My Addendum to Rick's Article | DomainInvesting.com

My Addendum to Rick’s Article

35

Rick Schwartz’s post yesterday morning resonated with me because his outline is essentially how I went from hobbyist domain investor to someone who buys, sells, and monetizes domain names for a living. The one “flaw” I could find in the post is that there isn’t much in the way of guidance about how to actually buy and sell the domain names for significant amounts of money. Hopefully, I can provide some insight based on my experience.

When I first started out selling hand registered domain names around 2003, I didn’t do much domain industry research. I created domain names that I thought would be interesting to buyers and hand registered them. I didn’t really think big. I was looking to turn $10 into $50 or $100 quickly, and if I made an extra $500 or $1,000 a month, I was psyched. This worked back in 2003, but I don’t think it would work well today and it certainly wouldn’t be enough money to make a living or make much of a dent in my expenses.

The smartest thing I did when I first started making real money was reading everything related to the domain industry. I figured there was no way I’d have the foresight to buy a $10 or $100 name and quickly turn it into $100,000, so I decided I would reinvest my smaller $100 profits into a higher value domain name. I figured I could have the same profit margin, but with higher values, it would be significantly more money.

I still remember the first time I made a $1,000 domain purchase. I was visiting my brother in Maryland for a weekend in 2006, and after buying a net/org/biz/info set at DN Forum for a few hundred dollars, I eyed the matching .com which was listed elsewhere. Sending the $1,000 Paypal payment was scary since I had only previously been willing to spend a few hundred at most.

So what made me comfortable buying the name for $1,000? I did a lot of market research. I learned that similar (but superior) names sold for 6 figures, according to comps I read. Even a typo of the best name in that business sold for mid 6 figures. I felt that although the name I bought wasn’t ideal, it was still worth far more than $1,000. I also figured that if I was wrong, I wouldn’t lose anything on the deal because the set had to be worth a couple thousand at the very least. Long story short, I sold the full set within a month for over $10,000.

I spend a lot of time researching domain sales. As soon as Ron Jackson publishes his weekly report, I read it. I look at every auction and try to memorize reserve prices and later, the sales prices. This is like a database I’ve built in my head. For sales I can’t remember, I use Google. I learn about why certain domain names sold and what gave them their value. I find out if a certain company has a marketing campaign geared around the term, if it has high paying clicks, if the exact match term has strong search volume in Google…etc. It’s a lot of legwork, but knowing why certain names sold for lots of money while other names aren’t worth very much is critical to making a living in this space. Clearly there is a HUGE difference between RealEstate.com, EstateReal.com, and TheRealEstate.com, and knowing the differences and valuations is critical.

When I am looking to purchase a domain name, I do similar research. I think about who potential buyers could be, what companies would absolutely want the name if the price was right, and I pinpoint a valuation. If I can buy the name for a lot less than my valuation, I buy it. When I buy a name, I know I am not going to take a loss. At the very least, I could sell it to someone for what I paid. That’s what happens when you do your homework. I primarily buy names for quick flips, so I haven’t done much in the way of long term investments in non .com extensions.

I don’t use Estibot or any other appraisal tool to value domain names. I may look at what others value a name at, but I don’t give it much influence in my decision making process. On occasion, I will ask business colleagues what they think of a particular domain name. I want to make sure that my thoughts are accurate, and I want to get perspective from someone else.

I firmly believe that anyone can make a few great deals. However, a few great deals isn’t going to get you very far unless you have a full time job or live somewhere cheap. You need to make a lot of very good deals every year to make good money as a domain investor these days. I suppose there are other ways aside from selling names quickly, but you either need to have very deep pockets or have very little legal risk aversion.

I would give some advice for people looking to become multi millionaires with domain names. Become knowledgable about a topic or maybe more than one topic when you want to make a major domain investment. Know all of the big keywords and buzzwords. See who owns those .com domain names. See what similar names have sold for. If any of the primary keyword names are for sale, inquire. Get a ballpark price. Use your intuition to determine a valuation. Negotiate with the owner to try and get a price that you can afford that is less than your valuation. Buy it if you can afford to buy it.

