How to become a successful domain investor today

People keep asking for advice on how to become a successful domain investor today, so I thought, why not make a blog post about this topic. Some of my blog readers are experienced domain owners already, but maybe you will find something helpful anyway.

“Domains will continue to go up in value faster than any other commodity ever known to man.” - Rick SchwartzFirst of all, it's wrong that you're too late. You can still start buying domains and make a living from it today. Generic domains have become expensive over the years and they'll not stop going up in value anytime soon. Therefore, you must concentrate on cheaper domains and a way of finding good but affordable domains is to be creative. Below I've compiled a list with a few tips on how to get into the domain business if you don't have enough money to buy your way into the high end of the market.

1. Register lots of domains

This is an obvious method, but many new domainers have failed taking this road already. Most of them failed because they started registering domains before they knew anything about the value of a domain name, which means they registered mostly worthless domains. The first thing to do before stuffing money into the pockets of your favorite domain registrar is to read as much about domains as you can. You will find useful advice on any of the domain forums. In addition to that, you should subscribe to domain blogs such as the ones listed on the right menu bar of my blog. Don't forget to read Ron's weekly domain sales reports at DN Journal for current domain sale prices. As soon as you think you've learned a great deal about domain value, about which domains can be sold and which can't, you should be ready to buy your first names.

There is money to be made with newly registered domains. You do not have to get your hands on high-value domains, but it should be domains that can be resold for a profit. What you can try to do, is to register domains at $7 each and then resell them for $xx each. If you resell a domain at $27 you'll make a $20 profit. This isn't much money and it might not buy you more than a meal and something to drink, but if you choose this method of getting into domaining it is about volume. Your aim should be to quickly resell hundreds of domains.

After a few months of successful domain reselling you might find yourself in a financially better position to purchase domains on the aftermarket. Additionally, you've completed several domain transactions and gained hands-on experience about how to sell and transfer domain names. You can then reinvest the domain you made in higher quality domains, which are for sale on domain forums and domain marketplaces.

Now, an obvious question would be, how do I know which domains to register? Basically, you should concentrate on domains that are generic in nature. You can, for example, register domains consisting of two- to four-word search terms. Use Google's AdWords Keyword Tool to find popular search terms (the Overture keyword tool has been more accurate than Google's tool, but the Overture search suggestion tool was taken offline, unfortunately). Sometimes I also use Google Trends for seasonal search terms.

To give you some examples of available domains, I recently read an article about budget weddings becoming really popular. The following budget wedding domains were all available for registration at the time the article came out:

BudgetWeddingCeremony.com
BudgetWeddingCeremonies.com
BudgetWeddingBand.com
BudgetWeddingBands.com
BudgetWeddingCake.com
BudgetWeddingCakes.com
BudgetWeddingDress.com
BudgetWeddingDresses.com
BudgetWeddingFeast.com
BudgetWeddingService.com
BudgetWeddingGown.com
BudgetWeddingGowns.com
BudgetWeddingPresent.com
BudgetWeddingPresents.com
BudgetWeddingRing.com
BudgetWeddingRings.com
BudgetWeddingGifts.com
BudgetWeddingGift.com

Each of these domains is worth more than $7, in my opinion. I also regularly find good local domains that are still available. So be creative and think of domains that can help an end user make money, and you should be able to come up with domains worth significantly more than the fee for registration.

By the way, I don't want to get into traffic monetization in this post, but I'm astounded by the great number of domains that I newly registered and which immediately started receiving type-in traffic and generating pay-per-click revenue.

2. Register domains (lower volume approach)

If you don't want to start making money in domaining by reselling domains at $xx each, you can try to register or acquire fewer domains that you think will have potential in the future, e.g. domains for upcoming technologies. Such speculative domain registrations usually take longer to turn into a profit, but they have the potential to sell for higher prices should they really become valuable at some point in the future.

In order to find domains with future potential it would be a good idea to subscribe to lots of blogs and to read technology and science magazines, because you must spot trends early on.

3. Limited supply

Three-letter domains were not considered very valuable once. But as you probably know, three-letter domains only rarely sell for less than high $x,xxx today anymore. This little piece of domain history should teach you that domains can become valuable if they're limited in quantity.

