction for $12,500 and 9 days later had the money in my account selling it for $16,000 on DNF. Not bad for a few minutes worth of work, but if I wasn’t up on LLL prices I probably wouldn’t have been comfortable pulling the trigger.

    That happens to us all the time. We bought N5.com for $12,500 and sold it for $25,500 a few days later. Bought WebsiteHost(/)com for $1.5k and sold it for $15k a week later. Bought PalmBeach(/)us for $500 and sold it for $4,000 a week later. We do it all the time, and usually hold for less than a week or two when we buy with the intention of flipping. We usually make very good margins because we’re confident in our ability to determine the reseller value of a domain.

    I would say there are deals like this almost every day, and they happen because our attention is split in so many places. You can’t be on top of all auctions, drops, forum sales, etc. all the time, so there’s usually something going for a steal. I remember seeing Hollywood.us sell for around $5k a month or so ago, it took me a few weeks to get over that one. I would have paid double for it had I seen the auction. The winner could turn around and sell it for $3-4k profit easy within a few days. Take a look at SDD(/)com, Stian snagged that for $8k at NP because the seller put a really low BIN (far below FMV imo). He could probably turn around and sell that for $10-$15k tomorrow. If he didn’t know his stuff, he may have wasted time doing research and been beaten to the punch, but instead he was able to pull the trigger and make a great investment.

    Regarding holding, I have the same philosophy as Rick Latona. There are so many bargains happening every day that I feel no regret when I flip. I can roll the profits into 10 more deals and flip those for more money than I would have gotten sitting around waiting for an end user to come knocking on that one domain. That, of course, is assuming I’m not holding something of the caliber of Rick Schwartz’s portfolio. Those would be a crime to flip to a reseller.

    October 9th, 2009 at 5:42 pm

    Calvin

    Great info! That’s why I love this blog.

    October 9th, 2009 at 5:45 pm

    David J Castello

    One thing readers should be aware of is that Elliot asked us what would we advise newbies to the industry. Even though these replies are all basically sound invesment advice based upon our individual experience/success, most of the readers here already know the domain business well enough to flip almost any TLD and make a handsome profit (developing any TLD and making a profit is another story).

    I take giving advice very seriously and I’ve been around long enough to know people who were wiped out in the crash of 2000 because they started using their hearts and not their heads.

    Last month, a non-domainer friend said to me, “I think I’m finally going to invest in domain names. I heard that dotCOM isn’t all it’s cracked up to be. Is it true that Toyota.ME sold for 90K?”

    I had him in mind when I sent Elliot my post.

    October 9th, 2009 at 6:08 pm

    Jason

    @Michael I’m just not at that level of game, being realistic and leveraging my dev/traffic skills. How do you start out? buying a big one or starting out small and working up?

    October 9th, 2009 at 9:48 pm

    Michael Sumner

    Jason, I completely understand. The reality is everyone has to find something that works well for them, and then scale it up. For you, that might mean contracting out development and site promotion once you have fine tuned your process.

    You can really start from anywhere, although coming into the business with money helps. Everything I have done was built from a $1k initial investment and then we kept rolling the profits into more deals. If you don’t start with a lot of money, one serious lapse in judgment can cripple your bankroll though, which is why you need to have a very good handle on reseller value.

    Again, everyone has to find what works for them. I know plenty of people who make a good living hand registering domains and selling them to end users for mid $xxx to low $x,xxx. They are good sales people and can repeat that process reliably. I know people who buy drops, develop them, then sell for a multiple of revenue. They know how to get a site ranked in search engines and leverage social media. I know people who just ride the margins by finding deals and reselling. They know how to spot a bargain. I know people who build a business on their domain and live off the income. I know people who buy and hold long term.

    The thing I love about this industry is there are so many angles, the key is simply finding what works for you and repeating the process. What is right for me might not be what works for you.

    That’s why I tried to stay away from advice like .com is king, quality over quantity, etc. There are people who make a killing in ccTLDs, there are people who have sizable portfolios of second-tier domains and do well. I don’t think there is any right or wrong way to make money in this business if you spend time learning the fundamentals.

    October 9th, 2009 at 10:31 pm

    Dan

    Elliot, great stuff!

    Soaking it up!

    Faves!

    October 9th, 2009 at 11:30 pm

    Michael Sumner

    Jason, I completely understand. The reality is everyone has to find something that works well for them, and then scale it up. For you, that might mean contracting out development and site promotion once you have fine tuned your process.

    You can really start from anywhere, although coming into the business with money helps. Everything I have done was built from a $1k initial investment and then we kept rolling the profits into more deals. If you don’t start with a lot of money, one serious lapse in judgment can cripple your bankroll though, which is why you need to have a very good handle on reseller value.

