Someone asked me why I was continuing to buy domain names when I couldn’t find the time to develop all of my names right away. One suggestion was to allocate my resources to developing what I have instead of buying more domain names. The question is reasonable and I spent some time thinking about it. Truth is, at heart, I am a domain investor. My business is built around acquiring domain names for good prices and then determining how to make a profit from each domain name I acquire. While I have been developing some of my names and continue to do so, I am not a developer. I believe to unlock the real value of many domain names, development must be done, but I have to determine where to allocate my personal resources, and sometimes development isn’t the best strategy.
When I am in the process of buying a domain name, one of the things I consider is how the domain name could be developed to make a profit. Once the name is acquired, I determine whether it would be possible for me to do this and/or whether I would have the desire to do this. If the answer to either is “no,” I will typically put the name up for sale. Sure, I could keep every great name I buy, but that would make it difficult to generate revenue here and now. In the long run, knowing what to develop and what to sell is crucial, as development can cost thousands of dollars, and recouping the investment might not be possible on some domain names, depending on how it was spent.
A real world example is one my fiancee and I are discussing at the moment. Our kitchen was re-done a couple years before we bought the apartment. I don’t love the kitchen, but I don’t hate it. We asked our building’s realtor to take a look at our place and see what improvements we can do that will be beneficial when we sell in a couple of years. Long story short, she said the kitchen looks good, so there aren’t many things we can do to add any more value to the apartment. If we make changes, it will only marginally improve the value of the apartment, although it will cost tens of thousands of dollars to revamp the kitchen. The kitchen is in great condition, but a buyer might make changes to his liking, so it’s not necessary or recommended for us to do it with the purpose of adding value. Just like some domain names, a website might look nice, but a buyer will probably have his own business plan, so sometimes its better to just leave it alone and sell it as is, as any changes won’t impact the value.
With my developed names, I am planning ahead to create a steady revenue stream for 3, 5, and 10 years down the line. I will always have to adapt to changes in the Internet landscape, but because I am bullish on the .com domain market, I believe no matter what I do, my domain names will increase in value. This is why I spend time and money developing good domain names rather than spending time and money building good websites on sub-par domain names. It is critical to build websites that can adapt to changes, but it is also important to know which domain names to develop and which should just be re-sold. I am always a buyer of great domain names, but determining which I should develop is difficult.
How I Privately Acquire Domain Names
I’ve been asked how I go out and attempt to acquire a domain name in private, and I am happy to share how I do it – although I don’t think there is anything special to it. There are a couple of ways to go about it, with the most common being via email, and the lesser used phone call. I believe the best way to acquire a domain name in private (that may not even be for sale) is to make a phone call to the owner.
With a phone conversation, you can hear the owner’s tone and gauge whether he is actually interested in speaking with you about selling his domain name. For most sellers, it’s much easier to negotiate a sales price via email because there’s more of an opportunity to craft the email. Because of this, you may be able to have a “real” conversation on the phone rather than a contrived email about how the guy has spent the last 10 years owning the name but hasn’t had the chance to develop his multi-million dollar plan. Sure, he might want to develop it, but chances are good that he would rather sell it. You can get a feel for that over the phone, rather than an email.
Phone conversations are also good because most people will pick up their phone when someone calls, whereas emails can be easily ignored. Phone calls are much more personal, and they show the buyer’s sincerity. Emails are impersonal, and they are much more easily ignored. The main obstacle I’ve found is that many phone numbers in the Whois database are either intentionally incorrect 555-1212 or they’ve been changed. If you can’t get in touch with the owner, you can’t try to buy it. This is where emails can be valuable.
While there really isn’t a special method to my efforts, I thought I would share an email that I typically send if a phone call didn’t go through:
Subject: Offer for XYZ.com Â
Dear (personalized if possible),
I am interested in purchasing XYZ.com from you. I would like to offer you $xx,xxx (always a reasonable offer) for the domain name. If you would consider selling XYZ.com, please let me know and we can discuss the terms and payment details. Please give me a call if you have any questions. I can be reached at (xxx) xxx-xxxx.
Regards,
Elliot Silver (always my real name)
By addressing the person by name (when possible), he can tell that I didn’t send a bulk email, and that the offer is sincere – this is important because of the amount of Whois spamming to huge lists of similar names. I also make an offer that is reasonable. If I offer $100 for a $100,000 domain name, it’s probably going into the garbage, or I will get a “f-off” response.
How do I figure out what’s reasonable? I do my research on the name and make an offer based on my gut and research. No, I don’t think it’s wise to offer $100,000 for a $100,000 domain name, but maybe $60,000 if I want it. Trust me, if you make a reasonable offer, you will usually get a response. Before I sent emails with offers (when I first started), I simply asked if the domain was for sale. If I received a response, it usually said it might be for the right price. Well, instead of responding with an offer on the second effort, I figured I might as well just make an offer and grab attention. Just like a 1-click lander is usually more profitable than 2-click, I found that starting with an email is a better bet.