Keep in mind who the buyers of this name may be after you’ve bought it, and possibly have a back up plan if your re-sale plan fails. It’s critical to know whether your potential buyers have bought expensive domain names before. For instance, if you think you are going to sell an awesome sports team .com domain name to a public high school of the same name, you’re probably not. Look at companies that have made big purchases in the past and see if they’re buying descriptive domain names. Brandable names are hard to predict because they are replaceable, have to be an exact match, can’t have trademark issues, and the buyer needs to have a big budget.

When you’re looking to sell your domain name, be realistic. If you get a strong offer that’s profitable, say no if you can afford to lose out on the sale. If you need the money, there’s no harm in leaving some money on the table. Rick Schwartz can afford to turn down every offer up to the offer he takes. Many people can’t. Take every negotiation as a learning experience and see where you erred and where you succeeded. Review the buyer’s responses to your replies. Strategize about what you can say the next time to make it better.

Everything you do today should be with tomorrow in mind. Think about how purchases and sales will impact your business tomorrow and the next day. Don’t be afraid to take big chances because that’s how you will succeed. It’s very unlikely that you’ll make a lot of money by dabbling or by making “safe” purchases. Sure, if you have a long time horizon, you may create future value. That’s a gamble, although it may cost less up front.

Turning $1,000 into millions of dollars is not easy, it won’t happen over night, and it’s not a certainty. Without a doubt, if you listen to others, read the news, become knowledgable, and make wise decisions based on knowledge you’ve accumulated, becoming a domain millionaire is certainly achievable – even starting out today.


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.


Reach out to Elliot: Twitter | | Facebook | Email

Comments (35)

    Gnanes

    Great post elliot.

    November 13th, 2011 at 10:50 am

    Bruce Tedeschi

    Nice article… If I could add, even if it is a simple wordpress page, have some content in your domain name. There have been so many times that clients tell me, there is nothing there. Then I have to explain the value… It is so easy to say, “imagine this is your site” and then explain the value.

    Humans are visible people we put more value in things we can see and touch.

    Also if possible, pay for a premium theme to put in the site. It is worth the money and it is the difference between $x,xxx and $xx,xxx

    November 13th, 2011 at 11:22 am

      Elliot Silver

      @ Bruce

      I almost never get offers for domain names where I have even the simplest website. I only get offers on Burbank.com and Lowell.com, which come from mass emails. I personally don’t think it’s worth minimal revenue to potentially miss out on a sale. In working with people who have bought domain names for business before, most have no idea about Whois or what Whois does. They visit the domain name to see if something is there, and if there is, they move on – unless they need that particular domain name. It’s not worth the risk of losing a sale to me.

      November 13th, 2011 at 12:09 pm

    em

    Nice addendum. Useful info.

    November 13th, 2011 at 11:33 am

    Tia Wood

    Post of the year, Elliot. Thank you.

    November 13th, 2011 at 12:28 pm

    Josh

    Nice write up Elliot!

    Since we followed similar paths to start I have to agree, knowledge is power and over time it is possible but again, lots of hard work and likely many years in the making. Many fail, it is nlt as easy as follow rule #3 lol

    November 13th, 2011 at 12:35 pm

    Bruce Tedeschi

    So how do you find your buyers?

    November 13th, 2011 at 1:01 pm

    Elliot Silver

    Google, Whois searches, and direct navigation.

    For instance, when I sold HumanResourcesOutsourcing.com a couple of weeks ago, I found the company by searching that keyword and did a Whois search to contact the CEO.

    I was paid but still waiting on transfer instructions, so the name is still in my possession.

    November 13th, 2011 at 1:11 pm

    Bruce Tedeschi

    I often use the same method but I find calling seems to not be as fruitful as emailing them. Do you find this as well? You select names that make perfect sense which I feel is the key. I just sold RegisteredAgentServices.net as an example. A service with exact keyword match string.

    What’s you perspective on Flippa and selling websites?

    November 13th, 2011 at 1:44 pm

      Elliot Silver

      @ Bruce

      I only like using the phone if I’ve already made email contact and just want to negotiate. I find that email is less invasive to someone at work, and I personally hate chatting on the phone.

      I’ve never used Flippa, but I would imagine it’s good for selling websites.

      November 13th, 2011 at 1:47 pm

    Kannan

    Thanks for sharing your valuable experience. I take it making serious money from Domaining will pan out only if you do it full time…

    November 13th, 2011 at 1:48 pm

    Tony

    Very solid advice, ES.