I believe that four-letter domains will become quite valuable, too, as I wrote about in my article "Investment Opportunity: Four-Letter Domains". Especially CVCV.COM (consonant-vowel-consonant-vowel) domains have seen a nice jump in value in the past 12 months, according to recent domain sale prices.

Four-letter domains can still be bought for $xx to $xxx, depending on the letters they contain. Some CVCV.COM domains have also been sold for prices in the four-figure range. And a major corporation, NBC Universal, has chosen the four-letter domain hulu.com for their new YouTube rival. You see, there is value in LLLL.COM domains and now would be the time to invest.

By the way, three- and four-letter combinations can be an acronym for popular terms. Use AcronymFinder.com to find out about the possible meanings of LLL/LLLL domains you want to buy.

There is GOLD to find among expiring domains!4. Find good domains in drop auctions

Every day you can buy expired domains in drop auctions. My favorite service for expired domains is SnapNames.com. Due to the vast number of expiring domains there are lots of crappy domains that have been deleted, but there are also some good and even a handful of highly valuable generic domains on the daily drop lists which the previous owners mistakenly or stupidly let expire.

An expired domain service catches expired domains and auctions them off to its users. At SnapNames.com the minimum bid is usually lower than $100 per domain. This makes it a great source for valuable domains that can be bought below value, because some good domains are overlooked among the high number of names dropping every day. If you're lucky you're the only person who expressed interest in a particularly nice domain and you then get it for the minimum bid without having to go to auction.

Many expiring domains have been actively used and therefore have a history. The following tools can help you determine if an expiring domain is likely to receive traffic:

  • Whois tools: Look up the creation date and expiration date of a domain name (e.g. iWhois.com)
  • Archive.org: Past uses of the domain name
  • Marketleap.com: Backlinks (or search for link:DOMAIN in Google)
  • DMOZ/Yahoo: Is the domain listed in one or both of these directories?

5. Development

If you're good at making websites you can register or buy a few domains and develop them into useful websites or full online businesses. Developing a domain requires lots of work, but it is rewarding in the end, as you will be able to sell the domain plus website for a price much higher than what you would get for the domain name alone. In addition, developed websites can make money from Google AdSense or affiliate ads (CJ; AzoogleAds).

Today it's easier than ever to develop a website, because there are various open source content management systems that let you build large and interactive websites without requiring deep knowledge in PHP programming. WordPress is a popular solution, for instance. Joomla is also good if you want to launch a bigger site. Both programs make it easy to customize your website with plug-ins and downloadable templates.

If you want to develop a domain of yours, don't forget that you're developing it for "human beings". This might seem obvious, but many "developers" just put up made-for-AdSense sites with duplicate content nowadays. A domain+website will be more valuable and it will receive more traffic if it is unique and has quality content to offer.

6. Recommended reading

By now, a few good books about domaining have been published. I think they're a great source of additional information and will certainly be valuable to domaining novices and, if nothing else, they might even be fun to read:

The Domain Game (David Kesmodel)
- The Domain Game (Kindle Edition)
- Domainer's Bible Kindle Edition (Paul Tebow)
- Sex.com (Kieren McCarthy)
- Sex.com (Kindle Edition)
- Buying And Selling Domain Names 101 (Zach Wilson)
- Domain Names for Dummies (Steve Newman et al.)

7. Conclusion

Now that I've pointed out proven methods of becoming a successful domain investor, let me complete my article with some general advice:

- If you're still uncertain about how much money you should spend on domain names, set yourself a limit (e.g. $500 per month) and do not excess this budget. The learning curve in domaining can be steep and a monthly budget helps you limit the amount of money you lose while making your first steps in this business. Raise your budget once you make a profit.

- Do not, ever, invest in domains that infringe on someone's trademarks. First of all, this is illegal and you can be sued for hundreds of thousands of dollars. Second, you are only one person, one important part of an entire industry that relies on you when it comes to being a trustworthy business person. The domain business has been considered as somewhat shady for a long time; in fact, the image of this industry has just gotten better over the past two or three years thanks to some positive articles in major publications and because of industry conferences like TRAFFIC and the impressive work of the Internet Commerce Association. People monetizing TM-infringing domains let this industry appear in a bad light and they're the reason why there is still so much talk about cybersquatting and domain kiting.

