By Ron Jackson, Editor,
One year ago I stumbled upon what had to be the easiest way to make money ever devised by mankind. I read on the Internet that you could actually buy words then SELL THEM to someone else for a big profit! That sounded like my kind of business! All I wanted to know was who did I need to see to get signed up.
After all, the dictionary is just loaded with words and if the supply of good ones got thin, you could just slap an "e" or an "i" on the front, string several words together, separate them with hyphens, mix them up with numbers – or better yet – all of the above! You were limited only by your imagination. No heavy lifting involved either, so how could you go wrong?
Well, it turns out there was one tiny little glitch in the business plan. Oh, you could buy the words all right...it was the selling them for a big profit part that proved to be a little tricky.
In fact, five months into my trip down the road to riches I could still count my sales on one hand without raising any fingers! That’s right, I had a shutout going. Why, if I were a major league pitcher, people would think I was great! However, in the domain business, pitching goose eggs inning after inning is not such a good thing.
At this point, some people would take the little bit of money they had left, buy a few rags to stuff in the exhaust pipe, lower the garage door and slowly drift into a very long sleep. I wasn’t quite ready for an eternal nap though and fortunately fate started dealing me a better hand.
Over the next 7 months I sold over 150 domains, completely paying for the 475 I currently own with a four-figure profit left over - enough to keep me yanking the handle of that slot machine in the domain game casino.
That’s probably a bad analogy because it implies that luck was involved in my abrupt turnaround. The fact is luck had nothing to do with it. What it really took was the very thing I entered the business to avoid – a lot of HARD WORK. It’s the domain industry’s dirty little secret. The easy money is all an illusion. When people find that out (usually about the time their credit cards max out) most leave the race before ever reaching the first turn.
For me, the only thing harder than the work I put in this first year was making the decision on whether or not to write this story. If I tell it, I might help newcomers to the business cut months off the time it takes to start making money.
On the other hand, if I give directions to the route I followed, I could find myself battling a whole new flock of competitors. No one needs that in a field where people put the bite on choice domains quicker than Mike Tyson clamps down on his opponent’s earlobe.
In the end I decided that if I wanted you to keep reading Domain Name Journal I would have to keep giving you good reasons to do so. That means spilling the beans, though I am going to keep a few in an inside pocket to make sure I can stay out of the soup line.
Though I only got into domain sales a year ago, I registered my first domain during the Internet’s Jurassic period – 1997. I had a real world music retail store and a flourishing mail order business fueled by national magazine ads. By registering MusicParadise.com. I was able to cut my advertising costs by 80% and exponentially increase my global audience at the same time.
So I had an appreciation of the Internet’s power and promise early on. Unfortunately, I was too busy running that business to pay any attention to the domain market at a time when really serious money was changing hands. You know that old saying, "A day late and a dollar short"? That was written about me.
Fast forward to May 2002. In just five short years, my world had changed dramatically. The Internet (along with record company greed and stupidity) had decimated the music business. I was looking around for something else to fill the widening revenue gap when I saw a NeuStar ad in a computer magazine touting the new .US extension.
I went online and read a little more about .US (unfortunately I had missed the land rush and subsequent debut of the extension just two weeks earlier). However, there were some really good words and terms still available. Too bad those weren’t the ones I registered!
In typical newbie fashion the first thing I did was find a domain that included the extension as an integral part of the name – HowAbout.US. Why couldn’t there have been a little voice of reason deep down inside whispering, "how about NOT!"?
I could not believe my good fortune. My very first domain name for the resale market and I had hand-regged one that had to be worth an easy 10K!
I had read about GreatDomains.com so I quickly signed up and proudly listed my new Porsche... I mean my new domain. It was late, so I figured the sale wouldn’t likely be made until the next day. When I woke up, I ran to my computer, checked my email box and was flabbergasted to see... nothing. No offers at all!
I smacked the side of the computer case a few times. Surely there were still a couple of emails stuck in there somewhere. No dice. Well, obviously the GreatDomains site had gone down (that would happen later and permanently of course) but that wasn’t the source of my problem either. I got a sinking feeling that this wasn’t going to be so easy after all.
I bought a few more domains that, in hindsight, were even worse than my first choice. They likewise were met with resounding silence in the marketplace. I decided it was time to take drastic measures. If I was going to pick up 10 grand for 5 minutes of work I was simply going to have to bite the bullet and actually learn something about the business!
I started searching the Internet and reading up on domain names. DomainGuru.com was a helpful site, particularly with its list of 100 top resources. A lot of old-timers still haven’t forgiven the owner, Britian’s Lee Hodgson, for cluing the unwashed masses in on a lot of the industry’s secrets. One of the Guru’s links led me to Domain Name Forum.
Forums are probably the best resources on the net to learn about this business. A lot of people who have already been there and done that are on the forums and fortunately a lot of them are willing to share their expertise. DNF spawned several others, most notably DomainState.com and more recently NamePros.com. There is even a new one devoted primarily to .US, USForum.US.
Just as important as gaining knowledge is making business contacts through the forums. A great deal of buying and selling goes on among resellers themselves.
So with a new circle of forum friends teaching me the ropes, I found that even an intimate knowledge of the English language will not make you a successful domain dealer.
You have to learn what buyers are looking for in a domain name. It is rarely something "cute" (see howabout.us above), a word that you made up (Ebay succeeded because of their business idea not the domain name) or anything that does not have an immediately obvious commercial application. While you are "in school" at the forums or doing research on the Internet, you would be wise to put off buying domain names.
Having said that, the fact remains that few beginners are able to resist those flirtatious glances from their favorite registrar. Besides, making your own registration mistakes is certainly part of the educational process. Consider it tuition.