    Glad you didn’t give an example of what a good domain investment is that most domainers would consider worthless.

    November 13th, 2011 at 2:06 pm

    Elliot Silver

    “Glad you didn’t give an example of what a good domain investment is that most domainers would consider worthless.”

    You lost me.

    November 13th, 2011 at 2:08 pm

    Deependro

    Great post Elliot, but something stroke my my mind
    Since, you mention above that you don’t use
    Estibot, made me wonder that I had read about you using and almost recommending estibot on your blog before,
    Not that matter but I just got confused

    November 13th, 2011 at 2:10 pm

    Elliot Silver

    @ Deependro

    I used Estibot’s tool to find a domain buyer, not to determine valuation for a domain name.

    November 13th, 2011 at 2:11 pm

    luizh

    Clear and detailed text. Very Good tips! Thank you Elliot.

    November 13th, 2011 at 3:17 pm

    Mark

    Hi Elliot:

    Informative post. Thanks.

    I have to say I am not convinced that leaving a parked page is the best way to communicate whether a domain is available.

    On another note, any thoughts on forums as a sales venue in this day and age?

    November 13th, 2011 at 6:01 pm

      Elliot Silver

      @ Mark

      I have a for sale message at the top of my parked domain names.

      I can’t remember the last time I had a sale on a forum… I think it was several months ago on Domain Boardroom.

      November 13th, 2011 at 6:03 pm

    domaining

    I bought my first 1k sale from you Elliot. Unfortunately still siting on it LOL.

    Can’t complain. Record year. Record sales this month and love domaining.

    Great post.

    November 13th, 2011 at 8:10 pm

    Poor Uncle

    Elliot,
    Thanks for your advices. It sounds more reasonable….like advices my mom would gave when I am about to commit some serious time and money to something. Rick and others though inspirational, their writing are going to cause some poor souls to lose their shirt.

    When someone built their business by using credit cards. I read, and inspired. But take their advices with a grain of salt since I am too conservative to do anything with the reliance of credit cards. :)

    November 13th, 2011 at 8:37 pm

    Poor Uncle

    Hi Elliot,
    Please delete my previous dumb comment. I just wanted to say your advices were reasonable. That’s it.
    Rick is my hero & credit cards are last resort. So I really don’t have anything negative to say about neither.

    November 13th, 2011 at 9:03 pm

    Picas

    long story but really attractive ..read it 3 times to get best lessons

    November 14th, 2011 at 3:23 am

    Mary

    I have found your post far more useful and informative than Ricks, at least you go into specifics, and I agree with 99% of what you said.

    And thank you for not stating the obvious, like “do not quit your day job”, even a low IQ person can realize that.

    November 14th, 2011 at 5:38 am

    Shrishail

    Nice Article Elliot.
    Its really a learning time for me, and I can surely say this is what I was wanting to read.
    Thanks a lot.

    November 14th, 2011 at 6:52 am

    Steve

    Elliot-

    Prob the best “motivational” article I’ve ever read on your blog. I domain on the side as a hobby, am very low on the totem pole and reading articles like this def gives a little confidence booster. Thanks for taking the time to write a lengthy article w/ lots of great info.

    November 14th, 2011 at 12:24 pm

    biggie.us

    nice article Elliot!

    would you advise new investors to purchase the full tld “set” of extensions for a domain name now?

    i know it’s too broad for every instance, but some may just look at that example you mentioned literally, without knowing the specifics of why.

    November 14th, 2011 at 2:41 pm

    Elliot Silver

    @ biggie

    I wouldn’t… In most cases, a buyer only wants the .com but will take the others if offered. I’ve found that they want them as “throw ins” so ultimately it is just less profit. I am not big on alternative extensions.

    November 14th, 2011 at 2:42 pm

    Larry

    I think one of the dangerous things you can do is take any of Rick’s advice out of context to the type of domains that Rick is selling.

    One example is this:

    “Learn to value a domain properly and stop selling to other domainers. That by definition proves you are leaving money on the table. They do what you do and see an upside.”

    But then he talks about the fact that many domainers don’t have a clue as far as the value of a domain name. (So which is it?) Actually he is right about that, that in many cases they don’t. And there is the opportunity. If the other domainer doesn’t know the value it’s possible he will overpay you for your domain relative to wholesale value. What’s wrong with that?

