Doing the Legwork to Check Investment Viability

Hedge funds and private investors that invest serious amounts of money in publicly traded companies have many tactics to understand how a company is performing before financial reports are given. People are hired to count cars in parking lots, check inventory on retail sales floors, ask employees of suppliers for production details, and a variety of other means to ascertain non-public information. Domain investors should consider a similar strategy using different tactics.

I am not an investor in non .com domain names. That should be pretty obvious. Despite this, I am emailed regularly asking me for thoughts on buying new gTLD domain names. I believe investors would benefit from doing end user market analysis to check their investment viability. This is important for non-.com domain names, but it could also be done for the non-blue chip .coms (one word, 3/4 letter…etc), too. People should understand the market before investing thousands of dollars in speculative domain names.

Here’s what I would do if I was going to the legwork to evaluate investment viability for a type of domain name I was unsure about:

– Check and note the domain names of startups mentioned in tech trade publications like TechCrunch, Crunchbase, Ycombinator, Techmeme… etc.
– Check and note the domain names in industry publications in industries I want to focus. For instance, if I have a background and familiarity with the agricultural field and want to focus on domain names in that space, I might read Farm Journal or Modern Farmer to see what domain names are used by advertisers and companies in the news.
– Check and note the domain names in the portfolios of venture capital and private equity companies. For instance, I might have a look at Reddit Founder Alexis Ohanian’s VC company website (Initialized Capital‎) to see the domain names used by his portfolio companies. There are hundreds of VC and PE companies that have websites with their investments listed.

Understanding the domain names that are used by businesses in areas of a particular focus (startups, ag companies…etc) is helpful to understanding desirable domain names. However, that does not tell the whole picture. This is where the extra legwork comes in to the picture.

One might assume (perhaps incorrectly) that because an Ag company is using NewAmerican.Farm that .Farm is a worthwhile investment. This may not be true. I would do historical Whois research at DomainIQ or DomainTools to understand the history of domain names that stand out to me from my research. Were the domain names hand registered or were they acquired from an investor or the registry? This gives even more information about what companies are spending to get a domain name. Perhaps NewAmerican.Farm was chosen because it was available to hand register rather than because it was desired.

I would then spend some time doing more specific research based on my observations. If the above research is helpful, it would likely help me hone in on a few extensions or keywords to consider researching further.

I would spend some time on NameBio to see what domain names are selling in my various niches or extensions of interest. This market data is critical to understanding whether a type of domain name or extension is worth investing in. I wouldn’t spend $200 on a domain name if the sale price ceiling is between $500 – $850. I would limit these searches to the last 2-3 years – perhaps 5 years at most – because sales older than that aren’t necessarily helpful. I would also try to make a determination of whether the sales were to an end user buyer or an investor. Investors speculate on names they think are good deals. In some cases, these are wholesale prices. In other cases, the investor will never resell the domain name profitably.

There are three takeaways from this article. There may be opportunities beyond the blue chip one word or 3 letter .com domain names. Investors can do quite a bit of legwork to understand the market. It’s easy to buy a domain name, but domain investing is not easy.