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Bob Hawkes

Catching Trains and Avoiding Train Wrecks

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By Bob Hawkes, Aug 20, 2020
  1. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    The Internet was in less than 5% of homes when visionary Gary Kremen registered jobs.com, housing.com, autos.com, sex.com and about two dozen other valuable domain names. For free! The story is relayed in David Kushner’s superb book The Players Ball. The main focus of the book is the decade plus legal battle over ownership of the sex.com domain name.

    Gary Kremen caught a domain train, seeing a demand before others. There have been numerous cases of trains that domain investors caught at an opportune time, such as the realization that exact match names had high worth, the early stages of extensions such as .io, and being among the first to see the value in developing technologies, service niches, or branding trends, among other possibilities.

    Because money can definitely be made by catching trends in early stages, this can create a fear of missing out. That fear may cause investors to sink too much into speculative domain investments, sometimes leading to train wrecks of financial ruin. Certainly many investors rode the .mobi investment wave to a train wreck of major proportions.

    In this article I look at catching speculative trains, and share a few suggestions on how to possibly avoid domain name investing train wrecks.


    There Is No Sure Thing

    This is obvious, but needs to be said: in the world of domain investing there really is no sure thing. Certainly domains of some types are more likely to sell at good prices, but there is no absolute guarantee that you will be able to sell any individual domain name for more than your acquisition and holding costs. The one exception would be if you are very fortunate in finding a seriously under-priced domain name in a highly liquid category, such as common dictionary word .com domain names.


    The Early Rider Gets The Reward

    Some say do not purchase domain names in anything that does not already have a significant sales record. While understanding that logic, if you apply it rigorously you will miss opportunities. The era of getting great .com domain names at low prices was in the mid-to-late 1990’s, and once their worth was established, the available name pool became much more sparse and expensive.

    There were similar eras in general purpose country-code names and in some new domain extensions. In general, you need to be in early to secure the premium names at reasonable costs. However, at that early stage you have no firm idea how well the extension will do. Your investment is therefore risky.


    Risk And Reward Are Related

    In conventional investing, investments that carry higher levels of risk, generally speaking, have higher potential rewards, although the probability of getting those rewards are lower. Some would argue that the same principle holds in domain investing, with higher return/cost ratios possible in some more speculative investments, although the contrary view can also be argued.


    Where Is This Train Going?

    While none of us can precisely predict the future, that does not mean that there is not available information to help us evaluate the speculative risk. In the case of investing in an extension, you might consider questions like these.
    • Who runs the extension, and how stable are they?
    • What end use is already active?
    • If a repurposed country code, are there any political storm clouds on the horizon?
    • What are the main competitors for this domain investment?
    • Based on early sales, what is the approximate sell-through rate and typical sales prices?
    • Is familiarity with the extension growing significantly?
    • In what sectors and regions does the extension find use?
    • Is there a trend of startups using this extension or type of name?
    Do your research before you make a decision to invest.


    Who Is Already On This Train?

    To me, one of the most important questions is who is already using this extension or type of domain name. One can use the Google site: command to find existing websites. For example a search on site:.vc will produce a list of websites on .vc extension domain names.

    Use sources such as NameStat.org and DomainNameStats.com to look at details such as number of registrations, number and ratio of sites in Alexa 1M, etc. I am personally cautious if almost all of those holding domain names in an extension are domain investors.

    The tools offered by CENTR provide information on trends in registrations, deletions, renewals, CISCO global use ranking, etc., along with benchmark comparison data.

    Dofo offers an easy tool for investigating any extension. Just enter https://dofo.com/extensions/TLD where TLD is replaced with whatever extension you wish to investigate. You can also use their Extensions tab to access the same data. The Dofo site shows the number of domains registered and actively listed for sale, a selection of popular websites, and registration breakdown by country and registrar.


    Don’t Try To Catch Every Train

    After a major sale is announced, it is tempting to rush in and try to benefit from registrations of similar names. Remember, though, that one big sale may simply be an outlier.

    Even beyond that, no one should try to catch every domain investment train, every hot niche, hot extension, new branding trend etc.

    Be selective in any speculation, and try to keep fear of missing out in control. There are millions of ways to make money in domain investing, and unfortunately even more ways to lose money. While catching domain investment trains can, for some, be part of your investment strategy, it should not be your entire strategy.


