Knowing When to Cut Bait

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Over the last couple of years, I have been taking more flyers on domain names. I have been buying more names at GoDaddy Auctions in the < $100 range, and my portfolio has grown to around 1,000 domain names. I have found pretty good success in this channel as one sale can pay for almost everything. As the year is coming to an end, I have been cutting bait – letting domain names expire instead of renewing them.

When I receive the expiry notices at GoDaddy and Enom, I look at a few things before deciding whether or not to turn off auto renew or simply not renew:

  • Quality of name – how does it sound to me?
  • Purchase price
  • Traffic
  • PPC Revenue (if applicable)
  • Inquiries

The most important thing to me is still the actual domain name. Sometimes I buy names at auction because the stats I evaluate look good and the domain name sounds so-so. I have sold enough so-so names to know that the sound of the name isn’t everything.

I also look at my purchase price to see if it was a name I paid a lot to buy or if I was the only bidder. In the first case, perhaps other investors would have an interest in buying the domain name. In the second case, maybe I was the only one who saw anything, and if there is no life with the name elsewhere, it’s not worth keeping.

Traffic and revenue are also important. Traffic indicates there are people typing it in to find something or see if the domain name is developed. PPC revenue can pay for the renewal or offset the renewal cost, making it easier to determine whether or not to keep the domain name.

The number of inquiries received is also important since domain name sales is what drives my business. The average sell through rate is pretty low across a portfolio, but if a name has received purchase interest, it’s probably one to keep.

I look at all of these attributes in totality to determine what to let expire. I have probably acquired 100 – 250 names in the last couple of years that I would consider flyers. These were small investments I hope to sell for 4 figures. They are essentially strategic lottery tickets. I buy them, set up forwarding or parking, put them on Afternic with a low 4 figure asking price, and hope to move them.

With the addition of so many new domain names in my portfolio, it’s important to know when to cut bait. I don’t want to build a massive portfolio and play the numbers game. I have done well enough on flyers that I will keep on buying them. Knowing what to drop is equally important so my overhead stays low.

11 COMMENTS

  1. My strategy is easy peasy straight forward.
    Hand reg using the big discount ($4.99 or less) and hold them for 3-5 yrs and resell. Very successful…Usually receives offers within 2 yrs and always make more than I paid for.
    Hand reg domains like okiegal, redneckguy, airporttourism,queerstrong,meatmeatless,gerryhome
    all dot com.
    Creativity pays!!

    Hand reg 10 domains for less than $50 and just have to sell one for $$$$.

  2. A lot easier to do this culling when you have been domaining for a few years.Have a portfolio so you’re able to judge quality, then keep a standard (for new domains too). Most all can probably drop 10% of our (perceived) worst domains each year in order to keep overall portfolio quality higher.

    Watch and see if your domains are getting drop-catched or registered right away and see how other people like them for perspective too.

  3. I think there are two themes in this article. The first one about dropping the deadweight (after you have identified it) is pretty obvious. The other theme is more about investment strategy. What I don’t understand is the somewhat derogatory tone towards the XXXX vertical. “Numbers game”, “flyers”. Domain names can have many shades of liquidity. In the end it’s about profitability, not if you can sell your portfolio tomorrow. I agree it’s a numbers game, like all business is. The numbers are good if you have talent and work hard. Just numbers will take you nowhere fast anyway.

    • I will take a stab at responding, but I am not entirely sure what you mean about this “What I don’t understand is the somewhat derogatory tone towards the XXXX vertical.”

      Five years ago (+/-), it was pretty easy to buy nice names for $20 – $100 on a regular basis. I would see a name I like in the Dropping.com newsletter and set an alarm for 10:55pm to remind me to bid by 11pm. There are so many bidders these days, I don’t even remember the last time I spotted a good name for just $69. Those names that sold for under $100 in past years now regularly sell for $500+. It’s much more difficult to get great deals these days at auction. I keep thinking there will be some sort of correction, but that has not happened.

      These days, for a name to sell for $20, it has to be passed on by everyone else. Just like in the NFL draft when executives will take a flyer (a chance) on a college player with a late round draft pick, I take some flyers on names others have overlooked. If warranted, I will keep it in my portfolio and continue renewing. If there is no life to the name after a year, I will dump it.

      I am still buying lots of good inventory above that $20+/- mark. Those are strategic purchases rather than flyers. Here are some recent competitive auction buys:

      Chilly.com
      BusDev.com
      MemberGateway.com
      LegendVentures.com
      GeorgiaMade.com
      DiscoverIsrael.com
      PracticalPrevention.com
      HouseholdWaste.com
      DoloresPark.com
      JRTS.com
      LeMatin.com
      Bisous.com

      Those are names I would not simply let expire.

      On the other hand, some of my $20+/- flyers include these names below I would probably let some of these expire if they don’t have any “life” based on the attributes I mentioned above:

      DefinitiveFunding.com
      AgricultureAnalytics.com
      BuckleIt.com
      MarketplaceDefense.com
      DependableDevelopment.com
      RemarkableHoldings.com
      WinnersVentures.com
      ScholarshipOptions.com
      FantasyPickers.com
      FamilySecurities.com
      VitalCoverage.com
      HealthPipeline.com

    • No. I assume if there is good SEO value, they will have been scooped up by others or I will get traffic.

      I do not turn on email for domain names I am not using, and in general, I think it is a bit slimy and possibly unethical/illegal to turn on a catch all email with the intention of telling an intended recipient I am getting their email.

      If you receive a letter in the mail from a law firm or doctor addressed to your neighbor or someone else in your town but with your address, would you open it? If you did open it, would you still feel comfortable delivering it to that person knowing that they know you went through their private mail? I think that would be pretty scummy and setting up a catchall, with that as the primary intent, is kind similar.

    • Ordinarily, I would have no idea but I remembered I dropped one in February I had acquired for $1,300 5+ years ago.

      This was a bit of an anomaly though. I bought two similar names for a total of $2,600. I sold one for $2,300 shortly after buying it, but the buyer wasn’t interested in the second name I dropped this year.

      I bought these two specifically because I had sold two others for five figures and thought these would also be appealing to a buyer. I was right about one but not about the other. Buying the second pair of names was a calculated risk that didn’t totally pay off.

      Someone else bought it (with its original creation date, so it did not delete). There is no record of a sale on NameBio, so it was probably not a whole lot of money.

  4. Elliot, asking about email because I know there’s email parking companies out there.

    For seo value, you should be checking links, blacklists, etc. Not because of traffic necessarily but because it’s an indication of whether the domain has been burned or not. Even if it’s a good domain, a burned domain can bring issues later on when you sell it. Buyer cannot clean up the domain’s links, it won’t rank, it’s on email spam lists, and the buyer can’t use it.

    • Honestly, SEO metric value does not play any role in an acquisition for me. However, I recognize that some of the tools I use take those SEO metrics into account, so a name may appear to be a higher target for me because of the SEO value but I don’t dig down deep enough.

      To me, buying domain name isn’t science. I have no idea of the metrics on HealthPipeline.com, but it seems like it could be a pretty solid brand name, and for a $20 investment, I think it has a pretty decent chance of selling for 4 figures in the next 5 years.

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