Hello and welcome to another edition of Domaining MBA Monday! Today I wanted to talk about a concept that might disappoint you a bit, but better to be disappointed now, rather than broke and disappointed later. The concept may sound simple but it’s not, and many new Domainers will take a year or more for this point to really hit home. The point here can be summed up as, “Not All Domains Are Investments.”
I’d like to start this article with one of my favorite quotes, from one of my favorite movies, Star Wars. In Return of the Jedi Han Solo says,
“A Jedi Knight? Jeez, I’m out of it for a little while, everyone gets delusions of grandeur!”
This is where most Domainers start. They have delusions of grandeur, typically spurred by domain sales lists. You know the feeling, you see a huge list of domains that sold and think, “I can buy domains like that! Heck, that domain stinks, I already have better names!” You then start coming-up with the value of your names based on “similar” sales and quickly value your portfolio and a few hundred thousand dollars.
Here’s the thing, until you make your first hundred thousand selling your names, you don’t really know if you have domains with the value you’ve assigned to them. Still, even without making any sales it can be all too easy to just keep on buying.
While you may see Sedo’s weekly sales week and think that so many of your names are similar to those that sold so you can just list them on Sedo and watch the money coming in. This is rarely the case. So what happens next? Domainers conclude that they just didn’t buy the right names, and keep buying and listing for sale, the entire time feeling safe with their purchase because, as I’ve heard far too many times, “they’re all investments.”
And therein lies the problem. They are not all investments, in fact, if they aren’t making over $8/year they are a liability until you sell them. Remember, an investment is something that pays you. If you buy a domain and sell it for 10x what you paid, then it was a good investment, however until that event takes place, if the domain isn’t generating revenue, it is actually just costing you money.
The critical task that all investors should be focused on is not just acquiring as many one or two word .COMs that they can, but acquiring the right ones. You’ll only know you’re getting the right ones when you start making sales and finding a repeatable model. It is this repeatable model that many investors never find because they become stuck in their ways.
Here’s an example. You assume that buying domains with the word “hair salon” in it will mean you have easy flips ahead since you can sell them to hair salons. So you buy 100 domains with these keywords in it and list them everywhere, no money comes in. So you call a hair salon, they don’t want it, and another, they don’t want it either, what gives?
The thing is you never took the time to validate your assumptions, which means all those “investments” were really just liabilities, and the more years you renew them, the bigger the liability they become. What you should do is start with one or two (and the best one or two in your niche) and make sure you can sell those first. If you can, then keep going, if not, then pivot and find a different strategy.
The great things about Domaining is that there are so many different markets to explore and different avenues to take. However, as you’re off exploring just make sure to remember that not all Domains are investments. Take the time to validate your market and see if there’s a good fit before diving in and buying a portfolio full of liabilities.