How to make money with domain names

People looking for ways to make money from home may be interested to know it is possible to do so through buying domain names. It is not an easy undertaking, but if you follow these steps to learn how to make money buying domains, you could build up your own nest egg. Once you buy the domain, there are a few different options you can do to earn money with it.
You don't need to be the next Google to start making money online. Thousands of people are generating income by investing in domain names. They do this by buying, selling, holding, or developing domains to increase their value.
Domain names are the internet's real estate, replacing land with virtual property. Like real world property, domain names can be bought and sold for profit, generate residual income, and developed to increase their value.

How to make money with domain names

Building a Solid Domain Portfolio

Building a high-quality domain portfolio can take months or years to accomplish. Often, the key is looking forward to what domains may become popular in the future and hedging through numbers by purchasing hundreds of domains. Others choose to purchase a few already high profile domains and sit on them hoping that they appreciate in value.

Generic Names
Words that describe a product or service, including new and emerging products, can be a great investment. But it's very important to avoid any copyright or trademark issues that could result in domain forfeiture.

Geographic Names
Names of cities or countries, including up-and-coming locations, can be great investments over time that can be sold to web developers looking to build out community portals or other businesses centered on those communities.

Business Names
Generic business names, such as dentist or chiropractor, can be great investments when combined with geographic names.

Timely Names
Timely names can be great investments when combined with events occurring in that year.

Buying and Selling Domain Names

There are many different ways to buy and sell domain names. Many standard domain registrars, such as GoDaddy.com, will facilitate sales via auction. Meanwhile, specialized websites, such as Sedo, are designed exclusively to buy and sell domain names. Finally, parking domains with a for sale page is a great way to draw targeted interest from potential buyers.

Set Price
Setting a specific price is the preferred method for domain sellers that have a large portfolio of domains and aren't in a rush to sell them.

Auction
Auctions are a great way to sell higher profile domain names where there is a lot of interest, since they typically result in the highest possible price.

Make an Offer
Make an offer sales are well-suited for niche domains that may not have a lot of interest and/or where the exact value of the domain isn't well known.

Risks of Investing in Domains

There are many risks that would-be domain investors should carefully consider before buying and selling. The three largest risks are liquidity, subjectivity and legality, but there are also many other ranging from misleading appraisals to faulty escrow payments. Would-be buyers should carefully consider these risks before investing in domain names.

Liquidity
Most stocks and bonds can be bought and sold with ease through a broker, but domain names can be much harder to sell. Finding the right buyer is often a matter of listing a sale for several months or even years, which means that investors should have a lengthy time horizon and the ability to stomach a loss.

Subjectivity
Stocks can be valued by the discounted value of future cash flows, while bonds can be valued by their coupon payments and interest rates. Domains are a much more subjective valuation that can be very difficult to pinpoint. And so-called domain appraisers are well known for issuing lofty valuations that can be hard to realize.

Legality
Domain names can be a sticky business from a legal standpoint. Choosing names that are too close to a trademarked name can result in a lawsuit and a court order to forfeit the domain name for free. In other cases, stolen domain names can be sold before the buyer has the ability to discover that they're not the true owner.

Steps

1. Learn about what makes domain names valuable. This way you can know how to choose the best ones to purchase, which can give you a better chance of making money.

2. Join various domain auction sites. These domain auction sites will give you an idea of what is on sale and available for your market. The availability of domains can also help you determine the method you will use to earn money with the domain.

3. Browse through the list of expiring domains to find the most valuable ones you can purchase. Choose the ones you believe will be the most profitable for you.

4. Check with other domain investors to see what their inventory looks like. If you cannot find domain inventory through the auction sites or other methods, this is a good way to get your own stock of domains started.

5. Purchase the domains you believe will be the most valuable. Buying domains to make money is quite a gamble because you do not always know if buyers will find value in the website domain. Making money with domains can be done in one of the following ways.

  • Park the domain with a domain parking service. A domain parking service will place ads on the domain. When people visit the domain and click on the ads, you earn money. This method generally only works with highly popular keyword domains that will get a lot of traffic.
  • Develop a website to go with the domain. A lot of domain buyers are not Web designers and developers, but they want to earn money through a website of their own. By building a website to match the domain and driving traffic to it, you can provide a product to buyers and increase your profit margins.
  • List the Internet domain for sale. If you don't believe the domain will make good money parked with ads or if you don't want to take the time to build a website and drive traffic to it, you can list the domain for sale to make money. Remember, buy low, sell high. You may have to hold onto the domain for awhile to earn more money.

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Tips

  • If you want to, you can try to come up with your own domain names to purchase directly from the registrar. However, there is greater risk associated with this, since domain age is a major factor in search engine optimization. This makes it a big selling point.
  • Buying domains to make money is somewhat of a risk. For the best results, it is a good idea to stick with .com domains, but good substitutes are .org, and .net.

