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Domain Name Investing – What Should I Consider?

When we started our educational articles several weeks ago, the first topic we covered gave end users an idea around how to choose the right domain name. The other side of the equation concerns domainers, who view their acquisitions as investments. Accordingly, there are different considerations that domainers often give thought to.

 

Portfolio Management

Like with any investment, domainers often consider spreading their risk across a diverse range of holdings. In this particular context, that means several domain names. While some consider a portfolio comprising exclusively of short domains (which are generally valued dearer) as desirable, the reality is, some domainers find value in also holding keyword oriented domains (e.g. geographic locations combined with services) and international domains to ‘balance’ their portfolio.

With that said, some domainers try to capture lots of  domain names rather than focusing on acquiring good ones which retain their value. Although smaller, cheaper purchases tend to assist domainers with their initial cashflow position, there is a risk that these domains are not favoured by others. In these instances, domainers are forced to either, write off the domain, or pay ongoing registration fees which add up across an entire portfolio.

 

Cash Flow

As we detailed in our last educational article, flipping domains within a short timeframe (for a profit) is not as easy as it once was. Domainers often sit on a particular domain for a lengthy period of time before selling their name. In the meantime, some elect to monetise their domains by parking them and displaying advertisements.

However, relying exclusively on domains to generate sufficient working capital is easier said than done – this sort of success is usually reserved for domainers who hold a high quality and large portfolio. Making a living from domain name investing is certainly the exception rather than the norm, and even then, many domainers only use the capital they can afford to tie up, or in a worst-case scenario, lose.

 

Know Who You’re Selling To

While high quality domains are more likely to sell themselves, for most domain investments domainers try to identify who they will sell their domain to – that is, another investor, or an end user.

In the case of an end user, domainers often try to foresee how the domain (including any keywords) might contribute towards the end user’s business, and what impact (if any) there might be if they are unable to attain this – for instance, a competitor gaining an advantage, or lost web traffic.

Another aspect considered by domainers is the likelihood of any preference a buyer may have towards a particular TLD. A business owner who is second to market might be open to acquiring a .net.au domain, however, a domainer may be privy to the lower liquidity level often associated with the .net.au TLD. Domainers who understand future trends and their potential customers often positions them well at the negotiating table.

 

That’s it for this occasion, stay tuned for our next educational article. If you have any questions, don’t hesitate to contact us.

Best wishes,
The Netfleet Team

http://www.netfleet.com.au

 

This information on this website is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any financial product.

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