I’ve heard all the stories about people making those $100 offers and getting lucky. Yes, it happens on occasion (just like the jackpot slots), but with all the spamming, it’s happening less and less these days – although maybe on some non-.com extensions it could be more fruitful. I would rather make reasonable offers and negotiate than rather than wasting my time trying to get lucky.
When it comes to making offers, you usually get one chance to make an offer before the owner sends your email to the trash – or worse – his spam folder. Once you’re in his spam folder, it’s game over since he won’t even see any follow-up emails. With all due respect, if you don’t know how much you’d pay for a domain name, you probably shouldn’t be buying it 🙂
Buying Domain Names Privately
I was just asked about how I buy domain names privately, and instead of replying to a comment/email, I thought I would make a post out of it, since the question has been asked before. Â The question I received was: “just curious if you could provide some detail on your process of buying a name privately. I am not seeking specifics like prices you paid, etc. But more general stuff like, do you use an attorney to write up a sales contract and liability release, do you use escrow, etc.“
When I purchase in private, I only use an attorney if the deal is more complicated than normal, if I am working with a seller who is unfamiliar with domain sales, or if the seller requests it. I had an attorney draft a sales agreement template several months ago, and I generally use that – making changes as necessary. Since most of my purchases are unsolicited offers by me, I am more comfortable moving forward with a deal than if someone contacted me out of the blue to sell me a domain name.
I am vigilant about doing a domain history search (using Domaintools) to make sure everything lines up. I want to make sure the seller has the right to sell the domain name. I also trust my gut – if something doesn’t seem right, I don’t do the deal. If I see a great name that is too cheap, I will typically stay away unless I am confident that things are legit. A few things that I look out for in the history check are that the email address didn’t recently change, the contact email isn’t that of the developer who might be managing the name but doesn’t have the right to sell it, the name wasn’t involved in a dispute, and anything that looks suspicious.
50% of the time I will use an escrow service like escrow.com or Moniker. Escrow.com is more widely known outside of the domain industry, so I will use them if I am dealing with someone who isn’t a domain investor. I don’t want someone to get confused about using a domain service they might not trust. That almost happened once, so after I close a deal, I do my best to make things as simple as possible.
The other 50% of my deals are done using wire transfers or payment via Paypal. These are done exclusively with people/companies I know and trust, or if the value is less than it’s worth to use an escrow service – going on gut instinct again. I also use my AmEx when I pay via Paypal, so if something does go wrong, I am fairly confident that I will be covered. It’s important to know the person who you are dealing with when sending a wire, as your options for financial recovery may be more limited.
The most important thing is going with your gut. If something doesn’t seem right, you are probably right. If you aren’t 100% comfortable going at it alone, you should invest in an attorney to assist you. I know a few who are familiar with the industry, and I’d be happy to make a recommendation if you’d like. There seem to be new scams popping up every day in the domain industry, so it’s important to learn what to look out for and avoid the pitfalls.
No Hurray for "Hoorray"
I understand the whole web 2.0ish theme of creating a cool sounding company name, but that becomes a problem when it confuses visitors who accidentally type-in the domain name phonetically. This type of thing seems to happen all the time when people opt to spend money on marketing efforts rather than ponying up to buy a good domain name. It’s almost like building a beautiful home high up in the mountains of New Hampshire. Sure, the house is beautiful, huge, and there is plenty of cheap land to build a sprawling estate, but when it comes time to invite your friends, you better hope it doesn’t snow, because they aren’t making it if there’s snow.
I was reading through my emails this morning, and I received a press release with the headline “Hoorray.com Acquires “Hooray” Domain Name.” Apparently, the company thought buying the correct spelling Hooray.com was press-release worthy. According to a representative of the company,
“This is a significant step as we prepare to relaunch the 2.0 version of Hoorray later this summer,” said Robin Zieme, Director of New Ventures for Hoorray. “While the spelling of Hoorray with two r’s was not a hindrance, it will ensure that all traffic intended for our site comes our way.”
Maybe I am not their target audience, but whether the name has one “r” or two, if someone suggests that I visit Hoorray, I am probably going to type in Hurray.com, another proper spelling of that word. Yes, having a cool and unique company name makes for a less expensive domain name, but losing a considerable amount of traffic to the proper/alternate spelling of the domain name can be an expensive mistake – especially since the correctly spelled domain name will increase in value once the incorrectly spelled domain name starts driving traffic to it.
I’m old school. If I am going to confidently build an online company that will rely on web traffic for revenue, I am going to bank on its success and buy a non-confusing domain name. At least if the company fails, the domain name will still have value!