- Don't be afraid of asking questions. Everybody had to start somewhere. There are "newbie" sections on all major domain forums where you can post questions, and in most cases there are experienced domainers who are very willing to share their knowledge.

Final sentence? "Good luck!"

34 thoughts on “How to become a successful domain investor today”

  1. Great article and very much appreciated!! Can you please tell me what kind of numbers in Google's keyword tool we need to be looking for? What number for a 2 word or 3 word search term guarantees or implys type in traffic? Also, if you own http://www.mortgagerefinancinglowrate.com (parked at Godaddy), can you assume that since mortgage refinancing is a great search term, that if someone built a site with content and adsense that it would generate good traffic and be positioned high in search rankings because keywords are in the domain name??? I have no desire to build sites, I just want to know what domain buyers are thinking when they look at a potential name. Thanks! Kelly

    **ANSWER**

    Unlike Overture's keyword tool, Google's tool doesn't give you a hard number. But the tool shows little green bars that can give you an idea of the relative search volume and advertiser competition for a search term. This means you should be looking for search terms that have high values at both criteria, because this would mean the domain is more likely to receive type-in traffic and the EPC (earnings per click) might be higher if you park the domain.

    In the case of MortgageRefinancingLowRate.com, one would have to search for "low rate mortgage refinancing". The search volume for this term is about 20% and the advertiser competition is at 40%. This means that there are not so many people searching for this term and the number of advertisers is just below average. Your domain probably doesn't receive much type-in traffic anyway, because it is "Mortgage Refinancing Low Rate" instead of "Low Rate Mortgage Refinancing".

    As for building a site with content, I'm not very good at SEO, I can't answer that question. But you can use Google's tool to find out if there is a good supply of Google AdSense ads for your site and which keywords you should target to achieve a higher cost per click.

    I did a little research and found the following informative post on Problogger.net, which goes into more detail explaining the Google AdWords keyword tool:

    http://www.problogger.net/archives/2006/03/23/google-adwords-keyword-tool-a-useful-tool-for-adsense-publishers/

  2. Great post- I am a big fan of the three and four letter type-in domains. One thing I'd add: Domaining is going to explode as promoters pitch it as the next get rich scheme anyone can pursue with little investment. The result is going to be a pricing frenzy as less sophisticated investors jump in and start driving prices up for marginal domains. Those of us with portfolios should sit on the sidelines but be prepared to dump a lot of domains when prices get ridiculous. If you buy into this theory, then you'd be buying a lot of marginal domains and hanging onto them until the bubble starts expanding.
    You heard it here first folks!

    **ANSWER**

    Interesting thoughts here... Though, "ridiculous" prices would be tantamount to a bubble pricing, which I hope we won't see. The domain market has become a matured market with educated investors and well thought-out companies, which is a very good sign. But you're right, of course, that domain prices will go up drastically. This will not happen because of unrealistic asking prices, but because corporate end users increasingly perceive solid generic domains as valuable and important marketing tools that can help brand their businesses and sell their products or services. It's this increasing demand for keyword domains that drives domain sale prices up.

  3. Thanks for the great article! It's packed with great resources and information. I was lucky enough to get one on the domains you mentioned above. We'll see if it sells.

    **ANSWER**

    Thanks, Dan. Good luck with the domain!

  4. Hi Dominik

    Some good points there for a newbie domainer like myself - thanks.

    Of course, when reg'ing and then flipping a domain for low £xx (sorry $nn) you have to factor in the commission that sedo, for example, take ...which is quite high IMO.

    I too think that as new technology products arrive there is scope for new domains. On the back of the iphone for example I'm trying my hand with touchsensitivephones.com for example (no type-ins yet though).

    What you think of reg'ing place names like towns, villages, local parks, etc? I figure that there must be some profit to be had in such domains, even at ccTLD (like .co.uk) level. Maybe I'm wrong?

    I've spent sometime in snap and there seems to be a lot of rubbish in there. Though I did pluck up the courage to bid, win and spend approx $150 on sportscycles.com (my one and only auction win ...most exciting too) - but again I don't have the confidence yet to know if generics like that are good enough or not??

    You mention wordpress as a development platform ..well as blogger now supports custom domains you can host for free at blogger and start to develop out domains.

