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Bob Hawkes

Domain Investing: Just The Basics – Part 1

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By Bob Hawkes, Sep 23, 2021
  1. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    This two-part series is intended for those just starting out in domain investing. It covers basic information about registering, buying, renewing, researching, and listing domain names.

    Next week, in the second part, I will look at landers, types of domain names, pricing, tracking interest, promotion, fast transfer networks, transferring, and easy ways to create your own marketplace.

    The Basic Idea

    The basic idea of domain investing is pretty simple: buy domain names and resell them for a higher price. Unfortunately, most domain names held by investors will not sell for a long time, if ever. This means that you must have a substantial markup on those names that do sell to make up for those that do not sell.

    It depends on the type and quality of names, and how they are priced and promoted, but as a rule-of-thumb perhaps 1 to 2% of names will sell at the end of one year. That is, if you have 100 names of average desirability, then, on average, at the end of one year, 1 or 2 domain names will have sold to end users at retails prices.

    This percentage that sell in some time interval is called the sell-through ratemore on sell-through rates in this article.

    Many Domain Extensions

    The rightmost characters in a domain name form the extension, or top level domain, TLD. If I registered the domain name example.com, then .com is the top level domain and example is the second level domain. The owner of that domain could also set up a third level domain, as more in more.example.com.

    There are well over a thousand different domain extensions, although the average person on the street may only recognize a dozen or fewer.

    One extension is much more popular, registered and sold than any other, .com. Other popular legacy extensions include .net and .org.

    Each country has a country code extension. Country code extensions are always 2 characters in length. Some examples are .de for Germany, .ca for Canada, .in for India, .cn for China, etc.

    While certain country code extensions are restricted to use by those with a valid association with that region, others are promoted as generic country code extensions that can be used by anyone. Examples of generic country code extensions include .io, .cc, .ai, .tv and many others. Extensions such as .co are used by a significant national population, as well as being promoted as a generic extension anyone can register.

    Some years ago ICANN introduced the so-called new generic top level domains, new gTLDs. Examples include .online, .xyz, .shop, .app, .club and many others.

    TIP
    If you are considering new extensions, use the nTLDStats site to research how registrations in the TLD have changed over time, when the extension was first delegated, and details on the registry and back end operator for the extension. Keep in mind that discounting has a big impact on registration numbers.

    There are also extensions, such as .coop, that are reserved only for certain organizations, in this case registered cooperatives.

    The new extension program included the possibility of businesses and organizations develoing their own brand domain extension, for example, .apple. These are not available for use by others or for investment.

    Technically, all extensions work essentially the same way. However, consumers know, and trust, some extensions more, and definitely demand and pricing is very different for the same keyword in different extensions.

    Registrars, Registries and ICANN

    When you register a domain name you become a registrant. You deal with a registrar, who will process your payment, registrant contact details, manage records associated with the name, etc. Some example of registrars include GoDaddy, Namecheap, Dynadot, NameSilo, and many others.

    Each domain extension has a registry. For .com, and several other extensions, that registry is Verisign. Among the new extension registries are Radix and Donuts, and many others. While you can’t register names directly with the registry, they are the overall administrators of the extension.

    The organization charged with management of the domain name system is ICANN, the Internet Corporation for Assigned Names and Numbers. While many domain investors will never interact directly with ICANN, the procedures and rules ICANN set impact all domain investors.

    ICANN approved registrars must meet certain standards and agree to follow rules set by ICANN. From time to time a registrar will go out of business, and ICANN have procedures to protect the interests of those who hold domain names at that registrar, normally the bulk transfer to a different registrar. There are several thousand ICANN-approved registrars.

    In addition to these registrars, you also have resellers, operating under the umbrella of one of the approved registrars.

    Renewals

    While domainers talk of buying domain names, it is perhaps more accurate to say that we are leasing or renting the domain name, since you need to pay an annual renewal fee to maintain the domain name.

    In the main legacy extensions like .com, .net and .org the cost to register or renew a domain name is usually not much different.

    However, in new domain extensions such as .online or .xyz, or generic country code extensions such as .co, there is often a sharply discounted first year rate, and then a substantially higher standard renewal rate.

    The term premium is, unfortunately, used in many different ways in domain investing. Some new extension domain names, as well as a few country code extensions, may have premium, that is higher than the standard, fees for initial registration and sometimes for renewal as well.

    TIP
    Different registrars may charge very different amounts to register or renew the same domain name. Fortunately there are services such as TLD List and DomComp that show price comparisons at a glance. Do keep in mind other aspects than just price in choosing a domain name.

    Normally when you transfer a domain name from one registrar to another an extra year is added to the registration period.

    You can renew a domain name for years in advance. ICANN set a 10 year maximum, however.

    Research

    Before acquiring domain names, it is essential to do at least some basic research. At a minimum it should include the following.
    1. How often are similar terms used in the names of businesses and organizations? Your best tool is the OpenCorporates database. If the domain name under consideration is a two-word name, consider checking each term separately.
    2. Have similar domain names sold in the past at good prices? Use NameBio to search prior sales, noting prices, venues and date of sale. Keep in mind that many retail sales are not shown in NameBio. You can capture some additional comparator sales by doing a GoDaddy GoValue appraisal.
    3. Are there potential trademark conflicts with the name? Trademarks are awarded for specific geographic areas and application categories. US Trademarks can be searched at TESS, while Trademarkia is one place to search global trademarks.
    4. Google the term you are considering. It can illuminate aspects of the name you may not have considered.
    There are many other factors to potentially consider, such as number of domain extensions the term is registered in, or search and advertiser statistics.