    Do We Know Where This Train Is Going?

    One reason that the early registrations and acquisitions by Gary Kremen were so smart is that he had in mind a clear plan of how those domain names would be used. At the time, much of advertising money was in newspaper classified ads, and he saw these moving to the Internet. Therefore names like autos.com and housing.com would have high worth. With the introduction of Internet image file formats, he saw that a web-based dating platform could be much more powerful than the newspaper personals, phone lines, and text bulletin board systems of the time. He therefore secured and developed Match.com.

    When you consider speculative acquisitions, ask yourself is there a clear plan on how the domain names could be effectively used?


    Is This Train For Me?

    Not every speculative domain investment is right for every domain investor. Your prospects are best when you invest in what you know. When considering any speculative investment, ask if you have special expertise in selecting and promoting the names.


    When The Train Is Gone…

    If the train has already left, don’t register lower quality leftover domain names. Oldtimer covered this well in a recent post.
    Avoiding Train Wrecks

    One way to avoid domain name train wrecks is to never invest in anything speculative. That may not optimize your probable return, however.

    Another way to avoid a train wreck, while accepting that some investments will not work out, is to limit how much you invest in highly speculative domain investments. In other words, invest only what you can comfortably afford to potentially lose. Financial advisors always stress knowing, and living within, your risk tolerance. The same should apply to domain investment.


    Not Everything On One Train

    The more diversified is your portfolio, the less you are tied to any one risk. Don’t bet your entire domain prospects on any one type of domain, whether that is a series of .com domain names all with very similar keywords, or one narrow technology sector, or a single alternative extension. Those with large portfolios have the added benefit of averaging there risks over many individual domain names. This article covers domain portfolio diversification approaches.


    A Little Checklist Before Boarding The Train

    I have found the following personally helpful, and perhaps you will too. When I am tempted to invest in a new domain sector, such as a new technology trend, or an extension without a long sales record, I ask myself the following series of questions. I require a yes to all items to go ahead and board the speculative train.
    1. Am I sitting on any money that is available for domain investing right now? I personally try to only invest what I have made from domain names. I pass up some promotions or opportunities if they happen when I have no extra funds. Don’t speculate with money you will need for other purposes.
    2. Have I researched this opportunity? Have I really put the hours into looking at the relevant statistics and type of names that have sold so far?
    3. Have I also put the effort into finding the best possible names?
    4. Am I the right person to invest in this? This is related to the point above that not every train is right for every person. Can you justify to your accountability partner why you are investing in this sector or extension?
    5. Is now the right time? The timing might be related to cost-of-ownership opportunities, like promotions, but also is there still a good pool of quality names available, or have I missed this train?
    6. If I reasonably estimate costs, likely return and probability of sale does it make quantitative sense? This is the hardest to estimate, but important. Promotions may tip the argument making a one year trial on some domain names worthwhile. For example if I estimate the annual selling probability at 1% for a particular domain name, and the likely net return after costs at $1500, then paying $15 for one year is the breakeven point. If one year of registration has dropped from $40 to $5, the odds now favour making a speculative investment, whereas they did not previously.
    So If I answer yes to all six points, I next set a maximum total amount that I feel comfortably investing, and stick to it. The discipline of setting a limit helps emphasize quality, by making the best choices with limited money.


    Final Thoughts

    You might wonder why I did not include Match.com in the list of free domain registrations picked up by Gary Kremen. It is because that was not a free registration; he paid $2500 to purchase it from the initial owner. That was a huge amount in 1994, particularly for someone carrying $50,000 in student loans at the time. Unfortunately his net return on Match.com was modest compared to the much higher price the site sold at a few years later.

    You can read more of the story of Gary Kremen’s domain acquisitions in The Players Ball or in a story written in 2006 by Ron Jackson in DNJournal, as well as many other online stories. For those attending the forthcoming NamesCon 2020 virtual event, author David Kushner is one of the speakers.

    While neither this post, nor a recent article posted to NamePros by Ategy, are about any particular extension, I urge you to read his caution about speculative domain investments.

    I would love to hear thoughts from readers on the degree to which they try to get in early on domain trends, and how they personally minimize the chance of train wrecks.

    May you catch the occasional profitable train, and avoid major train wrecks in your domain name investing career!



