About two months into 2021, to say that investing has become something of a hot topic might be a bit of an understatement. Of course, I’m referring to the rise (and fall) of Gamestop ($GME) during the last week of January 2021. Despite an unprecedented number of people getting aboard the Gamestop hype-train, and my fear of missing out–my fear of losing money prevented me from hopping aboard. Naturally, I watched the whole thing play out from the sidelines like so many others.
So, in the spirit of learning about investment fads, we’re going to cover one of the lesser known investment opportunities that exist—Domain flipping. The Domain Investing world is a tight knit community, and some of you may already be pros, this article is a primer to introduce the concept to a wider audience.
What is Domain Investing?
In the most basic terms, domain investing (or domain flipping or even domaining) is when a person registers or purchases a domain with the intention of monetizing that domain by selling it another person or company at a future date. Even if you are not familiar with Domain Investing, you may have seen a domain that was invested in. When you do a domain search, and you get an Aftermarket domain result which is priced higher or labeled ‘Premium’, that domain is currently being held by an investor.
Monetizing a domain can happen in a few different forms (parking and advertising, building a real brand and website or just selling on the name), but we’re going to focus on domain flipping. Domain Flipping is the strategy of purchasing domains and holding it for a period of time, with the intent of selling it on for a profit.
Unlike many other investment vehicles, simply waiting for the value of a domain to increase over time isn’t always enough, and isn’t even likely to work in many cases. Domain investing can be a time-consuming process. You’ll need to be proactive in finding domains that could hold value or are undervalued, identify trends that will lead to an increase in value for the domains you hold, and capitalize on those windows to maximize profit.
A generic example of such patterns could be domain names that include words about an emerging technology (for example, quantum supremacy) or a new institution in a locality (businesses or services in a newly incorporated city). As this indicates, domain investing is largely speculative, with an expected investment thesis and rationale behind a successful domainer’s investing decisions – much like other forms of investment. The risks involved in domain investing are equally high, if not more than popular investment options, since regulation is practically non-existent.
While the goal of domain investment is simple to understand (buy low and sell high), the execution of a strategy and achieving profitability requires a great deal of thought and patience. So, before a person decides to invest in a domain, how do they determine which ones are worth investing in?
How do I determine which domains are valuable?
Evaluating domains is a key skill in recognizing profitable investment opportunities. Arguably, the key skill. Why do some domains cost as much as a t-shirt, while others can cost millions of dollars?
Unfortunately, there’s no secret formula to determine the monetary value of a domain. The price of a domain will vary based on a buyer’s specific criteria. What may be worth millions to some, may be virtually worthless to others.
While the monetary value of a domain is ambiguous, there are common attributes that you can identify to recognize which domains have value, and which ones don’t. Here are some key characteristics of valuable domain names that can be used to identify which domains worth pursuing:
Try to acquire distinctive, and identifiable domain names, preferably with 3 or fewer syllables. Domains that are easier to remember are more likely to be investment targets because they can be leveraged for business/marketing purposes.
Domains with 5 or fewer characters will typically always be valuable. Short domains are easily brandable, which makes marketing significantly easier. Naturally, there are far fewer shorter domains available because of the limited number of words that can be created with 4 or fewer characters.
This doesn’t mean longer names don’t carry value, but they should meet some of the other criteria if you’re considering making a purchase. Whether you’re targeting a one-word domain or not, avoid domains that are long and complex. Since users are more likely to mistype or misspell the domain, longer domains typically carry less value, and are easier to create alternatives for.
Consider keywords that could be common search terms. Look for popular cultural trends that will remain relevant over a significant period. In addition, consider domains that describe a business or service that is commonly sought out. In many cases if a business is unable to acquire a domain containing their brand name, they may find value in a descriptive alternative that explains what their business does.
If you’re digging through expiring domains, tools like SEMRush are incredibly valuable for looking through a domain’s search traffic history or domain authority. Even if a domain is lengthy and difficult to remember, the domain could still be incredibly valuable if it generates significant amount of organic search traffic.
Spelling, Characters and Wording
Many words have multiple spellings. This can cause confusion when used in the context of a domain name. Selling a domain name that contains words with alternative spellings or special characters, will be significantly more challenging.
The launch of hundreds of new gTLDs in the past decade fueled a resurgence in domain investing, but the experienced domain investors will tell you that .COMs and ccTLDs such .ca, .us etc. make up the lion’s share of their domain portfolios. On occasion, there may be an opportunity to capitalize on emerging trends that involve specific domain extensions. For example, the rise in popularity of Clubhouse has led to a surge in “.club” domain registrations.
How do I purchase domains?
Once you’ve found the domains you’re looking for it’s time to start buying them up. There are 3 primary methods through which you can go about fleshing out your domain portfolio.
The simplest and most common method of registering a domain name. Visit the registrar of your choice and purchase a domain. This is the most inexpensive method of acquiring domains but is also the most challenging, in terms of finding valuable domain names that have not already been registered.
Placing a Backorder is to wait for domains to expire and registering them upon expiry. One of the most effective methods of acquiring valuable domains, but also one of the most competitive.
Aftermarket Domains (Marketplaces)
Through websites like Webnames, Sedo, and others, you can find domains of all kinds put up for sale or auction by users. Every marketplace has its own unique listings so be sure to cast a wide net to ensure you don’t miss any diamonds in the rough.
Direct Purchases via negotiation or through a domain broker. This is by far the most expensive and time-consuming process but may be worthwhile if you’re shopping for a highly valuable domain. If you want to learn more about domain brokering, check out this blog where we go over the basics.
How do I sell domains?
First and foremost, be sure to park your domain and list it for sale. That way when people visit your URL, they’ll be greeted with a message letting them know that the domain is for sale, and how to get a hold of you. While this step is certainly worthwhile, it’s not the most expeditious if you’re looking to generate as much visibility as you can.
To do that, list your domain on marketplaces like Sedo or Afternic. On marketplaces you can set a fixed price, field offers from potential buyers, or hold auctions for the various domains you’re looking to sell. By doing so, you can also make your domain listing visible on registrar search engines as well. Use as many marketplaces as possible, as they will increase the visibility of your listing.
Domain investing does have a unique learning curve, but that should cover the fundamentals. Buying, selling, and everything in between. Like any other investment opportunity, there is no fast track to success. So, while you’re investing in domains, be sure to invest in yourself. Whether you’re buying or selling, seek out as many resources as possible so that you can make well-informed decisions and get the most out of your investments.