My Thoughts on Domain Development

Very informative.Thanks for the read…

Elliot, thanks for the article. I’ve already begun stumbling along this path myself. I say stumbling because I have been attempting to develop some of my better domains myself, using 1-click install programs like WordPress or Pligg, and modifying them as needed. I’m familiar with the basics of web development, but it still requires a lot of study to master something new. I can’t afford to hire someone outright and don’t like the idea of giving away a piece of my business.

Here’s a question for you. Let’s say I have a themed portfolio of 500 California-related domain names, and I’m looking to sell the entire portfolio for $500K. There are several domains in the portfolio that are outstanding and get great traffic. Do you think I should go ahead and develop one of these? And if I do, should I pull it from the portfolio and keep it?

The dilemma is that a buyer may have a different vision for the domain and may not be willing to pay extra for all the time, effort and money that I have put into developing it. And if I pull the best domains from the portfolio, it makes the portfolio less attractive to buyers.

Any thoughts?

***UPDATED BY ELLIOT***

By developing the names, its much more likely that you will increase than decrease the value, so I see no harm in developing. Unless you build an adult site or something of the like, the “burn down” value of the domain name will be the same no matter what. If the names receive traffic and are somewhat related, I think you would be better off building one site that integrates all the information, and you can forward the related domain names.

Elliot,
From a logical standpoint, I agree with your thought process entirely. Building out a domain makes much more sense then parking. Content on generic domains also improves the quality of the Internet over time. Thus, the more generic domains that are developed, the higher others will value generic domains in general, as more users will assume navigating to the generic domain will actually provide them with what they are looking for. In turn it raises the value of the rest of your (and everyones) portfolio.
However, from a business standpoint, it is not always such an easy decision. Monetization through parking is a very clear strategy from a return standpoint and thus the valuation based off of parking can be clear as well. But the monetization of a developed domain is not always as clear. Rich Finkelstein hits the nail on the head mentioning ROI. If you do not take into account the cost of developing, and your expected return through however you have decided to monetize, development may not always be the right strategy.
Before developing make sure you have a solid business plan. Your costs can be fairly accurately predicted, however your revenue will be very difficult to judge. This is why I think developing a smaller domain from your portfolio is probably a better decision at first (as opposed to your suggestion of starting with one of your better names). The cost of development should not be as much as a larger domain and thus your loss will be less. You say that if your first attempt is a failure, you can always try again. The rate of failure is probably larger than most expect and thus first time developers should protect themselves accordingly.
In conclusion, I still think development is the right thing to do, I only suggest you start a bit smaller before going for the home run. Learn from your first development mistakes and then take a step up to a higher value domain. And always analyze your developement costs and expected revenue prior to beginning any project. I have been following your Lowell.com development with interest and enjoy the development ideas and steps of coverage. I do hope at some point in the future you explain the costs and revenue breakdown to complete the explanation that this development project is the correct thing to do.
Regards,
Conor