    This article was in preparation for more than a year, starting when I first read The Players Ball. However, the title was inspired by this recent NamePros post by Oldtimer that mentioned missing domain trains. The instant I read it, I realized that domain trains and avoiding train wrecks was exactly the framework I had sought. Thank you.
     
    The views expressed on this page by users and staff are their own, not those of NamePros.
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  4. Bob Hawkes

    About The Author — Bob Hawkes

    Domain analyst, writer and informal educator, with particular interests in domain name phrases and non-business uses for domain names. I am a risk averse domain investor who only invests modest amounts in a variety of extensions and niches. Don't hesitate to contact me - I like to help!

    This is Bob Hawkes's 53rd blog post on NamePros. View all blog posts

    Home Page:
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  5. Comments (30)

  6. Skyvisum

    Skyvisum Top Contributor VIP

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    👏👏👏👏👏👏.Your writing amazes me Bob.I hope to avoid train wrecks and always try to read as much as I can about any technology or innovation before diving in.

    You are spot on.👍👍.

    Thank you Sir.
     
  7. oldtimer

    oldtimer Do some good for humanity and the environment VIP ★★★★★★★★★★

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    @Bob Hawkes ,

    Thanks for another great article, you have a talent for being able to put all these vital information in an organized way that makes it easy to understand.

    Here are a few more tips that might help:

    If you have a setback and fall off of a train, dust yourself off and find a new train to get back on, Almost all famous domainers that we think of as being successful have had setbacks in one way or another, but they were able to reevaluate their methods and correct their mistakes without being stubborn about their strategies.

    Not everyone that gives you advice is doing it to help you, unfortunately some people try to discourage you from taking chances with anything that prevents them from unloading their own domains on unsuspecting newbies here on the forum. After a while you get to know who these old hand parasites are, because they make it their business to put down any extension or category that doesn’t match what they want to sell you. Although they might offer some good domains in the marketplace here and there, but I don’t think that it’s right for them to try to control other members for their own benefit specially when they resort to attacking and belittling others for even discussing other opportunities such as hand registrations or other alternative extensions.

    Finally you should be able to sell a few domains and use the proceeds for expanding your portfolio, if you can’t sell even one domain then be careful not to sink more and more money into domaining and keep in mind that a small portfolio comprising of super quality domains might get you better returns at the end than having thousand of lower quality domains that can put a drain on you both financially and emotionally to keep and maintain over the years.

    IMO
     
  8. Domaining Ocean

    Domaining Ocean Top Contributor VIP

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    Many many thanks @Bob Hawkes for the amazing insights. You always share the amazing content.
     
  9. Ariff BD

    Ariff BD Established Member

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    I registered some vc to catch the train. But only the names that is directly related or popular with venture capital like vaccine, air taxi, e-commerce or terms like accelerators, elevator etc
     
  10. bmugford

    bmugford www.DataCube.com PRO VIP ICA Member ★★★★★★★★★★

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    This is a very key point, like the ship and the shore analogy. It can be applied to any ship (investment) you missed. Don't chase after it, find the next ship.

    Source: pixabay.com; stokpic

    Imagine you are heading on a tropical vacation cruise on a ship, and you go to the dock to board the vessel, and lo and behold the ship has left without you! What do you do? Do you swim after it? No, of course not. You curse your luck that it left early, or berate yourself for being late, and then you wait for the next ship ... and you go on that cruise and have a great time.
     
    Last edited: Aug 20, 2020
  11. NickB

    NickB Wales.org VIP

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    It is happening with Defi.....

    Most of the good names went last year or even earlier, the train has left the station.

    Now with hype beginning to build and some domains selling people are registering domains that probably won't quite make it.....

    I have made the mistake of hand registering domains in other niches which where way below par and let them drop, you either get in early or buy on the aftermarket....

    Lesson learnt.....

    You hit the nail on the @Bob Hawkes with the below point...

    "Is now the right time? The timing might be related to cost-of-ownership opportunities, like promotions, but also is there still a good pool of quality names available, or have I missed this train?"
     
  12. bmugford

    bmugford www.DataCube.com PRO VIP ICA Member ★★★★★★★★★★

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    Yeah, you need a proof of concept. In my opinion it is kind of rough to go into a new extension, with no experience selling existing extensions.

    With an extension like .COM there is far more demand, liquidity, and sales. It is easier to establish some proof of concept with your business model because of that.