    Thanks again for the good post.

    John

    **ANSWER**

    Good point. When reselling domains at $xx you can't sell the domain through a domain marketplace or a domain broker, because there usually is a minimum broker fee you would have to pay. This approach I mentioned is for domainers who want to sell the domains on their own without having to pay for a third-party service. You can build a nice domains-for-sale site on your own, by the way. Domain Seller Pro is a pretty good and affordable domain sales script, for example.

    Regarding place names, I see a great future for geographic domain names. City and village names, also when combined with the name of a branch of business (e.g. CarlsbadInsurance.com, CarlsbadOfficeSpace.com), are sought-after domains under .com already. If you concentrate on smaller towns you should be able to find some good available domains or domains that are for sale at relatively low prices. I think that geographic domains are especially consistent with ccTLDs. I like Frank Schilling's advice on this subject: Invest in .com and the ccTLD of the country you reside in.

  5. Great article and lots of helpful tips! What about your thoughts on ext like .mobi? I started buying mobis a few months ago and have about 100 and the more I learn about domaining the more I am convinced mobile is a good place to get a toehold in the domain business. thoughts?

    **ANSWER**

    Although mobile web surfing is on the increase, I don't really like .mobi. This is mainly because one doesn't need an additional extension for surfing on the web using a mobile device. Current smartphones can open "normal" websites already, and the iPhone even has a .com button.

    Personally, I don't own any .mobi domains, but it is still too early to say where this TLD will go in the end. There have been some good .mobi domain sales in the past year and one-word domains under .mobi will presumably find buyers at relatively high prices in the upcoming auctions again. It's just that I don't think they're worth that much, but as said, it's too early to give a definite answer.

  6. Hi Dominik,
    Great article, you've made many good points. Domaining is a constant learning curve that doesn't end. Your point regarding limiting your investment monthly for domains is very important. Way too many new domainers are buying domains that are quite frankly, trash.
    I have been there, but thankfully realized my mistake, and moved on without too great a loss. I believe domaining is becoming very fine tuned. The domains that cover very "Broad" categories, such as "Weddings.com" are very high priced (and rightly so) and the movement logically will go towards the finely targeted niche domains, that define a product or service. These have fair value at the moment, but I think you will see a sharp rise in these generics sooner rather than later. Not only is the organic traffic there, it's very targeted and with a decent product and website, closing ratio's will be tremendous. The search engines also I believe are moving in the direction of very fine tuned search results as they become smarter. I don't think they have reached this level yet, but the personal finely honed results are coming. You cannot lose with targeted generics short or long term.
    Thanks
    David V

  7. Thanks for the article, very helpful for newbies like myself.

    Related to the last comment, I bought a few hundred "city name branch of business" names a few months ago. My strategy was to look at the largest US cities, then combine them with desireable business keywords. For example, AustinPlasticSurgery.com. However, I'm a little clueless about what to do next. I'd rather sell them than develop them, and the type-in traffic has been negligible. What would you suggest for a portfolio such as mine?

    **ANSWER**

    If you don't want to develop the domains you should do a little research and find potential end users. You an offer the domain to a plastic surgeon in Austin, for instance, who might be willing to pay $xxx+ for it. This is an approach which takes some time, of course, but selling to end users can be very rewarding and well worth the effort in the end.

  8. Lots of very good advice here.

    I cant help thinking that many of the domain names that we currently think are relatively weak (worthless?), will be worth big bucks in the next 5 - 10 years. If they contain no more than 3 keywords, are memorable, spelt properly and originally bought as a new registration for 20 bucks or whatever, they are always going to sell for good multiples of what you paid for them. I think this will be particularly true of .Coms and a few of the ccTLDs such as .us, .de and .uk.

    My problem with strategy 1, Sell lots of domain names, is that I would feel absolutely terrible if a domain I sold for $30.00 was in turn sold by someone else for 10 times or 100 times what I sold it for.

  9. Great advice Dominik!

    One cool tip for newbies: Some highly brandable domains in upcoming technologies can be regged if you are fast and smart. Think of the numbers 360, 365, 247 or 101. Then, think of great generics in upcoming technologies such as "semantic web", "ajax", "phev" (plug-in electric vehicle) and combine them!

