HODL Applies to Domain Names

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If you invest in cryptocurrency or follow the cryptocurrency business, you are probably familiar with HODL (meaning “hold on for dear life”), the term that refers to the strategy of buying and holding cryptocurrencies instead of selling or trading. I think domain investors can co-opt the HODL term when it comes to their domain investments, and I want to share a couple business examples from 2019.

In 2015, I bought a domain name at auction for a low five figure price. Since that time, I have received dozens of inquiries and offers. I would have to pore through my records to find out for sure, but the number of inquiries may be over 100. Unfortunately for me, I believe I only received one offer that was for more than I paid, and most offers were far below what I paid to acquire the domain name. It was frustrating, and I second guessed myself quite a bit.

Early in 2019, I received a fair retail offer for the domain name that involved a short payment plan. I accepted the offer and was happy to make money on this longer term investment. Within a couple of months of accepting the offer (before it was paid off in full), I received an unsolicited offer that was 20% higher and did not involve a payment plan. Of course, I did not accept that offer because it was already in escrow. I thought I held on to the name long enough and the sale price was good, but if I had more conviction in my valuation of that domain name, I could have made even more money.

On Christmas Eve day, I received an inquiry and offer for a different domain name I bought for mid 4 figures, also in 2015. After a short negotiation, the buyer and I agreed to a fair sale price. Over the years, I don’t think I received more than one offer for this domain name, and I frequently thought about whether or not I should just try and liquidate the asset. I always felt like this domain name had much more value than I paid, and I held onto the domain name until a good price was achieved.

There have been many times I have looked back on a purchase and second guessed myself about spending what I spent to buy the domain name. With domain names, a HODL strategy may be smart, especially with the low cost of renewal (holding cost) compared to the typical acquisition cost.

One of the best aspects of domain names is their unique nature makes it impossible to have an MLS-like pricing guide. This allows investors to make strategic purchases at what should be lower than retail valuations. One of the challenges is that the investor needs to make the determination about what that retail price is and needs to not only buy the domain name for an affordable price but be able to hold on to the asset until the retail price is achieved. This can be difficult when a great domain name may just receive one good offer after many years. It is also difficult because the difference between a great domain name and a value-less domain name can be just a letter or two.

2019 was a decent year for my business – not exceptional and not bad. When things aren’t going great, there is more time to second guess acquisitions and offers. If a domain portfolio has valuable assets, HODLing might be the best strategy, even if it is not easy.

21 COMMENTS

  1. Good read Elliot. Most of my sales have come from way out in left field with a good price for names I didn’t have much faith in, while my “”priceless” ones just sit there like a wallflower. The ones that did move seemed to fill a particular, obscure niche, validating the HODL perspective.

  2. A good quality portfolio (ie quite high quality .com’s) typically has a selling through rate of 0.5%-1% per year. That is a holding period on average of 100+ years.

    I am always surprised when people talking about 3-5 year holding times, only way to to do that is sell at wholesale prices or just above.

    • I don’t totally agree about that, but I think our ideas of wholesale pricing are different. I also think the purchase prices plays a big roll in determine the price at which to sell.

      The prices I paid in the examples above are the wholesale market price at the time of purchase. I sold them for much more than any domain investor would be willing to pay.

      • Ya, purchase price is huge decider. I want to try pricing around 1500-4k range, but usually if i go on after market and pay 400$ for example. My strategy is value investor, means if i buy something i am looking at around 10-15x at least (or more if i see value others dont). Hence if i spend $400, by definition i cant sell it for 1500 if i want to follow my strategy. And generally names that i think are good, others think they are good too. Recently i was able to buy portfolio of about 50 names that normally i would consider to be on average 300 per name on wholesale market , but i was able to get it for about 15$ per name. Now i feel much more comfortable trying out 1.5-4k strategy on this names. Since my risk was low, and it is no longer about 10x or 15x return but more about ability to test low price strategy without feeling guilty that i don’t follow my plan. I priced most of the names in that range, i am pretty certain i will see at least 1 sale this year, maybe 2 from that batch.

        • I suspect the problem is that your pricing is too low. If the names are costing you $400 I doubt it will work to sell for $1,500. Just price them at $5,000 or whatever multiple you expect to get.

          • Thats what i normally do, hence my example. If i buy at 400, i have to sell between 4-6k. Hence i cant test fast churn model, and with recent acquisition i am able to to just that.

    • @Snoopy – you are too jaded man! You make intelligent posts but you are getting increasingly jaded.

      We do NOT sell at wholesale prices and we turn over apx 12% annually. On our best names our avg holding period is less than 5 years.

      • I have been saying the same for quite some time. Snoopy is jaded.

        Not recommending this but I believe I could turn over 20-30%, making a solid profit if I wanted to, but it’s more important for me to hold until the time is right. I don’t want a solid profit of 5-10x, I want 100x (flipping $20 .NYC domains).

      • People selling at retail prices get 1% or less sell through rate a year. The way to increase that velocity is to lower prices.

        • Snoopy, there is no “Law of Domains” that gives a sell through rate. Yes selling cheaper would increase sales, but even Andrew Rosener talks of turning over 12% – why is that so impossible?

          You can get higher than your 1% by doing many things other than dropping prices:
          1. Being a better sales person – converting more sales
          2. Conducting more outbound or more targeted outbound
          3. Buying better names that there will be more demand for
          4. Adding logos to domains on a market place
          5. Making sure all domains are listed at all marketplaces

          This list can go on and on…
          All increasing % sell through while NOT lowering prices.

  3. I flinch every time I run into terms such as “retail value” and “wholesale value”. Several years ago, I had the pressure of communicating back and forth with Rick Schwartz. We both had a family loss at the time and it was hard..real hard for me and when I read his blog about how he was coping, I message him to say “hey life goes on” and he was kind enough to engage me back and forth. He gave me a piece of advise “You’re going to hear a lot of buzz words in this industry and you’re going to run into every supposed expert there is. You’re also going to have domains that won’t have an inquiry for years. Youre going to have any range of offers and you’re going to second guess your logic. The bottom line is, domains are a longterm investment. I have domains I have held on for so many years, I have to count to remember. The only expert on a domain you have is going to be you. The only buyer you’re going to have is the right buyer. Everyone else, forget them”.

    So I pasted this on my clipboard and looking back at it. I have sold over 170k in 6 domains from a 300 domain portfolio. I even got 500,000 shares from a high flying startup in exchange for my domain and have never sent out a cold sale email or phone to anyone. I just trust that I have made the right decisions according to me. Ofcourse its all a gamble but if you can follow simple rules, why not trust in your decision and let it be?

  4. > hodl.date – What would you guys / ladies valuate it at?

    You would have to pay someone the transfer costs, plus enough for a good bottle of something to take it off you !

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