Buying and Selling Domains Is More Art Than Science

Buying and Selling Domains Is More Art Than Science

As the economy stumbles through a recession, people are seeking portfolio diversification.

There are a variety of investment opportunities available, but what should you choose?

Is it better to own stocks? Real estate? Digital assets? 

As the co-founder of Odys Global and an active domain investor, I am often asked if premium-aged domains (and domains in general) are profitable investments. 

From January 2022 until today, I have spent over 70 hours helping Odys members get the most out of their aged domains. In addition to being actively involved in the domaining community, I have spoken with a number of domain investors who have portfolios ranging from 2 to 125,000 domains.

Here are my insights from talking to people of all backgrounds and levels about investing in domains.

Let’s start with the basics. 

Who is domain investing for?

Domain investing is the exchange of your hard-earned money for valuable domain names that you expect, know, or hope (based on thorough due diligence and market research) will increase in value as time goes by — just like any other form of investment.

As Warren Buffet said, “Price is what you pay. Value is what you get.”

Throughout the last 30 years, domainers have proven time and again that domain investing is a market in its own right. It is here to stay and flourish. 

I strongly believe domain investing is for anyone who wants to explore alternative asset classes and diversify their traditional investment portfolio.

Comparing domains to other asset types

Even though opinions vary on this one, I believe domains are separate asset classes and not directly influenced by other asset classes. This makes them a good way to diversify your portfolio. 

Here are the three things I find most attractive when discussing the advantages of domain investing:

  1. Relatively new asset class with lots of upside.

As a comparison, real estate has been around forever, while domains (digital real estate) only started gaining traction around 20 years ago. The sky’s the limit here.

  1. Multiple monetization opportunities. 

Flip the domain as soon as you get a decent offer. Alternately, contribute to the overall value growth by building a website and then selling it as a cash flow generating asset at a 50-60x multiple. Think content websites, lead generation, micro-SaaS, anything programmatic. There is huge potential here.

  1. Easy to buy, sell, transfer, and liquidate.

Because domains are entirely digital, domain investing is a very proactive market, allowing you to move fast with domain acquisition, selling, and development. 

Transferring domains from one registrar account to another is a quick procedure these days. 

Also, with the appearance of multiple specialized domain marketplaces, domains have become incredibly liquid assets.

Companies like Afternic, Dan.com, Sedo, Flippa, and most recently Odys, allow you to quickly monetize valuable domains that you no longer need — or want to remove from your portfolio.

Domain investing use cases

Your domain investing strategy will depend on your current position in life and business. 

Have you already transitioned to the investopreneur mindset when you aim to buy and rarely sell, waiting for the value and demand to go up, or do you seek to hustle your way to success by actively buying and selling or even developing and flipping domains/websites?

The most common use cases for domains:

  • Long-term investing (holding): Buy good names to diversify your overall investments and maybe sell at a later date, depending on the incoming offers. N.B: you can’t successfully get away with a handful of domain investments using this approach. At the very least, this type of investing requires a dynamic portfolio and some basic level of management. The more quality domains you have, the higher the chance of selling or generating demand. Sales can occur on the very same day or take years.
  • Domain development (building): This involves a little bit of creativity to come up with realistic domain monetization ideas. Plus, you need the know-how and resources to take action and execute your plan. Quality domains serving useful content and resources, and solving certain problems via a website (think AI domain name generator) are in high demand. Add some sort of cash flow and you can easily get a solid 50x multiple for a low-maintenance asset.
  • Domain rental: I find this the least lucrative way to use a domain but I know several domain investors who successfully rent domains to startups. These startups aren’t entirely confident spending 6 – 7 figures on a domain without a proven business model, so they prefer to rent one for a while instead of going all-in on a purchase.

Does domain investing yield a profit?

Domain investing can be very profitable due to the uniqueness of each domain and the limited number of exclusive domains on the web. 

Every hotel entrepreneur would want to own “hotels.com,” but that domain sold for $11 million because there’s no other domain like it. The same exclusivity applies to “tesla.com” which also sold for $11 million, and “voice.com” which went for $30 million. 

Based on available data for 2022 aftermarket domain sales, premium names sell for 7 to 8 figures, which is a clear indication that domain investing is lucrative.

Domain investors, like any other investor, aim to make money. People usually purchase premium domain names, wait for them to grow in value, and then sell them for a profit.

It’s hard to estimate the domain investors’ portfolios since there is no publicly shared data, but I ran a Twitter public call and asked the most active ones how many domains they own:

As far as we can see, 90 domainers own 322,241 domains, which is a tiny fraction of the whole market. 

4 of the 90 respondents own 70% of the total domain portfolio, and the largest domain portfolio is 125,000 domains.

You could say that domain investing is pretty addictive, and, because of this, we can conclude that they are a profitable investment. Why would anyone own that many investments without making money?

While there are exceptions, in our experience, domains are extremely profitable.

Investing in domain names isn’t for everyone

Domain investing could seem easy, but the people who make money are the ones with experience.

There are several pitfalls and caveats to the investing process. 

For instance, domain investing technicalities (such as where to buy, where to sell, where to park, and what landing pages to serve) are pretty easy to overcome. 

The trickiest part is usually the buying side. As investors generally know, you make money when buying, not selling; that’s why knowing WHICH type of domains to invest in is crucial.

When it comes to premium-aged domains (mostly acquired by entrepreneurs seeking to launch an online business), the most common questions revolve around getting the most out of them, considering a wide range of use cases. 