    Example: SemanticWeb360.com, Ajax360.com and Phev360.com! There you have it: killer, highly brandable domains that you can potentially sell for lots of money in the very near future.

    There is no shortcut...research, research, research!

    Al.

  10. Hi Dominik
    I am fascinated about the domain world as an investment. I am currently trying to know more about it before I start buying - Thank you so much for your article as it is one of the best I have read so far.

    I would much appreciate your expertise on the following (excuse me my ignorance:)

    How can you be 100% sure your domain name will not infrine on someone's trademark? Is it any web directory or guide to help on this matter?

    When buying the domain, do you recommend buying it from a company like Sedo where you can sell or park the domain later on or is it a way to register the domain cheaper and then use these companies to park or sell?

    On the generic names, do you see potential on buying names with generic.com.country of residency or better the generic.country of residency?

    Any views on the non english domain names?

    Thank you very much

    **ANSWER**

    Hi Albert,

    As for TM domains, you should search US and international trademark databases, for example: http://www.uspto.gov/ If you want to play it safe consult a lawyer.

    If you're going to buy a domain at a domain marketplace like Sedo you should be prepared to pay significantly more than registration fees, so you can't really compare buying a domain at Sedo to registering a domain. It depends on your budget. If you don't want to spend too much money on a domain you might want to find available domains which you can then register for less than $10. If you have more money available and you find a good domain for sale below value or at a fair price in the aftermarket, you can buy it at Sedo or Afternic.

    I most cases KEYWORD.ccTLD is worth more than KEYWORD.com.ccTLD. This is different with .co.uk, but usually you should prefer the ccTLD to the .com.ccTLD. Especially non-english domains have value under the respective country's top-level-domain. I see lots of potential in non-english domains, as local search is about to become really popular and global Internet usage is going up rapidly.

  11. Just a comment: I don't agree that it's a good idea to sell domain names for $xx amounts and doing the $27 -$7 registration costs = $20 profits calculation. For every domain name you sell there are some/many domain names you do NOT sell at all within the first year of registration and after 12 months you need to decide wheter to keep them or not. I usually keep them -> more costs than $7 for one successful sale. I just sold a name with a soso name for 500 that I got a few very low offers before, but this being 5 years after initial registration -> 5 times registration cost.

    **ANSWER**

    Thanks for your comment.

    That's exactly the reason why I said many have failed taking this approach already. If you want to pursue this strategy you must learn which domains you can quickly flip for a profit before you go out and register lots of domains. But if you are good at finding available domains and reselling them this is a very good and affordable strategy.

  12. There are few ways other than development, to maximize your overall return on your domain name investments. A domain name that is developed into a marketing juggernaut with lifetime passive residual income plus a future sale in the 10s of millions is the best path.

    I used to think the answer was to find end users with deep pockets. Then I realized that the smartest path would be to become that end user myself. So my vote for success goes 100% to DEVELOPMENT.

  13. Very nice article for domaining business guide. I love your words about:
    "What you can try to do, is to register domains at $7 each and then resell them for $xx each. If you resell a domain at $27 you’ll make a $20 profit."

  14. Alexander, you're misinformed.

    Cybersquatting refers to the registration of trademark domains. Cybersquatters register and try to profit from domain names they are not allowed to own and trade.

    Domain investing, on the other hand, is the acquisition and sale of generic domain names.

  15. Dear Dominik,

    Thank you very much for the information. I am a newbie in this area. I have a question:
    If I have coined a nice word that is easy to brand (and checked that it is not trademarked yet, and then registered it), should I also trademark it?
    If so, then how?

    Your answer very much appreciated.

  16. Trademarks help indeed, especially if you are about to launch the site. It is also pricey, so, you have to find a healthy balance. An US application will easily take a thousand bucks out of your wallet.

  17. I think that in years to come you will see these short domains commanding a premium. Even 5 letter .coms, at least the brandable / pronounceable ones. Face it, shorter is better.

    Statistics say that the internet doubles in less than 6 years time.

  18. Sir: I enjoy your blog very much. It is well written. I have 3 questions?
    1) How or where can I find what is trademarked?
    2) Can I intermix numbers and words in a domain name?
    3) Can I use capitals in the domain name?

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