In the last couple of months I have dived into the world of SEO and Domaining. Those things go hand in hand to someone who knows what he or she is doing. As someone who is addicted to competition and growing services, I find all the intricacies of these two fascinating.  I admit it, some friends and employees of mine might think I am crazy for spending $15,000 in the last three months on domain names - my wife would love a diamond necklace instead too I hear. I am in no way rich yet, but I do run my own business online, that is where the cash investment came from in my case. And I am still only under a 100 domains in total at this time, don’t think that a large sum should mean a large number of domains. Fortune favors the prepared mind, so let me clue you in on domaining a bit from how I see it, if you are new or are interested in learning more…

What is Domaining

Domaining is the business of buying and selling easily accessible or brandable domain names, often coupled with developing these domains in a way which would monetize them most efficiently. The theory goes that great domains continue to appreciate greatly online, as it is a scarce market for good and brandable domain names, while the amount of people who want to do business online just keeps going up. Big domainers have thousands of domain names registered, more like tens of thousands, with a few I bet going into hundreds of thousands. But for some I guess it could be more of a quality than quantity issue.

Anyone who knows about domaining can tell I am easily oversimplifying it all, as going into detail would be beyond the scope of one post. At times, understanding some of it even requires a different way of thinking about business opportunities and domain valuations.

Domaining is a Real Estate Business - Not Cybersquatting

If you don’t already know it, many domain valuations already sound absurd to us mere mortals. For example I recently inquired about JazzMusic dot com and got an email reply from a gentleman wanting $150,000 for it. Now I am sure if I had the money and really wanted the domain there may have been room for negotiation - even to get it down to 125k or 100k, but still, that sounds like a crazy number to people like us who hold a day job. In fact to many it sounds downright absurd - who would ever want to pay such a high amount for domain names, what on earth for. But that would be too quick of a judgement.

Domaining is an asset, in a way like real estate can be -  maybe even better. Assets can and do appreciate over time, assets have value which you can get money for now, and money for later especially when they appreciate. So if you have a gold chain, that is in some way an asset. So is the Mona Lisa but you aren’t getting that any time soon. Your home  - sorry not an asset if you are still paying for it, your mortgage is actually a liability! Just hope you don’t have an adjustable mortgage, because otherwise when rates go up you suddenly have to shell out more money for it.

So once you own a domain name, it’s an asset. Aside from renewing registration it will not suck money out of you. You can choose to develop it, as you could with land or real estate. Or you could choose to resell it. Or you could choose to just sit on it and let it appreciate over time. Demand and market scarcity seem to be working only towards the direction of making good domain names more valuable. We’re only in the early stages of online businesses, and as more and more people go online to do business they will need good, easy to remember, generic names, or very brandable names. That’s where the scarcity is. If you want to open bike store online and call it “John’s Bikes” - good luck, you can do that but it’s an uphill battle as you will need to spend a lot of money marketing this. But if you paid to get “BikeStore.com” you have no idea how much easier your job would be. JohnsBikes.com would not be a big deal, but BikeStore.com is an ASSET.

I am not sure if there’s a bubble here for domain names, I may be corrected one day but it doesn’t seem to be so for now. If buying a name such as BikeStore.com for a few hundred thousand dollars sounds absurd, think of how profit you can make as a business over next few years as a result of having such a name. Also think of how much marketing dollars you would save by not having to differentiate your name with the competition. Forget that, you are kind of locking your competition out in many ways, but that’s a bit beyond the scope of this post.

What I am sure about, is that the $15k+ I have spent in the last 90 days I can surely get back if I am to sell my names back on the after-market. And that’s what makes it an asset. With the dollar plunging against the Euro I might as well keep money saved in these domains which appreciate fast, rather than have the money devalued in a bank account. In fact if I was to sell all of mine now already I think I can get double with some work, and that’s not even waiting for better maturity. Time will tell.

True domaining is not cybersquatting. Cybersquatting refers to grabbing names for a pre-existing service or product. Domaining can be like investing in real estate - either because you have a lot of money, or you have the foresight to understand that many names will only be more valuable and actually be resellable if you can wait.

How Domainers Make Money

Domainers make money in various ways, but I would split it into two general areas: Traffic and Resale.The approach differs depending on how savvy the domainer is, and what kind of plans he or she may have in the long term. Domainers, as in everything else in life, is really a term meant to describe a wide range of people in this field - from simple speculators like you had them in the housing market, to savvy resellers, to long term asset investors, and all the way to asset developers. But let me go over the two branches in general.