Still, it is possible to whittle that tuition fee down considerably by remembering one thing. You will rarely make money registering a name that has been available for more than a few minutes. I wasted several months combing through the daily list of dropped names at DeletedDomains.com. I just couldn’t understand why there was never anything good there, but not wanting to leave the keyboard empty handed, I would register a few anyhow.
The fact is the domain ocean is filled with ravenous creatures who gobble up every good domain name long before they hit the deleted list you are looking at. These guys are the industry’s killer whales and tiger sharks. You are the minnow.
If you are going to look at anything at DeletedDomains.com, look at the On Hold list of names that have not dropped yet, then learn about the many drop catching services you can enlist to go after the best ones for you, because you are not going to get them on your own.
With private giants like BuyDomains.com and Ultimate Search in the hunt, you are not even going to get many of them with the drop services on your side. To have any chance at all, you will have to know exactly what names are going to be dropping and when they will drop. Companies like Exody.com (whom we will be profiling soon) can help there.
You will not only need the lists - you will have to be quick on the draw. Slots at the most successful drop-catcher, SnapNames.com, are usually claimed months before a name actually becomes available. If you learn about a drop late, your only option will be to bid very high at an auction service like NameWinner.com (where winning bids often seem to rise well beyond what the domain is worth).
This business is starting to look a little less attractive isn’t it? Maybe you should consider something that’s not quite so intimidating, like working as a human cannonball or as Saddam Hussein’s food taster.
Still if you are determined to plow onward, my next piece of advice is to find a niche in the market and fill it. That age-old wisdom applies just as much to the domain business as any other…probably more so. Finding a niche is what finally pulled me out of my five-month sales drought and put me on a path that now yields steady sales, even in a down economy.
Before we discuss niches, let me tell you about a fork in the domain road that you will encounter early on. Most people take the lane that leads to high traffic .com domains. If you can land a few of these, you have your own personal money printing press. The traffic can be sold to Pay Per Click search engines that will be happy to send you a monthly check for the surfers you send them. The less traveled road leads to domains that you have to sell on the appeal of the name alone, usually without much established traffic.
The natural inclination is to go after the big money high-traffic .com domains. If you want to do that, I would advise giving it a little time... like a decade or two. This is where the big boys with deep pockets play. You will need a big bankroll and several years worth of experience to identify and land these domains. Though I made my share of mistakes my opening year, I was wise enough to recognize I was not yet equipped to break into that part of the business.
So I went the opposite direction and headed for the outskirts of Domain Town, where the competition was much lighter. I figured if I was going to get mugged it would be better to face just a couple of thugs rather than the ruthless gangs roaming the .com alleys downtown.
The fierce competition for .coms keeps the prices for the better names at levels that are only affordable to corporate buyers. I came out of a small business background so I understood how that market thinks and what they are willing to budget for a domain name. These are predominantly 3-figure sales rather than the four to five figure sales at the corporate level.
On the other hand it is very big market (more than two thirds of the American gross national product is produced by small businesses). If you can find names that fit those businesses there is a ready market there and a handful of those smaller sales is just as good as one of the less frequent sales made to a large corporate buyer.
Another advantage is that this segment is not concerned with pre-existing traffic. They just want a name that is suitable for their business and then they take on the responsibility of building a site and drawing their own audience. At the present time, these are mostly .com, .net and .org domains.
I am a believer in the future of .us as well, but sales for the new extensions (including .info and .biz) will be weaker that the established extensions until they gain recognition. There are some signs that could come sooner rather than later. I have paid for nearly all of my 200 .us domains with the sale of just 3 to unsolicited customers this year – the most recent being APS.US for a mid 3-figure price.
I currently spend a lot of time on a segment of the small business market that uses .org domains, because it is much easier to acquire good .orgs than good .coms and .nets. This is an area you should enter only if you understand it because .org (originally intended for non-profit organizations) is not a good match for most businesses and services. However, there are for-profit areas, particularly those involved in humanitarian or public service fields that welcome .orgs with open arms. For my own good, I don’t want to say anything more specific than that (remember those beans in the inside pocket I mentioned).
That is just one example of a niche you might find. Use your own area of expertise to zero in on a field you know well and service that market. When you build a successful base at that level – then you can consider targeting the next level of more prestigious names.
If you are new to the game, you will almost surely have a rocky start. After 4 months without a sale the only thing that kept me going was a forum thread that said the average time it took the posters to make their first sale was 5 months! Hey what do you know, I was still right on schedule!
When my first sale came at the end of September, it wasn’t one domain – it was 21 domains at once! It didn’t matter that they were each priced just a few dollars above the registration fees - it was a sale. More importantly it allowed me to unload some of those many early registration mistakes and reinvest in better domains.
With a portfolio that was finally sporting some decent names, I made my first 3-figure sale three weeks later, a 3-letter domain, OYC.ORG to a New England yacht club. Applying what I had learned the first half of the year, I kept buying better names and the sales accelerated every month.
My happiest day came on April 27th of this year when I went into the black with my 142nd sale. It was a low 3-figure sale but at that point I had gotten back all of the several thousand dollars I had spent and now had 400 domains in my portfolio. The month since then was my best ever, with several inquiries coming in every day and at least one three figure sale every week. My profit has risen to the low four figures and my inventory is up to 475 domains.
I can now take money out of this business (rather than my own pocket) and buy the Snaps or make the bids I need to land higher quality domains and serve a larger market. With signs that the domain industry has bottomed out and is now on the upswing, I am extremely excited about what my sophomore year will bring.
I recognize that I still have a great deal to learn but the knowledge is there if you take the time to look for it. One of these days I might even be able to wander back down to that fork in the road and sneak up on the big boys! You can’t blame a guy for dreaming, especially when some of those dreams have already started coming true.
Special thanks to Ron Jackson of DNJournal.com for sharing this article with us.