This is part two of a series of five with one piece of advice from some of the most successful domain investors, domain developers, domain monetizers, and others involved in the domain industry. I asked them for one piece of advice they would give to a part-time domain investor looking to build his business. I believe there are quite a few people who are part time domain investors, and I also believe just about anyone involved in the industry can apply some of this advice to their own business models.
I really appreciate all of the contributions from the industry leaders who contributed, and I hope the advice contained within is helpful to you now – or will be helpful to the growth of your business in the future. As an FYI, I intentionally did not put these posts in any particular order.
If you haven’t read it yet, I recommend viewing part one, and part three will be posted on Monday.
Rick Schwartz, RicksBlog.com:
Don’t quit your day job.
Don’t buy crap.
Don’t settle for trading low quality domains.
Don’t buy to double your money. Buy to make 10x minimum. If the domain you are buying is not worth 10x what you paid, don’t buy it.
People lie, numbers don’t.
Rick London, National A1 Advertising:
Try and buy the best. Instead of buying 20 domains for 1K each try and purchase one for 20K.
JBlack
Vince Lombardi, arguably the most successful football coach of all time, placed constant emphasis on fundamentals, not complex strategies. There is a reason why he started off with the opening line, “Gentleman, this is a football” in the movie. That line stresses the point of fundamentals, to start from the beginning. He knew intuitively that basics, honed to precision by relentless emphasis, then applied win over all other methods. Today, our world is full of distractions like never before in history. But when one filters the noise and examines successful companies and individuals the common denominator always is the persistent application of fundamental principles.
In that vein, if I had to offer a single piece of advice it would be define in precise terms where you want to be. I see this basic necessity, this fundamental, being ignored almost across the board. Many jump into domains with no end state planned. Its my view that one has to write the objective down, be specific, and describe it in sufficient detail as to provide a navigable roadmap to the destination. When you take the time write your plans down you start to become serious rather than a dabbler. When you become serious you learn and apply proper business applications like incorporation, intellectual property, law etc. Only when the objective is written out do the holes and assumptions make themselves apparent.
Writing compels one to think, to fill those holes and address the assumptions with plans and action. (The planning method also greatly helps select which domains should be bought and which domain names should be sold or advanced well beyond parking or notional development.) The detailed, written goal that includes a final valuation figure provides the tangible anchor point which almost prohibits one to veer off course with endeavors that do not lead to the singular goal. (“Gentleman, this is your goal”.)
Most seem to start in domains with an ill-defined but implied objective of “being successful” or to “make a lot of money”. Ok, but how successful, by what measure, by what date, by what final net value? Without these questions being adequately answered one does not just risk but is guaranteed to end up exactly where they planned, in an undefined, unfulfilled, lost place.
Michael Sumner, MiniSites.com:
I think the best piece of advice for someone starting out is to learn how to appraise a domain before investing a dime. People should read DNJournal sales reports from start to finish every week, and go through NameBio.com data on a daily basis to get a feel for what domains sell for, this should help fine-tune their instincts. Until they have good instincts, they should check exact search volume using the Adwords Keyword Tool, check CPC using the little-known Adwords Traffic Estimator Sandbox, look for businesses who might be interested in the domain, check comparable sales at NameBio, etc.
I have found that if you’re really good at appraising a domain, you rarely get yourself into trouble, and when you do get into trouble the damage is minimal. That was the approach I took for the first four months after I found domaining, I read everything I could get my hands on trying to figure out how to value domains and rarely bought anything. Then I jumped in head-first with a friend of mine flipping relatively high-value domains, and within our first year we had sold almost $350k in domains and only lost money on one deal, and the loss was very small.
Fred Mercaldo, Scottsdale.com:
Although I own over 300 generic domain names, I am primarily a geodomain .com investor and developer. When looking at a potential purchase, numerous things come to mind: in my opinion, is this domain undervalued? Even if it is not undervalued, what can I do with it? If properly developed, what is the conservative potential for monthly/yearly income? Is there an end user out there that can benefit from this name? My main goal is to monetize the domain on a yearly basis for what I have purchased it for, after development.