    If you start there you might want to branch out. But to just go full force into some new extension without a proper foundation is going to be very difficult.

    Brad
     
    Last edited: Aug 20, 2020
  13. oldtimer

    oldtimer Do some good for humanity and the environment VIP ★★★★★★★★★★

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    You are right, that's why that @Bob Hawkes mentioned that it's good to diversify your portfolio,

    I go with the 80/20 rule as I currently try to keep 80% .coms and 20% other extensions.

    Disclaimer: I am more of a collector and hobbyist, I try to maintain a small portfolio and I like to be able to hang on to my domains on the long term basis, although I don't mind selling a few domains here and there to pay for renewals and new acquisitions.

    IMO
     
    Last edited: Aug 20, 2020
  14. jim h

    jim h Upgraded Member Gold Account

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    Sir,Thank you for sharing. It's very enlightening. The tools and methods mentioned in it are instructive.
     
  15. GreatBrand.in

    GreatBrand.in Established Member

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    @Bob Hawkes for nice article once again. Your analysis and insight about the subject is very deep and practical. For newbie like me who joined NP 2 months ago, you are an institute. Sometimes I wonder, if you write a book on domaining your profit and royalty from the book would be more than the return from your entire domain portfolio :)

    Thank you so much for sharing your knowledge and wisdom. Best wishes
     
  16. Mister Funsky

    Mister Funsky Top Contributor VIP

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    Thanks for the article Bob...always a worthwhile read when you post one!
     
  17. QuestFuture

    QuestFuture Established Member

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  18. kandyan

    kandyan Established Member

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  19. oldtimer

    oldtimer Do some good for humanity and the environment VIP ★★★★★★★★★★

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    Here is couple of more tips:

    Although reading and doing research are very important in order to gain the required knowledge and skills that can put you ahead of the game, but it's also equally important to get some hands on experience with domains. But until you have found the confidence to tackle big ventures in domaining it's best to take it easy and just get some practice at a very small scale. One of the biggest mistakes that most people make when they get in to domaining is to jump in and start acquiring a lot of low quality domains that are going to become a hindrance in the way of their success especially if they are stubborn about not correcting their mistakes.

    It's important to realize that just like playing a musical instrument or becoming good at any game it is not you that has to learn the ropes, but rather it's your subconscious that has to become trained in being able to recognize what a good domain is. So no matter how smart you might think you are it is going to take a while for everyone to become good at domaining, the important thing is to not get bogged down with a lot of useless domains while you are still learning.

    IMO
     
    Last edited: Aug 20, 2020
  20. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    THIS^^^ An important point eloquently expressed. I think in most things in life there are setbacks, and the important thing is not to let them define our future, and learn from them without letting them unduly discourage us. I have in crude draft a future post sometime on the importance of self-analysis and reflection, that i sort of related. Thanks.

    Re your other point, I take a different view. i think almost everyone on NamePros shares what they honestly believe is the best advice. But we must all keep in mind that what is the right advice for one person may not be the right choice for someone with a different expertise and personal situation.

    It is true that most websites on .vc are currently venture capital businesses, but i would not absolutely rule out the possibility of the extension growing beyond that base. VC could mean many things, such as virtual classroom, visual communication, virtual currency, virtual consulting, and many others. In the current climate of doing so many things virtual, I can see it might broaden like .io has from a base in the world of coding. It may well not. Speculation only.

    Your point is well expressed Brad and I am sure many successful investors would agree with you. I don't necessarily see it that way. It is true that .com investing, with a larger pool of sales, fairly constant and low renewal rates, names that sell in all types of names, etc. is a simpler landscape to navigate for the beginning investor. But it is also true that the vast majority of investors are concentrated in that, so lots of competition for your names.

    I like the idea of setting some guideline like that.

    Thank you. To me the most important part of most articles will be to enable domain investors to analyze for themselves. We are fortunate to have such amazing tools, many of them free.

    Thank you for your suggestion. Perhaps someday I will, but have some sense of the work involved in a truly comprehensive book. In some ways I prefer to write for NamePros Blog not only because it gets read quickly by a significant number of people, but also because it is such a vibrant and interactive community. I think the comments people leave, the varying viewpoints and arguments, make this much stronger than anything written by one person.

