Investing in Domains for Profit

Business.com / Technology / Last Modified: February 22, 2017

Investing in domains can yield dramatic returns - much higher than investing in stocks, bonds, real estate and precious metals.  ...

Investing in domains can yield dramatic returns - much higher than investing in stocks, bonds, real estate and precious metals.  In fact, doubling your money in one to three years is quite common for the average investor.  

The reason for this is that by buying a domain, you literally own a piece of the internet.  As economic activity and marketing move online more and more, the value of domains will continue to go up.  

Here are the resources you need to start investing in domains:  

Get the Domaining Knowledge You Need

The first step to being a successful domain investor is to be an educated domain investor.

Take it Slow

Yes, you're excited about domains and want to get going right away. That being said, it's best to wait at least a month before buying your first domain. Spend that time reading about domains voraciously and perhaps attending a domain conference to meet people in the field and learning the stories behind their successes and failures.

Stick with .com at the Beginning

There are a variety of top level extensions you can invest in. You are probably already familiar with .com. Some other extensions are .net, .org, .info, .biz, and .mobi. Each country also has their own extension: e.g., .us (United States), .uk (United Kingdom) and .de (Germany). Each extension has its opportunities and pitfalls. However, historically .com has outperformed all other extensions and many experts believe that this will continue in the future. As a beginner, the .com world is the safest place to be. As you grow more experienced, you can decide whether you want to branch into other extensions.

Choose a Domainer Friendly Registrar

Frankly, a lot of registrars are not that secure, and a valuable domain is at risk of being stolen. Indeed, one registrar has even tried taking domains from its clients. You want to make sure that your domains are registered at a place that's secure and understands domaining.

Choose Domains with Terms That are Searched

One reason why Work.com is such a fabulous domain is because people actually search for the term "work" and also use it in their day-to-day conversations. While you may not be able to afford a domain like Work.com, there are many much cheaper two and three word terms that people do search the internet for.

Learn How Domains are Valued

You need to gain some sort of a gut feel based on experience as to what the market value of a domain is. The best way for someone new to gain this experience is to pour over previous reported sales.

Know the Law

Domaining is no longer a wild west - there are many laws you should be aware of. Avoid trademarks: registering a domain, even inadvertently, that includes a trademark can get you into legal hot water. And large corporations tend to over-reach when it comes to claiming what is covered by a trademark, so you want to make sure you are not pushed around by cyber-bullies.

Sell A Few Domains

Even if you are investing for the long haul, it makes sense to sell a few domains to get an idea of the process - e.g., how to negotiate the sale, how easy or difficult it is to sell a particular domain, and the mechanics of escrow and domain transfers. Selling a few domains will give you a good reality check as to whether your domaining efforts are on the right track.
  • Understand the Difference between "Wholesale" and "Retail". In simplest terms, wholesale is the price that a domainer buys a domain for. Retail is the price that a person who plans to develop the domain (known as an "enduser") buys for. There can be a big difference between the two. This is for several reasons. Domains aren't a very liquid investment - they can be very difficult to sell. In fact, if you are looking for a sale to an enduser (preferred obviously, because retail prices are so much higher than wholesale), it can take years before an enduser is interested. In fact, for lower quality domains, there may never be an enduser who is interested. The smaller the chance of a retail sale happening, the lower the wholesale value is.
  • Specialize in a Niche. It is difficult to be an expert on all types of domains. By specializing in a niche, you will get a much better understanding of what types of domains in that niche sell and at what prices. If you are in the financial industry, consider concentrating on financial domains. If you are in the health care industry, consider concentrating on health related domains. Another popular niche is geo-domaining (domains that include geographic locations).

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