For example, I purchased www.nofeecreditcard.com for $3300, and am only making $300 per year; however I have simply used a second party provider and we did not develop it internally….I believe we will develop it in-house in the coming year. I purchased www.FountainHills.com for $14,000 and we are making $60,000 per year on it; these are 2 examples of the “so-so” return versus the “home run” return.
I look at domains as potential “businesses” rather than just names, and here is why….and let’s take a hypothetical example….Domain “A” purchased for $30,000…..spent $10,000 developing it….presently making $30,000 per year. I now have a “package”…meaning “domain name PLUS yearly income” that is arguably worth 3 to 7 times income…plus the inherent value of the domain name itself…meaning I can sell Domain “A” for anywhere between $90,000 to $210,000…a great return on my original investment, however I had to develop it properly, and obtain advertising partners to monetize it.
I firmly believe an end user or investor will pay $200,000 for a domain that is bringing in $30,000 per year presently than pay $80,000 for the same domain name that is both undeveloped and non performing. Why? Because it a proven entity and already has a financial return attached.
As you can see, my strategy is completely based upon buying, developing and monetizing, and not just buying and reselling. My advice for the new domain investor? You need to decide on a specific strategy and become an expert at it. Like real estate, where there are many kinds of specialties…shopping center investors, land speculators, residential development, commercial development, apartment developers…all of these real estate specialists have different skill sets and talents; same in our industry. The person that buys and develops is so different than the investor that buys and flips, and so on. Decide on 1 or 2 strategies and stick to it; don’t try to do a little bit of everything. I would also recommend quality over volume….one good name is better than 100 mediocre names.
Mike Cohen, WannaDevelop.com:
Do not register all those unnecessary gTLD’s and ccTLD’s in addition to your primary domain(s)!! If you are into domain investment, you gotta be careful with what types of domains you acquire during bulk purchases because the fees can quickly add up to large sums before you realize this. If you want to be successful in this business, you need to be real picky and not carry any extras or duplicates, in other words real long shots that aren‘t going to make you a whole lot of money no matter what angle you look at it.
Forget buying the .net, .org, .info, .biz and all those other second tier names if you have a .com domain because they are simply worthless for the most part. Domain registrars such as GoDaddy will always try to upsell you all those gTLD’s and ccTLD’s in addition because that is how they make their profits but do not fall for it even if they have offer special discounts. Register only one domain per topic / idea… Because if you register 5 or 10 identical keyword domains, but in various other extensions… You will end up getting stuck with them all. Instead you should diversify x5 or x10 different other topics / ideas. It’s a numbers game… 
Patrick Ruddell, ChefPatrick.com:
My number one piece of advice is to buy niche domain names. I’ve been able to take my personal real estate experiences and register hundreds of good domains. On top of the “insider” information I had for registering domain names of quality I also had a source to sell them. Now, if the new investor is not lucky enough to have the already established connections then they should still pick a niche. Having a single niche makes it easier to create those contacts (buyers list) and give potential buyers options. Make yourself the authority in a niche like dental domain names. If you create a ton of contacts in the dental industry (example) then other domain professionals would be wise to broker the name with your help.
Craig Rowe, WhyPark.com:
Focus on quality over quantity. Too many new domainers get caught up on building a large portfolio. For the same cost, focus on buying a few good names from auctions or drop catching services and set clear goals for each of those names (development, ongoing revenue, flipping, etc.) After achieving those original goals, buy more quality names or go after a small number of even better quality names. Owning a smaller portfolio will be easier to acquire, manage and ultimately sell or develop. There is no lack of bargains out there these days, so it’s the perfect time to work on building a quality portfolio.
Howard Neu, World Association of Domain Name Developers:
Best advice I can give – get a category-killer domain and develop it.
Insure.com, a publicly traded company whose shares trade on the NASDAQ stock exchange, sold its corporate name and related domain name for $16,000,000, and the company will be renamed Life Quotes. The company paid $1,600,000 for Insure.com in 2001.
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