Over the past couple of weeks, I’ve written about a few of my recent end user sales on new registrations that were for less than $1,000 each. A couple of people have made comments and sent emails asking about whether these lower value sales are worth the time and effort when it can take a similar amount of time and effort to sell a much higher value domain name at a significantly higher profit. These comments are worth addressing because they are valid concerns.
One of the primary reasons I became fascinated by the domain investment business was because I could virtually create something from nothing, pay around $10, and sell the name to someone else for a nice profit. Much like some people go on vacations where they can dig for gold, hunt for gems, or search for other objects of value at a minimal cost, domain investing at this basic level is exciting to me.
Don’t get me wrong, my company wouldn’t be around if it wasn’t for the high dollar sales, but I enjoy creating names after doing research and then flipping them for a large profit.
Below are a few pros and cons to consider regarding selling new registrations to end users:
PRO: When buying newly registered domain names, there is far less risk than paying $5,000, $10,000 or $50,000 for a domain name in the after market. If it sells for anything over $10, I will make a profit (not considering the cost of my time to research, contact, negotiate, and transact).
CON: If a newly registered domain name sells for $1,000, there’s a huge profit margin, but the actual realized profit would not be enough t sustain my business unless there was a significant number of these sales each month.
PRO: There is very little carrying cost to domain names that don’t sell. If I buy a $10 name and email 30 companies who don’t express an interest, the cost to maintain the domain name is just $10 a year, and I can later decide whether it’s worth keeping.
CON: Although I don’t usually (well, ever) purchase dozens or hundreds of domain names at a time, I know there are plenty of people who do. Despite the fact that a domain name can cost $10 to register, if you own dozens, hundreds, or thousands of these new domain names that generate no parking revenue, the carrying cost on virtually worthless domain names can be considerable.
PRO: It’s fairly easy to find decent unregistered domain names that would be coveted by companies in those specific markets.
CON: It can be very easy to go overboard, purchase thousands of dollars in domain names that don’t receive any interest from potential buyers, and those thousands of dollars could have been spent on one very good domain name.
PRO: Making the decision to buy a $1,000 domain name can be easy for some end users and not require approval from higher levels at a company because the cost is relatively low. This generally makes transactions go quickly.
CON: Some companies may not like the idea of enriching you when you literally just spent $10 to buy the domain name and turned around and asked for $1,000.
PRO: Deals under $1,000 can be done very easily (and quickly) using Paypal, and the cost of escrow is relatively cheap.
CON: New registrations can’t be transferred to a different domain registrar within the first 60 days of registration, which could pose a problem for a buyer.
Ultimately, I think it might be wise for domain investors to try to buy interesting domain names for end user sales slowly and pitch the names to potential buyers. If you find that you aren’t having luck, perhaps hiring a domain consultant (NOT me) might be beneficial. It’s a good idea to hone your domain research, sales, and negotiation skills on lower value domain names before moving up and making more expensive investments.
Selling newly registered domain names is a small aspect of my business, but it’s been enjoyable for me so I am thinking about doing it more frequently as time permits.
As many people probably did after learning that Rick Schwartz sold SydneyHotels.com for $100k, I spent some time searching for city Hotels.com domain names to see who owns them and how many are developed. Just about all of the domain names I looked up are developed, which says to me that there is money in that business.
In the last several months, I’ve picked up a new hobby – biking. Although it’s not easy biking around New York City (except in Central Park, which can also be a nightmare), I have enjoyed taking my bike out for long rides. As a result of this newish hobby, I’ve rented bikes on recent vacations as a way to explore a city.
