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!"