Domain Traffic

Monetizing from traffic for domainers usually refers to “type-in” traffic. This means that domainers like to get generic names, such as CreditCards.com, CollegeScholarships.com, or FreeMusic.com because as it happens a huge amount of people online just happen to type things in. Believe it or not, when domainers aggregate portfolios of thousands or hundreds of thousands of domains, this traffic adds up. Don’t believe people actually have that many? It’s an addictive thing, just read about aojon’s domaining addiction.

Usually this will be .com names, as .net and others get valued typically at 15% or less for their .com counterparts. Simply because nobody ever really types in a .net. Although, coupled with good old search engine optimization, someone can spend enough effort to get their .net or .org counterpart ranked high enough so that they get traffic from search engines instead. This is where it is beyond the scope of this post to go into details on this, there are numerous blogs out there dedicated exactly to these things. Suffice to say sometimes non .com names are also great. Hey I have my own SKY.fm, and for the net radio market that is very brandable so it has value in itself.

So now that you get traffic to your domain portfolio, how do you actually monetize them? At the time of writing the majority of domain owners tend to Park their pages with services such as Sedo. Parked pages is what you have seen, a generic page with affiliate or ad links here and there, just luring you to click on something. Although with services such as Sedo I think they are a little bit more relevant ads, but the bottom line is parked pages are just excuses to get people to click through on something - when they do you make a tiny amount of profit. If you have a lot of traffic, through SEO or direct type-ins, then you make a lot of profit.

If you are more savvy, and have the time and resources, you will actually get to develop your domain portfolio into sites of their own. In fact in the future more and more of these are actually going to be turning into legit businesses and starting to look like real sites. For example, I have recently acquired 80sRadio.com, and currently we’re developing that to be a standalone 80s music radio site. Try and compete with a generic name like this in the long term - it’s a huge advantage from the branding pont of view, and the direct type-in point of view, let alone SEO (I won’t go into details here, as I think this blog is too exposed to my competition in the industry, sorry folks).

For more professional examples of what I mean and where good domaining is headed, please check out the following recent post called “A Content Site for Every Domain Name“ by Frank Schilling, a very smart guy in the business of domaining.

Domain Reselling

Then there is the huge domain after-market out there, and where one can still make a good buck if you know what to look for and aren’t afraid to risk some cash. Basically it comes down to this these days: if you would like to get a good domain name for your business, forget about going to a regular domain registrar. Almost all the good domains are long gone, but a huge amount of these is for sale by those who got to have that piece of real estate before you.

Some domains can be had for hundreds of dollars, many for a few thousand. If you are starting a business, that’s not such a horrible price to pay. I paid $1000 for 80sRadio.com, and while that’s all I had to spare for a low volume keyword like this, many would consider this an absolute steal of a price. But we’re working on developing the site as I write this.

Some of the places you can go looking for domain names to buy in the after-market are Sedo, SnapNames (dropped names go there first too, for now), TDNam, DNForum. Hope you are a decent negotiator too There were times I was able to easily bid down prices of domains from $3600 to $1600, or from $3000 to $1250, so it’s worth a try sometimes, you will find you don’t have anything to loose by trying and many in this business just want to turn it over already so are happy to negotiate.

So you can do buying and selling of domain selling without ever developing sites. Markets always have imbalances and need the middle men to do the dirty work of finding names, and sometimes finding better buyers for them. But quite simply it’s not about this too, it’s about letting domain names mature. Over time the domain names greatly go up in value as they are a scarce resource. There are only so many good brandable or type-in domain names.

So if you are smart you can hang on to them until you are ready to sell. Someone may be ready to sell a domain name now for $1000, but in 2 or 3 years you might find a buyer willing to pay 10-15K for the same name. The trick is knowing, hedging, and being able to risk smartly to spend cash now to wait and let domains appreciate. I don’t know, can you make 10x the return in a few years on the stock market? Of course this isn’t for everyone, and for many people it may be money down the drain as in the stock market, you need to know what you are doing. For example check out this guy who claims to have bought FuneralArrangements.com for a few hundred bucks only to resell it for $9500.

