How to be a Domain Name Tycoon
People have invested in physical real estate like land and housing for millennia. Investing in virtual real estate—domain names—has a much shorter history.
Domain investing is a fun pastime for some and a serious profession for others. If you’re thinking about buying domain names with the hopes of selling them for a big payday, read on…
Domain Investing 101
Think of domain name investing like real estate investing, but with some key differences.
Each domain name is like property. You buy the property and earn rent on it, perhaps with a plan to eventually sell the property for more money than you paid for it.
Rent for domain names comes in the form of ad revenue. Domain name investors (also known as domainers) can park their domain names with companies that show ads related to the domain topic. Investors earn money whenever someone visits their domain and clicks on the ads.
For example, here’s an ad page that shows up when you visit CandyCorn.com:
Whenever someone clicks on one of the ad links, the domain owner earns money.
Ad revenue used to be a large portion of the profits for domain name investors but isn’t as lucrative as it was ten years ago. Today, domain investors focus on buying domains that they can sell for a profit later.
There are some benefits to investing in virtual real estate (domains) compared to physical real estate.
While holding physical property, investors have to pay for upkeep and property taxes. Domain investors only have to pay renewal fees.
Also, the cost of entry is much lower. It costs hundreds of thousands of dollars to invest in real estate. Virtual land tycoons can get started for less than ten dollars.
How Investors Acquire Domains
Domainers acquire domain names for investment purposes in one of three ways:
1. Hand registration
Domainers refer to registering a domain name that is currently unregistered as “hand registration.”
This is an inexpensive way to get started with domain investing. In fact, you can get started for less than ten dollars. Please, look into the articles “How to buy a domain” and “How much does a domain cost“.
Of course, the best domains are already registered. Hand-registered domain names can be sold for a profit but domain investors often have to hold onto these domains for a long time in order to sell them.
Hand registration is ideal for newer terms that you think might be valuable in the future. For example, if you think artificial intelligence (AI) will become popular, you might hand register domains related to AI.
2. Buy domains from others
Another way domain investors build an inventory of virtual real estate is by buying domain names from people who have already registered them.
This involves a lot of work but the payoff can be faster than hand registrations. Many domain investors cold call or email owners of domain names that they think are valuable. They hope to find domain owners who aren’t using their domains and are willing to sell them.
It’s rare to find domain registrants who are willing to part with their domains for less than $1,000. Many ask for much more so this requires more capital than hand-registering domain names.
A benefit to buying domains this way is that they have typically been “off-market” for a long time. Think of houses or land in your area that have been owned by the same person for decades. If they list them on the public Multiple Listing Service (MLS), they might sell quickly. Buyers who find these properties before they are listed can profit by buying them and putting them on the market themselves.
The same concept applies to domain names. By purchasing a domain that the owner isn’t actively marketing for sale and then actively marketing it, domain investors can sometimes make a “quick flip”.
3. Expired domains
You can also acquire domains by buying expired domain names. These are domains that someone registered but decided not to renew.
Expired domains can be a great investment. In many cases, these domains have been locked up for a long time by the previous owner. They haven’t been actively marketed for sale. And while there is a lot of competition in auctions to buy expired domain auctions, most of the buyers are other domain investors as opposed to “end users.” This means that investors can buy the expired domain names and then try to sell them to companies that will put the domain to use.
Domain investors use many strategies to sell domain names.
One is to create virtual “for sale” signs on their domains. Companies that offer domain parking with ads on domains also let investors put a notice on the domains that they are for sale.
If someone types a domain name in their web browser, they will see a message that the domain name is available to purchase. They can click a link to contact the domain owner to buy the domain.
Using the CandyCorn.com example, here’s the full parked page with a message that the domain is for sale:
Another way to sell domains is to list them for sale on marketplaces.
Investors in physical real estate usually list properties on the MLS to advertise them for sale. Once listed on MLS, properties are posted for sale on many websites such as Zillow and Trulia.
Domain names have something similar. Domain name marketplaces Sedo and Afternic both offer their own domain versions of the MLS that let people list their domains for sale and have these listings show up on many websites.
For example, if you list your domains for sale with Afternic and opt-in to the service’s Fast Transfer network, they will show up for sale on Namecheap. If someone searches for your domain name, Namecheap will display a notice that it’s for sale and let people buy it.
On Namecheap, this looks a lot like any other domain you register. It just has a much higher initial purchase price—one that you as a seller set when you list your domains on Afternic.
Some domain name investors also choose to reach out to potential buyers for their domains to try to sell them. A real estate analogy would be reaching out to active investors in your city to try to sell them your property. Or buying land next to another property and then asking the other property owner if they are interested in buying your land to build something bigger.
Not for the Faint of Heart
Domain name investing has the potential to make outsized returns in little time. It’s not uncommon for people to sell domain names for two or three times what they paid with a quick flip. People who hold onto domains longer can make 100x or more their initial investment. Think about a hand registration for ten dollars than you sell for $1,000.
But domain names are not liquid investments. Domain investors need to be willing to hold onto domains for a long time in order to sell them. A typical domain investor with thousands of domains will sell 1%-2% of their domains in any given year.
New domain investors tend to make mistakes when they get started. They buy low-quality domains that no one will ever buy from them.
With this in mind, start small. You wouldn’t start real estate investing by putting your life’s savings at risk. Neither should you invest all of your money in domain names. Educated yourself by visiting domain blogs such as DomainNameWire and DomainInvesting. Also read NamePros, a forum for domain investors.
Ready to get started? You can take the first step to become a domain investor today for less than $10 by hand-registering a domain at Namecheap.