    I don’t agree in blowing off any person inquiring about a domain *especially* if they are a domainer. Domainers buy domains and you very well might have a name that they see opportunity in that you could get rid of and make some money.

    Are they going to pay top dollar for 1 of the 15 domains that Rick has sold? No they aren’t and they didn’t. But you don’t have Rick’s names you have your names. And I’ve sold 3 and 4 letter domains to domainers and have received what I’ve felt is a good number relative to waiting many years if ever for the big kill to come along.

    November 14th, 2011 at 5:05 pm

    Dave

    Great info … but why would somebody not buy a domain name with a basic website? It would not stop me from buying either a full website or a one pager.

    November 14th, 2011 at 9:27 pm

    Larry

    Dave – it totally depends on the name and the situation. Here is the real estate analogy.

    1) You own a crappy restaurant next to an exit of I95. That’s not going to scare off a major player from approaching you. If McDonalds wants to build a restaurant there they will approach you because in general they know they can make you an offer that you might accept. On the other hand if Burger King is on the lot probably not going to happen because Burger King owns the lands and is a competent operator. McDonalds most likely won’t approach them.

    Consequently if you own a killer name “hotels.com” and it has a crappy blog on it that won’t stop anyone significant from making an offer.

    So what we are looking for is the delta between the potential buyer and the seller to see whether it would matter if the name is in use or not.

    If the name you own is not top shelf in general it’s probably better to make sure the site says loud and clear “I’m for sale”. But once again each name and each situation is different. In many cases even a page of ads (which we in the business all know is a parking page) will scare off a potential buyer (say the guy who runs the local flower shop that might think your name of “flowersonmainstreet.com” is a great name for him.)

    Actually now seeing flowersonmainstreet.com (which I thought of while reading this) is owned by FTD.. But my feeling is that if that was being used by a local flower shop FTD would have passed on it because it’s not that valuable or top shelf.

    November 15th, 2011 at 10:35 am

    Elliot Silver

    @ Larry

    My primary focus would be on smaller operators who want to buy one of my domain names in the $3-10k price range. These people may not know how to find the owner of a domain name aside from visiting the domain name to see what’s there and how to contact the owner if nothing is there. A major online operator would certainly be able to contact me via Whois. However, those major players come by less frequently than small operators, and for most people who read my blog, major players likely won’t be interested in our domain names. 85% of my domain name assets aren’t really the kind of names a company would spend 6 figures to purchase. I realize this and have no problem admitting this.

    I would rather lose a couple dollars a month by having a clear “for sale” notice on my parked pages than take a chance on losing a $5,000 sale from a local business looking to buy my name but not inquiring because I have a mini site on it earning a few pennies a month.

    November 15th, 2011 at 10:41 am

    Larry

    “I would rather lose a couple dollars a month by having a clear “for sale” notice on my parked pages ”

    In general of course (and based upon what I have said above) I agree. But another thing to factor in (which may or not be relevant depending on the particular name) is UDRP and/or legal issues.

    If you have a domain name that could be a target for a UDRP then putting up a “for sale” sign is not ideal. On the other hand if that name would only fetch a few thousand (below the general threshold of getting an action filed) then not a big risk. So as I have said it all depends on the particular circumstance.

    As an example I would almost never put up a “for sale” page with a three letter .com. A four letter .net or .org or maybe even .com a definite possibility. Even if the name would fetch $10,000 the probability of getting an action filed against you is outweighed by the chance someone coming after you. With a three letter .com the scales tip in the other direction.

    November 15th, 2011 at 12:52 pm

    Elliot Silver

    @ Larry

    I agree… the only 3 letter my company owns is SHS.com, and you can see how I am using it: http://www.SHS.com (for my brother, Scott).

    November 15th, 2011 at 12:53 pm

    Larry

    “action filed against you is outweighed by the chance someone coming after you. ”

    I mean “the chance of making a sale to someone who doesn’t have trademark rights”.

    November 15th, 2011 at 12:53 pm

    Ask For Name

    Elliot is right ! Most of the time “For sale” notice on the parked pages of good domains is the great way to make a solid sale.

    November 19th, 2011 at 10:40 am

Leave a Reply

Name *

Mail *

Website