Buy and sell domains to make money

I know people say you can't make money buying and selling domains in 2012 because all the good ones are taken. That is true to some extend as all the single word generics such as candy.com, or chocolate.com is taken. However, you can still make money, just like how people can still make money off properties even though they are so expensive now compared to 20 years ago.

Anyway, I am not an domain buying expert but I want to start building my domain portfolio. Maybe I will lose a lot of money and maybe I wouldn't. It is hard to say as domain selling can be like a lottery game but I believed if I stick to buying good names, sales will eventually happen.

In buying and selling domains, there are 2 models that are happening in the market today:

Quick flips: In general, there are many small business who are willing to pay a few hundred dollars for a good .com that describes their business. Here are a few examples, DallasAcRepair.com, NycLawFirms.com, CleaningExperts.com. What you can do is to buy them for around USD25-100 on godaddy auctions and then try to sell them by emailing companies that are listed on Google for these keywords. It takes a lot of emails to get one sale but it can be done.

Long term investments: Another way is to build up a quality portfolio that big companies or well funded starts might desire. Most of the time, these domains are not exact match keywords. In fact, most bigger companies or well funded startups doesn't want exact match keyword names unless they are single words like Apple.com, Amazon.com, Kayak.com etc

Very seldom, you will hear names such as MobileHealthConsulting.com or SocialNetwork.com. Instead, you will see names such as FastPay.com, HealthTap.com, SkyDrive.com, DropBox.com, VoiceWorks.com. Although the latter may seems random, but the common thing is that:

(i) they are short,
(ii) they are memorable,
(iii) they imply certain things or industries although not explicitly,
(iv) they are easy to spell with no overlapping letters between last letter of the first and the first letter of the second word
(v) you can imagine a business build on top of these names. 

It is hard to sell these names. Most probably, I might need to hold them for a long period of time and wait for the company who wants it to approach me. It is almost like a lottery ticket except that you have some control over the quality.

Given these two approaches, I am more incline to the second investment model. Although long term, I think it will bear bigger fruits. This is based on my belief that over the next 10 years, the meaningful domain names will get lessor but there will be more online businesses coming, not to mention existing businesses who want to upgrade their names by truncating them.

Let's go back to history to see the foundation of my belief.

Back in 2002, it is hard to believe that a name like VoiceWorks will be sold at 45k because there was plenty of single word domain names for that price. In fact, many domain sales were based on how much type in traffic the domains can generate. These traffic metrics become an important part of a domain's value.

In 2012, single word domain prices are at least 6 figuress. I think these high prices plus the fact that there more online business in 2012 explains the shift towards 2-3 word names that is meaninful, has some form of relevancy to their businesses and is more affordable compared to the 6-7 digit single word domains.

An article  from Fred Wilson of Union Square Ventures lets me know that I am not insane to hold this belief. In that article, he stated that the budget they recommend for a good domain has increased from 10k to 50k. To see VCs recommending such an increase in domain bying budget within a span of a fe years strengthened my belief that domain names might still be a good investment area.

I believe in 2022, even 2 word brand names will be in short supply which is why I am building them up now while they are still affordable.  If you are interested to follow up my progress, I will be blogging about my domain investment journey from my early retirement blog, rather than here.

I hope to see you guys there.