    Again, everyone has to find what works for them. I know plenty of people who make a good living hand registering domains and selling them to end users for mid $xxx to low $x,xxx. They are good sales people and can repeat that process reliably. I know people who buy drops, develop them, then sell for a multiple of revenue. They know how to get a site ranked in search engines and leverage social media. I know people who just ride the margins by finding deals and reselling. I know people who build a business on their domain and live off the income. I know people who buy and hold long term.

    The thing I love about this industry is there are so many angles, the key is simply finding what works for you and repeating the process. What is right for me might not be what works for you.

    October 10th, 2009 at 12:10 am

    Dan

    Elliot, great stuff!

    Soaking it up!

    Faves!
    Oops…forgot to say great post! Looking forward to your next one.

    October 10th, 2009 at 6:57 am

    Richard

    Have to agree with TF, Chef Noob and Mike BSer Cohen probably don’t deserve to be listed with these professionals. Thanks for sharing some more great tips.

    October 10th, 2009 at 10:48 am

    Elliot

    @ Richard and @ TF

    I believe Chef Patrick and Mike Cohen are both making a good amount of money in the domain business and are successful in the space.

    This isn’t advice from the top 50 domain owners of all time or anything like that. These are people who I think are some of the most successful domain owners, and some may not be the typical investors per se, but all are successful.

    October 10th, 2009 at 10:50 am

    Billy Flynn

    Elliot, I hate to have to go here as this is a great series, but I also have to agree with Richard and TF here. Your first column on this is titled “Advice from the Most Successful Domain Owners of All Time”!! Not – those ‘I believe are making good amounts of money’. And your reply to Richard and TF now says – “it isn’t advice from the top 50 domain owners of all time or anything like that’! ??!!??

    There are ‘many’, ‘many’, more long time and short time domainers making I’m sure ‘lots’ more money, and are a lot more successful than either of these two, and many of which you know too. Heck I guarantee I’ve made way more than CP, and I’m way down on the pecking order of ‘successful domainers of all time!’ And as you’re pretty well plugged in to the domainer world, I’m sure you’ve reached out to many other ‘successful’ domainers, and many more you may have forgotten or missed. There are also many on DB alone, that are much more deserving to be noted and quoted on this. And this is ‘not’ to get on CF or MC (after all you contacted them, they just replied), but it does seem somewhat like ‘wtf’ to those who’ve been around longer than a year or two, and are making more than a couple hundies a month! Maybe you should change the title of this now to the Most Known Domainers and Bloggers of All Time!

    Sorry for taking this offtrack, but..

    October 10th, 2009 at 12:06 pm

      Elliot

      @ Billy Flynn

      With all due respect, I think the focus should be on the advice being given. If you think the advice is bad, then post a reply refuting specific advice and why you think the advice is bad.

      As you continue reading the series, I think you will see that many of the people who replied are some of the most successful domain owners – at least those that I know.

      October 10th, 2009 at 12:10 pm

    Billy Flynn

    Ok, I can go with the ‘advice’ angle. But perhaps your title of this should of then been – “Advice from Successful Domainers”, and NOT – “Advice from ‘the Most Successful’ Domain Owners of All Time”

    October 10th, 2009 at 12:19 pm

    BullS

    Again and again, buy dot com , buy dot com—so why are people putting money on other extensions?

    and if everyone just buy only dot com and forget those no use extensions, then your dot com portfolio will definitely go up.

    “Mike BSer Cohen”–wrong…I am the biggest BSer , after all I own the BS websites…

    October 10th, 2009 at 3:29 pm

    rick schwartz

    Hey Billy… NEXT!

    October 10th, 2009 at 3:38 pm

    Josh

    ” Advice From the Most Successful Domain Owners of All Time ”

    You may want to look into who is going to be considered for your list next time, Mike Cohen????. There are some there who have had ZERO success and shunned as spamming morons. Some good advice there too buit a lot of hypocrisy. The best advice I took from this is from those we rarely hear from at all.

    October 11th, 2009 at 11:16 am

    Fred Mercaldo

    To Mojito…our unique visitors are much higher than reported, but still YES I agree with you that we are successful here in monetizing the site. My first goal in every geo domain I’m involved with is finding the right real estate partner. In all the geo sites I’m involved with, (over 10) that is my first priority and usually our quickest and most successful division. FountainHills.com is no different…we also have significant golf course revenue, and once I get some more time, there is both a casino and major hotel that will get us to an even higher level. This is not to say we don’t struggle with other city.com’s…we do…but ultimately we develop a game plan and get the results we desire…however in many cases our 6 month game plan turns into 12 month results. I’m learning to accept this!!!!

    October 13th, 2009 at 5:39 pm

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