The ultimate domainers already have their piles of cash and know the real value of appreciating and maturing. There are many now who have generic terms with two word names who claim they will not sell their domains for anything less than $100,000. They are willing to wait 5-10 years. Sometimes what you’d think is quite absurd is worth a lot more to domainers. For example during a recent keynote speech (which is very intersting) from the Domain Roundtable Frank Schilling noted that he bid $4000 and won Rumcakes.com

How I Determine If a Domain is Valueable To Someone

First of all I like to look for names in the industry I am in - streaming and music especially in my case. This gives me the edge of knowing what to look for. So my recommendation is if you’re interested, look into niche things which you are good at.

Generic domains are valueable especially if they are .com ones. People either type them in, or search for them on Google and other search engines. If you have a name such as WoodenTables.com, and people are searching for wooden tables in Google, it is much much easier to rank for that term to the top of search engine listings with some SEO. Then you could set up a table selling business there, or a table selling affiliate business, or at least such a person would be interested in this domain name.

A side note on search engine optimization (SEO) - you don’t need a .com to have the edge to bring the domain up in search results, however you don’t always want to go with a .net either. It depends on the marketing aspect and conversion ratio that this causes. If there’s already a prominent business on the .com counterpart, you may find spending time maketing the same .net will just get your visitors ending up going to your competitors when they search. But when .com is missing, you might consider .net, .org, or whatever (.fm in my radio business).

Two helpful tools I also use are:

Google Trends- this tool allows you to put in search phrase terms to see what the volume of the searches for your combination is like. It’s helpful especially if you think about it as relative volume - that is, put a keyword you already are familiar with perhaps, and compare it against what you are researching. If you find that volume is good for your niche, that has some bearing on the domain value. If the value is super low, it’s either very much a specialty niche, or nobody is interested in it at all (well it can be both). If the volume is low, it does not mean the domain associated with the term is not worth anything. Just put in “Funeral Arrangements” and you will see almost no traffic there at all, yet supposedly the margins in this business are really high, and someone found it worth paying $9500 for FuneralArrangements.com.

Yahoo Keyword Selector Tool- this tool is similar to Google Trends, though not as pretty and has less data. This is because Yahoo has considerably less market share for search, so you should expect volume to be much lower there. The tools is nice in that it shows you number of searches conducted in a given month, typically few months ago though, through Yahoo for your term. It also breaks out similar and additional deeper terms. So if you put in “loands”, it will show you what people tend to search for, such as “home loands”, “refinance loands”, and so on. Just remember that it’s all relative, so whatever the numbers, you can multiply it by 7 or 8 and I am guessing that’s what you can expect from Google’s search volume for the terms used.

I am still learning, so if any of you can recommend other tools, or methods, which can help significantly improve research (I don’t just mean keyword research and keyword tools for arbitrage purposes or the like), please let me know in the comments.

And finally, I think you do need to be smarter than the average guy out there if you’re going to be quick enough to catch a good domain before it is popular, or buy and resell great domains in the aftermarket. No guide or post can ever tell you how to be that, some just develop or have that quality to themselves and others don’t.

I Have Yet to Sell a Domain Name Myself

Writing all this may make it sound like some kind of a pro at this, but in no way am I trying to say this. Actually all this just makes me a domainer-wannabe. This is information which you can find on the net yourself, I’ve just filtered it down to what I can write about in a nutshell, and what I think is reasonable to believe or do. I am still learning about domaining, and acquiring names. My problem is that the stuff I acquire I really want to develop eventually myself or am not willing to let go I have bought a few in the last two months but I am still under a 100 total. Some I would be interested in selling in a few months, so if it happens and I am free to share details, then I will. Some of the recent ones for which I paid a bulk of that sum for, I do plan to develop very soon -  and I shall share some of that on this blog.

If I only knew and understood these things just a few years earlier, I would already be a very very rich man. But that’s life, and the challange is always to go head on and do the best with what you’ve got. There are still plenty of opportunities out there, but don’t quit your day job for this, you need the day job to pay for the seeds.

My recommended resources for more info:

• Domain Name News
• Seven Mile - Frank Schilling blog
• Conceptualist.com - Sahar Sarid blog
• Elliot Silver’s blog
• TheDomains.com
• DNJournal
• DNForum
• Domain Investing - what you can learn from the stock market
• SEO Book Blog - Aaron Wall continuously shares SEO related insights, complete with awesome Google rants.
• SEOmoz- if you want to keep your eye on the seo space, great community too.
• Google Trends
• SEO Book Keyword Suggestion Tool
• Yahoo Keyword Tool (usually doesn’t work these days)