Warnings

1. Labor-wise, it doesn't add up

In the grey hat SEO world, the thought is that you can take a domain that is keyword driven, do a quick optimization to get the site ranking, and sell it off at a profit. It could, and does happen daily. How much time is invested in optimizing a site to get to page one, vs how much the site will sell for? Let's put it into simple math:

According to Sedo.com, the average cost of a purchased .com domain is around $2100-2300. Depending on how much your time is worth, you may have to take a hit on labor cost to get the domain where it needs to be in order to entice potential buyers. Here is some theoretical math for you number crunchers:

  • Optimize keyword-driven site to rank in Google: approx 30 hours at $50 hour labor cost (using low $50 rate for sake of example) = $1500
  • Time cold-calling and email blasting potential buyers in industry niche to purchase said domain: approx 8 hours = $400
  • According to the data provided by Sedo.com, likely cost for selling said site: approx $2300 max ($1000-1500 most likely)
  • Gained vs Invested = $2300-1900= $400 profit.

$400 doesn't really seem worth the effort and coffee expense invested. This is a very basic example used to put the costs in perspective. Most SEO providers charge more than $50 per hour, and you get what you pay for. The above example of a final labor estimate is probably much higher, or if the domain is already ranking high and the owner wants to sell, so is the initial purchase price. Since this is often repeated many times over for multiple domains, it could get time consuming, and expensive.

2. You might get someone's dirty laundry

It's ranking high today! What could be the problem? NO. JUST STOP. Unless you know the entire history of a domain, you may be setting yourself up for failure before you begin. SEOs (and business owners) use a variety of tactics to get a site ranking high in search results. For some of these methods, we'll just call them "questionable". These methods could include everything from buying links, overuse of directory submissions (non-industry related), duplicate listings, poor quality backlinks, and guest blog comments.

With a domain of this type, it could be very easy to get it to rank quickly, before the powers that be see the domain for what it is, and put it on the blacklist. While that study is being done, you could end up with a domain that has a lot of problems coming down the pipeline that you are completely unaware of.

3. It undermines your quality and reputation

If you know how to get websites to page one, why are you not marketing that fact to potential clients and consumers or would-be domain purchasers? Trying to get a keyword driven domain to rank high and sell it off for a profit isn't a good investment, either time wise or for the long-term success of your company. Instead, use sites that you have already ranked high as an example of how awesome you are and sign them up for a monthly fee, rather than trying to sell them a "make money now" domain.

  • Demonstrate SEO prowess to potential client using existing sites as proof of results
  • Sign up client for basic SEO services at $600-1000 (depending upon site and competition) per month
  • Invest 30-40 hours in making the client's site soar in results
  • Client is happy. Refers friends and other business owners your way
  • You get: More clients, better reputation, month recurring income, and gain a positive reputation for being a quality SEO provider.

4. It's not sustainable income

We talked to guy who actively does this business to find out if all the bling and glamour behind selling domains was true. This is what he said:

  • US: "Is buying domains with the intent of selling them a sustainable model?"
  • HIM: "Honestly, it depends. Overall, I'd have to say no, because you never know what you are going to get in return. One week I might make $900 off one domain, but the next week I'm stuck with five nobody wants. However if you are a great salesman, you can make it work."
  • US: "What type of domains do you see being the most sought after?"
  • HIM: "Mainly small-medium sized local businesses looking for a way to increase their ranking. Most already have a branded domain in place, and have heard that using a keyword domain can help. Or they have seen a competitor ranking using that method. The problem I face is that they don't have a lot of money to spend, so I get low balled on the asking price. There have been a few that make a ton of profit vs what I purchased it for, but that boils down to luck: what is for sale, when I find it, things like that."
  • US: "When do you think it makes the most sense to buy or sell a domain?"
  • HIM: "When someone is selling the company, and have a high ranking domain already in place. Those companies stand to make the most money by selling to their competitors, who always seem to be willing to pay. (laughs)"

Selling a domain negates the fact that you can make additional money from this client, unless you start the process over again, with another domain. You could use the domains position as proof of your SEO-prowess, but once it's already ranking and optimized, what other services can you entice them with?

5. Waiting on and finding buyers can be a pain in the arse

We did a search for GoDaddy and Sedo domain experiences, and many of them came back as negative. In one such example, Online Domain stated that "GoDaddy is destroying domain sales." The author speaks about having to wait up to 80 days to get his domain sold, the whole time being questioned on his asking price.

But wait, there's more. So you are looking to sell a premium listing that is not keyword-driven? Be ready to take a hit. On all premium domain sales, GoDaddy takes a 30% commission fee. This process happens before they remit the payment. Yikes. When you are already operating on a slim margin, 30% can be what makes or breaks the bank for that sale.

6. Conclusion

While buying up a ton of domains seems like a great way to make some extra money, the real world results show that it is very hard to make that process profitable. As with any industry, you will have those "golden moments" when someone you read about made it into a million dollar a year business, all while sitting in the comfort of his own home. That could be true, but he probably consumed a lot of alcohol and lost a lot of hair doing it.

See also

References

1. How To Make Money With Domain Names December 22, 2014.
2. How to Make Money Buying Domains December 22, 2014.
3. How to Make Money Buying and Selling Domains on the Internet December 22, 2014.
4. Is Buying Domain Names Profitable? December 22, 2014.
5. Save Money on Domain Registration December 11, 2016.

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