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.