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Creating an “Out Strategy”

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Reading Sahar’s post this morning has me also wondering what people have in place as an “out strategy.” What if domain values suddenly dropped (due to a number of possible factors), and the value of undeveloped domain names suddenly plummeted? I can’t even imagine this happening on one and two word category killer .com domain names, but this is something to think about for people whose portfolios may be made up of decent, but not killer domain names.

As with any market crash, panicking will only make things worse. I would advise against rushed selling just because the perceived value has decreased. The domain market is always in somewhat of a state of flux because there is no completely accurate price guide.

Here are five recommendations I would make while you evaluate your portfolio (which is always a good thing at this time of year)
1. Cash in hand is very important – (you can’t pay your taxes with domain inventory)
2. Have a development plan for each name you own. If PPC advertising drops, you will be more protected
3. Trim down your portfolio ($8/year x # of names is expensive).
4. Drop names that realistically have no chance of making money unless someone random wants the name to start a business. A few names at $8/year is nothing major, but if you have 500 or 5,000 this is a huge sunk cost.
5. Make less speculative purchases. Just because Brittney’s sister is pregnant, doesn’t mean you need to try to guess the name of the baby and buy 100 .com names.

As an aside, if you are concerned about this and want to cash out of your one word category killer .com names, drop me a note 🙂

Disconnect Between Buyers & Sellers

“This domain name can be developed into a great website!” This popular phrase amongst sellers is laughable to many buyers and developers who would argue that ANY domain name can be used for a great website. What some sellers don’t realize is the actual time and cost of building a profitable website. This can cause a disconnect between domain sellers and buyers.

For many buyers who plan to develop their domain purchases, the right domain name is essential, but contingent upon the price. When buying a domain name for a specific project, the buyer knows his overall budget (based on expected returns). In the budget, he allocates funds based on the approximate cost of the project, the cost of marketing, the cost of technical management, hosting, and other incremental costs. He also knows what he can afford to spend on the domain name. Most of the time, a buyer is willing to spend a bit more than he really wants on the right domain name, but there is a limit to the overage.

Developers typically think differently than domain investors. Developers believe that if they build a great website, visitors will find it no matter what the domain name is. Domain investors believe visitors will find the website more easily (and more quickly), and they will be able to recall the website much quicker if it has a memorable generic domain name. Both lines of thought are accurate, which can make bridging the gap more difficult.

In my opinion, the time to spend the money on a generic domain name is if you have a “category killer” product or service, and owning the domain name of that category will instantly make you the industry leader. If you are building a city directory for example, you want to spend the extra money and buy the city .com name rather than a “brandable” domain name. It gives you instant credibility when speaking with potential advertisers, and Google loves targeted domain names!

Giving Advice is Better Than Giving Money

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I sometimes reflect on just how incredible the Internet is with its reach across the globe   I am doing some work at Starbucks right now, and the guy who stands on the corner collecting money for the homeless walked in to get a cup of coffee. He and I frequently nod to each other and wish each other a good morning, but I know absolutely nothing about him.

As he was leaving Starbucks this morning, he saw me on my computer and asked if I had heard of YouTube before.   After telling him I was familiar with it, he gave me a piece of paper with his name on it and told me to check him out on YouTube.   Low and behold, there he was beat boxing. His seven videos garnered a few hundred views in about a month, no doubt intrigued by his beat boxing skill and cool personality.

On my way home today, I am going to give him something more valuable than a dollar or spare change.   I am going to make a suggestion to him. He should buy the .com of his beat boxing persona (I will even buy it for him). He should then overlay this domain name on his videos to bring traffic to his website. If he adds his contact information to his new website, perhaps someone across the globe will be intrigued by his skill and offer him some work. Even a simple blog site with contact information could give him the exposure he needs to break out of anonymity.

Assuming he takes advice, this will be one time he is happy that I didn’t give him a dollar.

Sedo to Repeat .mobi Auction

According to a post on DomainNameNews.com and a post on NamePros, Sedo will be repeating the recent .mobi auction. In an email to clients, Sedo and the .mobi MTLD decided that the results of the recent auction would be null and void after some technical glitches occurred. As reported here, the initial auction set a sales record for total value of .mobi names sold ($1.5 million) and for the highest sales price for a .mobi name – $616,000 for Music.mobi.

.mobi MTLD and Sedo announced that they will will conduct a new auction at Sedo.com beginning on January 23rd, 2008. Coincidentally, this falls on the same day as the Snapnames/DomainFest live auction in Hollywood, California.

Domain Investment, Security & Common Sense

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I frequently visit the various domain forums, and I am often surprised by the lack of common sense exhibited by some people who are too trusting. Accepting a direct Paypal payment directly from a buyer on a transaction over a few hundred dollars can pose a significant risk. Apparently it isn’t too difficult to request a chargeback, and once the domain name is transferred, if a chargeback is requested, it may be difficult to reclaim the name.   This would remove the money from the seller’s account, while the buyer can retain possession of the domain name.

Another thing that seems to occur too often is payment for domain names using a stolen or compromised Paypal account.   When the actual account owner learns of the charges and requests a chargeback, the domain seller is once again left without the domain name and an empty bank account.

The most simple way to avoid this is to use common sense. If you are completing a deal with someone who you’ve never met or heard of, it is always best to use an escrow service such as Escrow.com or Moniker. If that person refuses to use an escrow service, it is probably better to avoid the transaction. If you have a sneaking suspicion that something is amiss, its always best to trust your gut.

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