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Saturday, 6 February 2016

Complete Domain Name Investing Guide for Beginners

Complete Guide On Domain Name Investing For Beginners. Learn How to Make Money By Investing In Domain Names.

Domain Name Investing Guide

For few months, I was doing a research on domain name investing. Finally my research is over and this article is outcome of the same which I present here for my readers. Investing in domain name proved to be a very appealing experience for some people while some people burnt their hands in this profession. 

It is a risky business in the same way investing in stock market is or even more than that.

So it is not made for everyone. Some have made millions while some have lost their principal amount. 

What exactly is Domain Investing?

Domain Investing
In simple words, domain investing refers to buying a domain name for normal registration price and selling it to the person or company who requires it at higher price thus making a profit. One can also buy domain name from secondary market and sell it at higher price. A domain name should be attractive enough to find buyers. Registration of a domain name expires after a certain period, so it needs to be renewed before expiry.

Why anyone will buy just a name for millions of dollars?

fb.com domain sale
OK! Before answering let me ask one counter question - Do you go to fb.com to use facebook? The answer of most of people would be a YES. The relevance of this question to the value of a domain name is that fb.com was purchased by facebook for a whopping $8.5 million in November, 2010. Surprised! Let me give you one more shock - This is not the costliest domain name in the history. Some domain names were sold for gigantic amounts even more than this. By now you might have understood the value of a "GOOD Domain Name".

Which domain names are the so called "GOOD Domain Names"?

There is nothing like "Good Domain Names". The value of a domain name is decided by a buyer and seller. A domain name which might be useless for you can be of utmost importance for someone else, so important that one might spend astronomical amount for it. So no one can tell you a diamond worthy domain. However some domain names are assumed to more important than others. Keep reading this article, I have added about it in Rules for investing in domain names section.

How is it different from investing in stock markets?

There are some similarities and some differences. There is a well established market for buying and selling stocks with definite prices while there are many small markets or sites for buying and selling domain names without any fixed price. Stock market is a liquid market while domain names are illiquid assets which can't be sold easily. However some domains might get sold for unbelievable prices. Everything is uncertain. 

All stocks of a company or firm are identical while all domain names are unique. So you can't get assurance that your domain will also get sold for a high amount if a similar domain is sold for huge amount. There is no renewal fees in holding a stock of a company while you need to pay a renewal fees for holding a domain name for certain period of time.Exact value of stock portfolio is known at any particular point of time while value of domain portfolio is unknown, it might be worth millions of dollars or might be of zero value. In stocks, one gets a regular income in the form of dividends, while in domain investment, one gets regular income by parking the domain name.

So investing in domain names is far more risky and illiquid  than investing in stocks. But if you are lucky, you might get a diamond worthy domain which might give you astronomical returns. It all depends on your risk appetite.

5 Basic Rules of Domain Investing 

  • Focus more on quality than quantityThere are infinite possible domain names, but try to pick golden fish from the ocean. Buy high quality domain names and focus on selling them before accumulating more domain names.

  • The Smaller, The Better - You can't get a domain name less than 5 letters because all smaller domain names are occupied. 2 letters and 3 letters domain names are sold on marketplaces for a huge amount.

  • Stick to .COM - I am not staying that other extensions are useless, but investing in other extensions is far more riskier than investing in .com domain names. So for beginners, it is recommended to invest in .com. However if you are able to find a small and good non .com domain, you can proceed.

  • Follow trends - When some topics become extremely popular, the domain name related to it start getting certain amount of visitors, so try to pick up domain names containing a trending keyword. 

  • Unknown Value - This is the most important one. There are many hidden gems but finding them is not easy. Nothing is fixed. No one can tell you a million dollar name because no one know about it. You might be able to figure out a million dollar domain name which even I can't find or you might get another penny domain name. Winners create their own rules. So develop your own style of investing and create your own rules of buying domain names.

How to start investing in domain names?

Investing in domain names is very risky, so invest according to your risk appetite. Invest on your own risk. I have written this before the start of this section because it is a highly risky business. So it is better to warn. 

So I have compiled a step-by-step procedure to invest in domain names.
  • Find a valuable and saleable domain. This is the most important and toughest part of this business.

  • Once you have found a valuable domain, buy this domain name from any domain registrar of your choice. Remember, the domain registrar should provide the facility of transferring a domain name.

  • Make it available for sale on any of the domain marketplaces such as Sedo or Flippa. They will guide you through the procedure to list a domain name on their platform and sell it. 

What should be the price of your domain names?

Price of domain name
There are three ways of pricing your domain while selling it -

  • Fixed Price- You can demand a fixed price for your domain name. This is preferred mode when the exact value of your domain name is known, so that it can be sold for profit easily.

  • Auction - You can make your domain available for auction on Sedo or Godaddy auctions. For premium and diamond worthy domains such as two letter domains etc., it is advised to sell them via auction to get the highest possible price.

  • Make Offer - This is the most common method of pricing because the exact value of most of domain names are not  known. As I told earlier, a buyer and seller decide the price of a domain name. In this way of pricing, a buyer has to make a offer of his choice to seller for domain name and now the seller has the flexibility of completing the sale or asking for more amount.