Buying Domain Names

I’ve been criticized a few times about my coverage of various cctld – and/or lack of coverage. Simply put, I don’t think most are good long term investments when they are released. There are too many people trying to grab these new domain names at the bottom to sell them to the next round of fools who want to sell them to the next round of fools who want to… well, you get the picture.
Sure, quite a bit of money can be made on quickly reselling newly released domain names, but how will you know ahead of time if you get stuck “holding the bag?” I really can’t think of one cctld introduced in the last 5 years where a majority of the domains purchased in the aftermarket have held their value.
I am not averse to risk taking at all. In fact, I’ve been day trading GS ($86.60), LVS ($8.25) and MNTG ($2.69) for the last three days – sold the first two for a nice profit. At least with stock investments, there is a priced market where I can sell these stocks for a set price if the value goes down. I can generally put a stop loss and limit my losses in most cases. If you buy a domain name only because you think the price will increase due to the newest domain “trend,” you are really gambling.
Like I’ve said before, if an extension is accepted and widely used by the public five years after its release, and the values are increasing due to that, then I may buy to develop and hold as an investment. If you are buying just to get on the next bandwagon before it leaves the station, chances are good that you’ve already missed the boat and will get wet.

When people are selling domain names, I frequently see them quoting the Wordtracker daily searches for the domain’s keyword phrase as well as the number of pages there are in Google that have that keyword or keyword phrase. It’s often thought that the higher the number of daily searches and the higher number of Google results, the more valuable that keyword domain name is. This is just theory here, but I think the ratio of daily searches to # of Google results is a better indicator of value for someone that wants to develop the domain name.
The more daily searches a keyword phrase (“painting contractor” for example), the more value a name like PaintingContractor.com is.   If people are searching for that term, not only are some of them probably typing   PaintingContractor.com into their browser bar, but the greater chance this domain name will be relevant to more people.   A generic domain name is valuable because there are people who want to find that generic term. Some will type the term into their browser (with a .com) while many others will search Google for that term, and hopefully your site will come up in the top 5 or 10 results to attract the attention of the searcher.
I would argue that the old way of thinking – the more Google results for the phrase the better – is actually not really that great for the value of the domain name. Sure, the more results there are usually means that more people are interested in that topic – and that more people are writing about it and covering it on their websites. With more interest in the topic, the value should be higher.   However, to a developer, the more interest in the topic usually also means the more difficult it will be to rank in Google. The lower a website ranks, the less traffic it will receive, making it more difficult to generate revenue.
That said, I believe the ratio of daily searches to Google results is important to consider.   “Painting Contractor” has a WordTracker count of 367, and there are 896,000 Google results for “painting contractor,” which would be strong compared to “Flooring Contractor” which boasts a WordTracker count of 19 and has 309,000 Google results. The more searches with less results in Google means a website will likely have an easier time ranking at the top of the results, meaning more traffic.
I don’t think this will become a commonly quoted ratio due to the actual size of the result (.000405), but I do think people should at least consider this when researching a domain name. It’s great that people are searching for a particular keyword or keyword phrase, but if the SE competition will relegate your developed domain name to the second page of Google or lower, it’s probably worth less than a similar domain name in a less competitive category (assuming PPC values are similar).
This post will be reevaluated once the weekend haze wears off.   I spent the weekend at a friend’s wedding, which is where I thought about this 🙂   More time needs to be spent analyzing this theory, but I think I am onto something.