Development: A Domain Investors’ Dilemma
This might sound strange coming from me, but as a domain investor, domain development often brings up a dilemma for me. In order to generate the majority of my revenue, I rely on the sale of domain names that were usually recently acquired. I buy domain names at great prices, and I sell them for fair prices in the aftermarket.
Most of my acquisitions would be considered “ripe for development,” and most people could immediately imagine what should be developed on these domain name. For example, I recently sold MountainBikers.com and CDStore.com, and it’s fairly obvious what type of content should be on those sites.
For the most part, I look at a majority of my domain names as pure investments. Aside from a vested financial interest, I have very little interest in being the developer. I buy them specifically as investments and hope to re-sell them at a profit without adding content. However, there are times when I do want to develop a website on a particular domain name, and that leads to internal business conflict.
When I buy a $10,000 domain name and hope to sell it quickly, the $10,000 investment is in the form of a salable asset, which hopefully will be converted back to $10,000 + profit in short order. When I keep a $10,000 domain name for development, that $10,000 is no longer liquid. I can’t pay my bills with a domain name. I also feel added pressure because my bank account holds $10,000 less. Additionally, I need to spend time and money researching and building a website.
I am counting on building a revenue generating website on that $10,000 domain name, which would not only earn more from advertising along the way, but it will also increase the value of that asset. As most people can tell you though, development isn’t easy, and there’s no guarantee that the domain name will earn more in advertising revenue than you would had you kept the money in the bank and were earning interest.
Holding domain names right now is smart due to the economy, but because of my business model, I need to be selling to pay most of my bills. Whenever I get a domain name I have a particular interest in developing, I always have to think twice about whether it’s worth putting that investment funding on the sidelines. In some case it’s not, but in some cases it sure is.
I just acquired another domain name in the aftermarket after some internal (and external) debate, and I hope to be able to share the finished product in a few weeks. In the meantime, I will feel added pressure from taking some liquidity out of the business for a period of time while developing, but I think it will pay off.
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