Most bloggers aren’t going to sit here and tell you how much money they waste on domains, but the truth is most domain investors will never make a net profit. You’re going to have people tell you every day how much they sold domain X for. Usually saying they paid a very low amount and selling it for much more. What they won’t tell you is how many hundreds, maybe thousands of other domains they spent money on that collect dust and annual renewal fees. Names they overpaid for and have no outlet for or interest in, their domain. It’s like the lottery and horse players that talk about the $1000 they won on Friday but never talk about the $5 they played everyday for a year and a half. They celebrate the victories without acknowledging the losses.
There is a certain personality that is attracted to buying domains. They are people that previously have bought and sold on ebay. Dabbled in the stock market. Poker players. Sports gamblers. People that have that bug that drives them to make money through risk. And domain investing has as much risk as any investment you’ll make. The positive is with risk comes reward. The negative is the house. The registrars and their tlds. You are going to lose $8 a year on every domain you buy and your dividend has essentially been negated to nil because of the reduction in parking income. In reality, there are more people in stands watching the championship of your kids tee ball game than actually make a living buying and selling domains. Most of us either make some “extra” income or no income or make it through other methods involving domains. Blogging, site creation, or providing products or services to other domain investors.
I won’t lie. I make most of my domain flipping money on NNNN.coms and 5 letter domains. If it wasn’t for those niches, I would have lost money. I like many, did much of my buying from 2008 to now and the returns on that period have been very poor. In hindsight I would have been much much better putting every penny in the stock market. My belief in CVCV.coms and 5 letters bailed me out of my hole but I would imagine that most domain investors bought domains in this period that now have a lower value than what they paid. Some may say that I am a hypocrite by putting out a daily list of names that I think are worth buying. Advising people to spend more money on things they will never sell for a profit. I would answer that by saying that of the names that are available to purchase on a given day, my list are the names that I think are best buy on that given day for resale or for developing. It is merely an opinion but I do look through thousands and thousands of domains. Of those , I put out 10-15. It’s a very small percentage and out of all the domains I look at, I might buy one a week. That’s 52 a year. Very small compared to many domain investors.
So how do I know that most people are lottery players? I get the lists sent to me every day. Names that are horrible. Lists several pages long with every tld known to man. Typos. Words people never use. Words in an order usually not spoken in the English language. All sent by people that honestly believe they have a winner in there somewhere. Is there any other industry in the world that the majority of prices are set at “make offer” The biggest domain investors in the world rarely have set prices on domains. They wait for the offers to come in. Yes, there are exceptions. Yes there are very skilled investors but I am talking about the masses. They are in a crapshoot.
So what can you do to actually make money?
1. Absolutely don’t listen to the people that tell you are going to make big money on the other tlds. You think making money in dot coms is difficult? Try taking that same keyword and adding a lesser used tld. I explain it to my friends like this. A dot com is like taking the player of the year after four successful years of college basketball. Other tlds are like taking him in 8th grade. It could become a great player but he could get hurt along the way or may not reach his potential. You MAY make money just like you may make money in poker. There are those that will but most are going to leave the table empty handed.
2. Patience is a virtue but cutting your losses is talent. We all make bad purchases. Most of us don’t have the portfolio to support a high percentage of bad buys. The key is to try and cut your losses somehow. It might be development, it may be sell at loss, it may be drop. Despite what many may tell you, time won’t make up a bad buy.
3. Quit using the shotgun method. You keep buying hoping that one of them will sell for a nice profit. And while that may happen, add up the cost off all the other domains you purchased and see if you still made a profit.
4. Your time is worth money. If you spend 2 hours scanning the lists each day and sell two names a month for $1000 profit. That’s $60 hours spent for $1000. That’s $16.66 an hour not counting whatever you paid for the domain and the other money spent on domains you can’t sell.
5. Be realistic. “One off” of a great domain doesn’t make it just a little less valuable. It makes it almost worthless.
6. You are not Michael Berkens, Frank Schilling, or Rick Schwartz. It’s too late to buy your way into a portfolio of that size for 99% of people. Even they are selling more than they are buying. Concentrate on buying ONE of their better domains. One good name is MUCH better than 20 OK names.
7. Make enough money to become an unmotivated seller. It’s why the married guys seem to attract all the ladies. They don’t come across as eager. They are comfortable and confident. Once you don’t need money seems to be when you make the most. You can maximize sale prices and pass on lower offers. You don’t have to play the lottery and don’t blow you’re money trying to find that lottery ticket. You can buy higher quality names.
So even if domain investing SHOULDN’T be like playing the lottery, to many it is. Dreaming of a $30,000 offer on a name they just paid $150 for last year. The stuff domain blogs write headlines about. Then again “Man pays $3000 for name worth $150” isn’t exactly the story we all want to read.