During the past several months, I’ve had several conversations with Theo Develegas, and I always get new ideas after listening to him and understanding his perspective on things.

When it comes to web development and graphic design, Theo is certainly one of the more  knowledgeable  domain investors out there, and he is a very good resource. He has done design work for me on three projects, and I was very pleased with the results. He’s also been helpful to me when I’ve need some feedback and assistance.

Theo and I had a discussion about domain names and web development and created a two-part series, one of which is here and the other on his blog. Feel free to ask any questions.

Elliot: I posted an article last week discussing how I turned a parked domain name with a fair amount of type in traffic into a very mini website that doubled the revenue in less than a quarter of the time it was parked. Do you think it’s possible to scale something like this to a large number of domain names and have it pay off, or would the time and cost outweigh any added revenue?

What do you think are some options for people who have a lot of domain investments that aren’t making a lot of money parked and aren’t selling right now? What considerations should be made before jumping into developing, keeping in mind that most people who invest in domain names have full time jobs and couldn’t become full time developers/website owners.

Theo: Both parked domains and mini sites require traffic to generate revenue. That’s the common denominator. With parked domains you’re restricted to the visuals provided by the parking company, some of which aren’t intuitive and turn visitors away; the only benefit is zero development cost. With mini sites or any type of development you incur upfront costs, such as templates, logos, content.

As long as you don’t offer services or products through the mini site, you are restricted to revenue from AdSense or affiliate referrals. With mini sites you can drive traffic through ad campaigns; with parked domains you can’t, it’s against the TOS. Therefore, establishing a mini site paradigm and scaling up the process can be successful, as long as you maintain a low start-up cost and you choose your domains wisely.

There is no silver bullet with regards to generating revenue from domains. The best approach would be to first slim down your portfolio, either by dropping the worst names or by selling them. Then, develop a handful of domains into potential revenue streams or affiliates; sites that produce the most revenue are those with steady traffic and healthy commissions.

The alternative: invest money in development. To make gold you need gold – that’s the old alchemist’s saying 🙂

Elliot: How can someone research what will generate the most commissions/revenue? Do domain owners need to apply for accounts with companies like Linkshare and Commission Junction on their own?

Also, once accounts have been opened and approvals for affiliate marketing given, what’s the best way to set up these types of affiliate sites? From my experience, even if you have targeted traffic and an affiliate account, it’s still tough to close sales and earn revenue. Do you recommend a hybrid affiliate/Adsense website?

Theo: I put off joining Sedo for 2 years, being unsure of its benefit. When I finally joined and parked domains in 2004, I was amazed at how streamlined everything was – even back then. Domainers need to be bolder in testing different venues and then compare the results. That’s the only way. Affiliate marketing, just like parking requires traffic. That’s when the SEO “fun” begins.

The best way to incorporate affiliate marketing in AdSense sites (provided that they are approved by the AdSense TOS) is to use both text links and eye-catching call to action images.

Elliot: What if people have domain names that don’t get type in traffic – or don’t get decent type in traffic? Should they sit on those names until someone buys them, or can they do something that would enhance value while generating revenue?

Theo: That’s the $64,000 question 🙂 Parking at places like Sedo has the added benefit of getting offers through the automated system. Listing these domains for sale at forums is another option. If the development route is taken, to increase traffic one must possess domains of ample quality and provide content that is unique and fresh. Overall, not all domains are created equal.

Elliot: In your opinion, what are the best ways of knowing a domain name’s value? For me, I look at things like advertisers who pay for ads for the keyword, the amount of money that’s paid for the keyword, cost of the product/service, domain sale comparisons, # of other extensions registered, # of domain names with websites that have that exact keyword, age of the domain name, exact match search volume…etc.

Theo: I primarily invest in domains that are brandable, aged, short and hard to mistype. Essentially, I invest in generics that can be used in many industries; those that buy these names from me usually have a development plan in mind. Some succeed, others simply sit on a name they paid thousands of dollars for.

Research for metrics helps when you acquire domains with traffic or potential for traffic. Overall, tagging a dollar value to a domain is a complex methodology that sometimes depends on intuition. I’ve sold many “reg fee” domains for four and five figures, all while holding them produced negligent amounts of revenue.

Elliot: Do you do a lot of hand registrations? What do you expect the “hold period” to be when you hand register a name? Do you drop names that you bought years back that have received no interest or revenue?

Theo: I support the notion, “if it’s on CNN (or the news), register the .com!” However, most of my new acquisitions are direct purchases or bids.

I hold domains long term; usually parking revenue matches or surpasses the reg fees. I’ve done “spring cleaning” several years ago and I try to be very picky with the domains I add to my portfolio. Of course, there are exceptions: new TLD’s require both an aggressive investment strategy and an exit strategy if the plan fails.