Take into account existing authority, trust, and references, as well as quality pronounceable or keyword-focused names. And don’t forget that, in some cases, targeted traffic can be monetized.

Odys members usually want to know how to tap into the domain authority to get organic traffic faster.

They want to know how to make the most out of the domain historical pages, which still get visibility and are mentioned on authority websites.

And, generally speaking, our members seek help with the overall premium aged domain acquisition strategy — primarily aimed at growing their existing business or starting one from scratch.

The biggest domain investing or acquisition pitfall of all time is biting off more than you can chew — acquiring more domains than you can develop or have the means to sell.

7 tips to follow for domain investing

  1. Before you start investing in domain names, it’s crucial to clarify what types of domains are available and where you can find them.

Domain names are either newly registered (freshly registered domains) or aged — also referred to as aftermarket.

You can earn money online with both types of domains, however, owning an aged domain is a much safer investment than registering a new one. That’s because you can’t predict how much a new domain will grow over time. 

No matter the age of the domain, you need to know how to spot a good one.

  1. Start with the name itself. 

First off, a domain name should be pronounceable (aka pass the radio test) and represent a clear direction for the business behind it. Nobody wants to own a domain that is a random collection of letters and numbers.

They want to own a brand. Brandable domains are short, non-keyword names with no particular descriptive meaning that can further become associated with a particular business to create brand awareness.

There are also descriptive domain names that may consist of one or several words with a relevant keyword. These names are self-explanatory and directly speak about your business.

You should also consider the domain’s top-level domain (TLD). Generally, dot com domains are the finest choice for your portfolio. 

Lastly, and perhaps most importantly, we recommend considering the market trends in general and registering or purchasing domain names in industries that are currently booming: cryptocurrency, technology, fitness, and cooking.

  1. Having learned how to find a suitable domain name, it’s time to figure out where to get one. 

When you register a new domain name, you can check whether it is already registered (or not) and then register it with the TLDs you believe would be strategic for a potential buyer.

As for aged domains, there are several sources you can use to secure them, including auctions, social media groups, and dedicated communities. 

The safest way to secure a domain is to head to an official domain marketplace, such as Odys Global, that has already performed proper research and selected the most brandable names. 

The best thing about Odys Global is the rigorous due diligence process the company applies to each of the domains published on the marketplace. You can never go wrong with them. 

Okay, so let’s assume you’ve acquired a domain.

What’s next?

  1. To increase the potential of a domain, you must enhance your offering. 

You do that by either building a brand around the name or waiting for enough growth in the market before selling it under the most advantageous conditions.

Domainers typically sell their portfolios for 10 to 100 times the initial cost. That’s a pretty good deal compared to other types of investments. 

  1. There are several ways to sell a domain, either in the aftermarket, specialized marketplaces, or by reaching out to potential buyers.

No matter the platform, if you want to increase the likelihood of selling a domain it should be packaged as a landing page. This gives the buyer some perspective on why they should invest in it.

In a nutshell, domain investing is a powerful way to diversify your portfolio with a positive ROI. But, just like any other investment, you should complete proper research and follow a clear due diligence process rather than blind intuition.  

  1. So you’ve bought a domain. 

What now? 

This is what I recommend to Odys members during my strategy calls:

Even though it’s lucrative, I rarely recommend domain investing for the sake of investing (think buying and holding). 

In 99% of cases, I suggest our members develop valuable digital assets that generate passive income with minimum ongoing management. You should treat your website like a real business.

Also, I recommend that people avoid buying multiple domains at once unless they know what they’re doing for sure. 

  1. Avoid buying domains just because you like their names. Think in terms of a business model

Consider monetization ideas every single time you aim to acquire a domain.

A domain that cannot be easily monetized will have very little demand as a separate asset. Focus on acquiring domains with commercial intent. The entire Odys portfolio is built around such domains.

If you want to make a passive income faster (without going through the site-building process), you could also buy a website.

Website investing means you purchase a site that has already been developed and you have the potential to earn some passive income (or not). Compared to domain investing, this usually requires a bigger budget and can be riskier if you don’t perform proper due diligence.

Pricing your domain portfolio

Buying and selling domains is not science.

It’s art.

The easiest way to evaluate a domain is to compare it with similar names on the market and also check historical sales. 

This is why taking current demand/future demand into account, as well as predicting commercial intent for certain industries and niches, is critical (think crypto, NFTs, and AI).

Evergreen markets fall into the same category. There’s interest in both.

At the end of the day, a domain is worth as much as someone is willing to pay for it.

The most successful domain investors aren’t emotional about the names in their portfolios. 

Everything has a price, so there are no lifetime domain investments for me. Obviously, there are some domains that I might leave for my kids to sell since I know they will increase in value over time, but then again, these will definitely sell — just at a later date.

Successful domain investing = endless learning

The field of domain investing is an interesting and dynamic thing.

I gain new insights and learn additional tricks and tips daily. 

Discovering what works, adjusting to market trends, and balancing gut feeling, experience, and numbers are all part of this never-ending process. 

For those of you who want to stay up to date with what’s happening in domain investing, I strongly recommend following Elliot Silver of DomainInvesting.com, Michael Cyger of GoDaddy, NamePros, and Andrew Alleman of DomainNameWire.com.

I wish you long-term earnings and endless learning from domain investing.

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Alex Drew

Founder and CEO of Odys Global. Alex Drew has been in the domaining business for over 15 years, not only growing as a specialist but rather becoming a driving force behind some of the intrinsic factors in the field. He ultimately co-founded Odys Global, a premium aged domain marketplace that takes aged domains to the next level.

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