Risk & Reward of Buying a Domain Portfolio

I am occasionally offered the opportunity to purchase a domain name portfolio. Most of the time, the portfolios I am sent are relatively small, but the portfolios can be comprised of a wide variety of domain names in them. Last week, Mark Levine tweeted about buying portfolios, and he likened it to the A&E television show, Storage Wars.

Buying a domain portfolio is a lot like those tv shows where they buy storage locker contents – beneath the nickle & dime stuff are some golden nuggets!#domains #domaining #domainnames #StorageWars

— Mark Levine (@domaintheory) January 10, 2019

I agree with Mark. There can be some gems in a portfolio acquisition that sell quickly or earn a nice stream of PPC revenue. These names will help earn an ROI on an acquisition, and the rest can be gravy – as long as they can be sold for more than the renewal cost. If the domain names are maintained at the same registrar, renewal fees may not be needed right away, allowing the buyer to begin monetizing before incremental fees are added to the cost.

My own domain portfolio is relatively small, so I don’t typically buy a large number of domain names from other investors. When looking at a portfolio to buy though, the most important thing for me to see is what improvements I can make that will better help me sell the domain names. If I see the domain names are all parked at Uniregistry with a “for sale” link on top, it is unlikely I can do better than the seller, although timing is always important.

One risk of buying a domain portfolio is highlighted in responses by attorney Jason Schaeffer and attorney John Berryhill, both of whom have extensive domain industry experience:

…if for no reason other than loss of priority due to the new ownership.

— John Berryhill (@Berryhillj) January 11, 2019

It is possible that a seller is not divulging legal threats that exist in the portfolio, and threats may emerge at any time. In addition, a change of registrant can mean a loss of priority. For instance, if SillyExampleCompany.com was registered by the seller in 2000 and a company called Silly Example Company got a trademark for its brand name in 2015, the buyer in 2019 would possibly have some exposure to the trademark holder, depending on the domain name.

If a portfolio can be had at a reasonable price and the buyer can make some improvements, there can be a nice reward for a big acquisition. It’s important to keep in mind the risks though.