    It is true that I spend, it seems, more time analyzing, writing and interacting than I do on even basic tasks in my own portfolio :xf.wink:. I have some domain names out of lock not even listed for sale anywhere!:xf.eek: I know, I know, I tell people not to do that!

    Thank you everyone for your interaction. I feel truly fortunate to have found the NamePros community.

    Bob
     
    Last edited: Aug 20, 2020
  21. oldtimer

    oldtimer Do some good for humanity and the environment VIP ★★★★★★★★★★

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    I also believe that what you currently are doing as far as writing these blogs about different subjects related to domains and domaining is much more effective in bringing the kind of real time exchange of ideas and knowledge that can help us learn from each other's experiences.

    I only wish that Namepros would differentiate between Threads and Blogs that we have created and the regular Comments that we have posted when we check under Content.

    IMO
     
  22. bmugford

    bmugford www.DataCube.com PRO VIP ICA Member ★★★★★★★★★★

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    I am not really aware of all that many people who have had massive success selling only new (or newly rebranded) extensions, and have no other experience with legacy extensions like .COM.

    There might be a handful, but those are certainly the outliers.

    Brad
     
    Last edited: Aug 20, 2020
  23. FolioTeam

    FolioTeam AMDB.tv VIP

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    Thanks for another brilliant article. I always look forward to your articles as they are well written and can teach me a thing or two about domains
     
  24. 1Darko

    1Darko Top Contributor VIP

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    @Bob Hawkes

    Thanks for writing this blog - this was a very nice read and I learned something new.
    Also some great response and advices form the members. Just great - thanks! (y)(y)(y)
     
  25. Bravo Mod Team

    Bravo Mod Team Moderator, NamePros Moderator PRO VIP Gold Account

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    #TheFeelingsAreMutual :xf.love:
     
  26. WatchDogue

    WatchDogue Top Contributor VIP

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    This was an enjoyable as well as a very informative article Bob.

    The train analogies were done to perfection and I readily recall a few of my domain train wrecks that left my wallet screaming for mercy!

    As you stated Bob - " There Is No Sure Thing " -

    I always operate under the assumption that one should never invest any money in anything - stocks - bonds - real estate -gems - antiques and, domain names without giving it a kiss good-bye as you may never see Mr. Green again.

    And sometimes Mr. Green takes the happy train back to you and you greet at the station with hugs and big grins and, sometimes Mr. Green takes, well let's call it that unhappy train ride back to the station.

    Only invest what you can afford to loose and most get rich quick schemes only make the other guy a bit richer.

    As I reread this article, overall this a common sense primer on domain names for the rank amateur wanting and willing to learn and, the veteran of failed domain ventures who needs and will use some common sense guidelines to get them on the right track, the right train track of course!

    Great work Bob, enjoyable and informative!
     
    Last edited: Aug 20, 2020
  27. digitalpandit

    digitalpandit Established Member

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    @Bob Hawkes Your post is a value bomb.Thanks for the same.
     
  28. TauseefKhan

    TauseefKhan Established Member

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    @Bob Hawkes Sir, how you come up with such ideas???

    I will put this article on top of all the articles you've written so far and shared here.

    It's really a blueprint for investors - the nuggets it contains are just invaluable.

    Thanks again!
     
  29. oldtimer

    oldtimer Do some good for humanity and the environment VIP ★★★★★★★★★★

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    Some more tips:

    Although some people who have a good eye for picking the right domains might do good by playing the numbers game and amassing huge portfolios (5000+ domains), but It probably is much easier to handle and maintain a smaller portfolio of 250 domains or less for most domainers. The trick is to keep the total number of domains in your portfolio the same, but constantly and continuously try to improve the quality of your portfolio by dropping the less desirable domains and replacing them with better quality ones. Remember if you let your portfolio grow out of control it’s overall quality will be diminished since the larger it gets it becomes much more difficult to maintain the same level of quality across the portfolio, even the more experienced domainers will eventually have to face this fact after they have acquired hundreds or thousands of domains.

    Also as I already mentioned earlier it’s probably better in the long run to have a few super premium domains than having hundreds or thousands of mediocre ones, so you should be careful not to sell all best domains in your portfolio and be left with just the lower tier ones ( unless of course you can sell them for a life changing amount).

    IMO
     
    Last edited: Aug 21, 2020
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