It’s important that you think about your domain investment strategy each day, and how your purchases and sales impact your strategy, both today and in the future. While most people have an idea of what they are looking to gain from their domain investments, I think answering some of the questions to yourself will put things into perspective:
- Do you sell your domain names?
- Do you buy domain names with the goal of selling them in days, weeks, months, or years?
- Do you buy domain names with the goal of building websites on them?
- Are you spending more money on domain purchases than you are generating with sales and advertising/PPC revenue?
- Are you buying risky domain names (trademarks, typos, gambling…etc)?
- Are you reaching out to potential buyers, or are you passively holding your names?
- Do you park your domain names?
- How much passive revenue are your domain names generating?
- How much are you spending on new domain names vs. generating from sales/PPC/advertising revenue?
- Is this a hobby for you, or do you hope to grow this into a full business?
- Do you have enough money in reserve to fight a UDRP or a lawsuit?
- Are your domain assets diversified (different types of names, various extensions…etc)?
- Are you involved in the industry in domain forums, and/or do you attend domain conferences in order to network with others in the industry?
These questions are somewhat personal and should be considered by people who are buying, selling, or developing domain names. Strategies can change, especially in changing economic times, but it is important to think about what your strategy is. I know of many people (myself included) who had no strategy in the beginning. Basically, you will be left with a lot of domain names that you like (and maybe nobody else), and while you may sell on ocassion, it’s not covering your expenses.
It’s very easy to spend a considerable amount of money buying domain names. Buying domain names smartly, while thinking about your strategy – short and long term – will save you money and make you money. Domain investing can be lucrative, in good times and bad. Developing a strategy and always considering whether you are sticking to your strategy will keep you in line to meet your objectives.
Elliot — Thanks for another great post. I’m currently going through the process of determining my end game and developing a strategy to get there. It’s not easy, but it is necessary if I ever want my domain ownership to turn into a full-time endevor.
Thanks for the advice,
Nice post Elliot. Definitely food for thought for those in, or getting into domaining. Your questions are all very good ones that one should ask themselves in their domaining endeavors.
The worse the economy gets, the more these notions are going to be obvious to those that never considered it.
Lots of great questions, and certainly worthy of concerted thought. Here is how we approached these and other questions a few years ago.
To develop our investment strategy, we considered as many different domain plays as we could see happening in the space. Then we whittled that list down to what we thought were the most sensible and manageble plays considering our investment stake vis a vis the most potential for reward. Next we created an investment overview so all partners in our LLC knew what “The Plan” was. The plan used an analogy of “3 buckets” that we were going to pour our money into over time.
The first bucket was for hand-regged geo-domain products/services (CaliforniaPlumbers.com, for example, though we don’t own that one ;-). We would sell these domains outright for the “correct” price, but we would also hold them for a while until better mass-development software (and/or techniques) became available. Eventually we would offer end-users developed websites instead of just a domain.
The second bucket would be comprised of higher quality 1 and 2 word generics that we would develop over time. Each of these domains would cost in the thousands of dollars (at least) to acquire, but we were confident that with the right development plan, they would each be worth many times their acquisition value at some point (2-5 years?) in the future.
The third bucket would be cash – used for future re-registrations and for use in the (hopefully unlikely) event of a UDRP (though we never buy TMd names, and always do a tradename/mark search before buying anything).
All domains would be parked somewhere while the development process continued in the background.
Have we stuck to that plan? Yes, pretty much (although we have also veered off course a few times, buying search phrases in Spanish, for example). And at times we have considered selling certain domains before their time – meaning, before we developed them into sites. Why? Because both making sales to end-users and doing development is very hard work. And if the offers we received were many times what we paid for the names (sometimes 100X what we paid), then we found (and find) it difficult not to consider taking that kind of profit.
However, in general, we have remained more bullish on the idea of adding value to our domains via development and remaining focused on a mid- to long-term investment horizon in order to maximize our return on investment. Can short term profits be tempting, particularly if parking isn’t covering some of your re-registration fees? Yes, it sure can. But we’re trying to be patient, work hard, and stick to the plan as much as possible. Rome wasn’t built in a day (yada yada).
Oh, and except for certain .orgs and .nets that make a lot of sense to us for various reasons, we’re usually only interested in the .com space.
Any new investors in this space should definitely give all your questions a whole lot of thought before diving in.
There is one word for this post, “Excellent”