How I Determine Whether to Develop or Flip
When I buy a domain name, the most significant quality I evaluate is the likelihood of it being used commercially. Using common sense, my marketing background and my consumer-savvy mind, I analyze whether a company would be willing to spend money building, marketing and branding a particular domain name as an online business. If I believe the answer is “yes,” and the price is right, I will usually buy the domain name. Since is not a tangible quality, I think this is where a huge disparity lies between people who have been financially successful and people who haven’t been as successful.
Once I purchase a domain name, I determine whether I will develop the domain name into a commercially viable business or sell it to someone else with that inclination. My first step after purchase is to try and determine the value of the domain name on the market – both to other domain investors and to an end user. If the value is worth considerably more than I paid and it’s not a project I’ve dreamed about working on, I will usually sell it. When I can quickly profit and/or upgrade easily by selling, it’s usually a no-brainer.
If the profit margin would be somewhat slim, I think about how I can develop the website on my own (with my developer) to increase the value and generate a passive revenue. Determining the type of site it would be best as is important, as there can be considerably more work depending whether it’s an informational website, offers a service or a commercial endeavor offering products for sale. I need to then figure out if I have the ability, capacity, and drive to operate and manage such a site. Additionally, I need to determine how long it would take to be profitable.
If I don’t particularly have an interest in the industry but I can build an easily manageable informational site, I might develop it with the intention of selling down the road. I have been doing this with some mini-sites, and I hope to share the results in a few weeks/months.. If I have little interest in the industry, and the site would take time and a considerable amount of money to develop, I will look to sell – even at a slim profit margin.
For me, development is equal parts enjoyment and equal parts profit. I am a history buff, and I like direct marketing (I was a History & Business major in college and have a Master’s Degree in Direct Marketing). This is just one reason why geodomains (such as Lowell.com and Burbank.com) are perfect for my business. My goal is to make a comfortable living – to enjoy life without many worries about money. I earn hotel and job revenue, and I am going to begin soliciting local businesses very soon. In fact, I received this nice submission on Lowell.com while in New Orleans:
subject : Lowell Form Submission
redirect : thanks.html
Name : xxxxxxxxxxxxxxx
Company : xxxxxxxxxxxxxxx
Email : xxxxxxxxxxxxxx@gmail.com
Phone : please email
Website : xxxxxxxxxxxxxxx
Comments : Could you please send me a rate package to advertise on your website, it would be a small 125/125 button preferably on your main page for a small business I own
submit1 : Submit
Personally, I would prefer a solid geodomain over almost any other type of domain name for several reasons.
- The branding is already accomplished (assuming it’s the exact name of the city/town)
- Many people type-in the domain name directly (57% for Lowell.com)
- Can be informational or service oriented with ad sales depending on how much involvement owner wants to have
- Huge opportunity to grow via search engine optimization
- Almost all large US city .com names are currently developed (largest 250 cities in the US), so they don’t come on the market often I would still pay up to $100,000 for an east coast US city .com (I didn’t receive a single offer meeting my requirements.
It’s important to note that I am still generating most of my revenue by selling domain names. I am a “one man show” here and it wouldn’t make sense to overwhelm myself with development projects as there aren’t enough hours in the day. Â I love my fiancee and my friends enough not to become a slave to this business, although they all know how much I love this business. I will slowly develop some of my domain names into revenue-producing websites while I continue to sell other domain names. As my websites continue to grow and generate more revenue, I will be able to scale down my selling to develop other websites.
This is the first business I have run entirely on my own, and it’s a learning process. Just like learning which domain names to buy is important, it’s equally important to learn which domain names to keep and develop and which names to sell.
Using Comps to Buy Domain Names
A while ago I discussed buying domain names to capitalize on industry trends and recent sales. For example, VideoShop.com sold for $30,900 last week, so very similar names like VideoStore.com or VideoShops.com would be great buys in a similar price range, as the sale of VideoShop.com could be used as a comparison point to make a profit (if you are buying for flipping purposes). Using relevant sales for comparison and valuation purposes is a great idea, and it’s a good way to pinpoint the value of a very similar domain name.
However, people should be cautious to not go out and make stupid registrations to try and capitalize on these trends and sales. Recently, Pizza.com sold for $2.6 million at auction. Since then, I can’t tell you how many pizza names have been listed for sale on various forums and sales venues at ridiculous prices. Just because Pizza.com sold for $2.6 million doesn’t mean GetYourHotPizza.com or NeighborhoodPizzaPlace.com are automatically worth anything, and in many cases, they aren’t worth any more than the registration fee.
Understanding why a domain name sold and buying similar names for the same reasons is good. For example, names like PizzaShop.com and PizzaDelivery.com are great because they make sense. Simply appending a word to the front or back of “Pizza” don’t automatically make it a good name. When you are trying to capitalize on a trend, do some keyword research to see why the name sold, and try to find similar names. Just because a name sounds like another name or looks close to another name, it doesn’t mean it has similar value.