    TIP
    See Free Tools for Domain Name Research. for additional domain research tools, and what the results mean.

    Where To Acquire Domain Names

    There are many ways to acquire domain names.
    1. Hand-register You can go to any registrar and create a name that is not currently registered. This is called hand registering a domain name.
    2. NamePros One of the many reasons to be an active member of NamePros is that it provides a commission-free place to buy and sell domain names. There are auctions, fixed-price, bargain, make-offer and other categories in the NamePros Marketplace.
    3. Expiring Auctions Domain names which have not been renewed are one of the main sources for domain acquisitions. The most popular place to buy these is GoDaddy Auctions. You will need to purchase an inexpensive annual membership to participate in most auctions. If you want to only consider expiring auctions you can use the Advanced Search button on the right to select the type of purchase, Expiring Auctions. Other frequently used auction sites include NameJet, ParkIO and DropCatch. Note that these sales are called expiring, not expired, since they will transfer just prior to true expiration, so the age of the domain name is preserved.
    4. Closeouts Domain names that have not been picked up in expiring auctions, enter what is called closeouts. On GoDaddy Auctions these now go into a cycle of 5-steps at decreasing prices.
    5. Domainer Auctions and Sales GoDaddy Auctions also covers domain names that have been placed for sale by users, in most cases domain investors. In GoDaddy Auctions these are called Public Auctions and Public Buy Now. Most of the other registrars also offer similar public fixed-price and auction format sales, and as mentioned earlier NamePros is a rich source of domains for sale by other domain investors.
    6. Backorder You can place an order to have a service pick up a domain name for you when it expires, this is called backorder. If more than one person requests the name, it is usually placed in an auction. Many registrars offer backorder services, as well as businesses that specialize in backorders.
    7. Liquidation In addition to NamePros and the registrar marketplaces, there are several places specifically for domain liquidation. DNWE, the Domain Name Wholesale Exchange, requires a subscription, but then you have access to domain names being liquidated, or to list your own. NameLiquidate allow you to list names in a 7-day Dutch auction format that starts at $998 and counts down every hour to an ending price of $9 or whatever higher reserve you have set.
    8. Private Purchase If you encounter a strong domain name that seems under-utilized, perhaps only for a personal website that has not been updated in a long time, an email to the owner to inquire if the domain name is for sale might yield a gem at a reasonable price.
    9. Requests Sometimes an efficient way to acquire domain names in a sector is to put out a request either on social media or in the Request thread here on NamePros. Make sure you follow the rules, and the more specific you are in your request specification, the fewer unrelated submissions you will get.
    TIP
    Use ExpiredDomains.net to do powerful searches in one place that cover a number of the sources mentioned above, as well as to to track domains that are about to expire.

    Whois and Domain Name Age

    Every registrar will offer a way to Whois query a domain name. While much of the information that used to be available is now cloaked under privacy, the Whois record will indicate when the domain name was created, where it is registered, when it expires, and some additional information.

    Note that if a domain name fully expires, then its age is reset. So you should not say that a domain name first registered in 2010 is 11 years old if it was allowed to expire and you just hand registered it this year.

    TIP
    ICANN rules require that you maintain accurate information in the Whois record for your domain name, or you risk losing ownership. Even if you have privacy enabled, there can be circumstances that the information is not fully protected. It is a good idea, if possible, to use a registrant telephone number that goes to a VOIP phone that records messages, and that you not use your primary email. Otherwise spam messaging may become unbearable.

    Many names expire and are picked up again multiple times. You can track this for many domain extensions at HosterStats.

    Wholesale And Retail Sales

    One can sell domain names to businesses and organizations that will eventually use the name, end users, or to other domain investors. The price points will be very different, however. A domain name sold to another domain investor is a wholesale price, while retail transactions refer to sales to end users. There is no simple rule, but often the ratio of a retail to wholesale price may be a factor of 10 to 100 or even more. That is, a name that might retail for $4000 could sell wholesale at $40 to $400, or even less in many cases.

    So why would you sell wholesale? The reason that wholesale prices need to be so low is that the buyer will probably need to renew the name over many years, and still has no guarantee of a sale. Wholesale selling is trading a possible higher-price future retail sale against a sure lower-price wholesale sale now.

    In setting a wholesale price, I find it useful to ask what I would pay today to acquire this domain name. The wholesale price should not be much different from that.

    Starting out in wholesale transactions may make sense, as you will have a steadier stream of sales, and by seeing what other investors will buy, you gradually come to know the domain market better. Don’t expect to get rich from wholesale transactions, though.

    Where To Sell

    While there is nothing to prevent you from developing your own website and selling domain names directly, most domain investors sell through a marketplace. The marketplace will list your name, provide some sort of lander, negotiate with potential purchasers, handle payments, and supervise transfer of the name. Many buyers will feel more comfortable buying from a large established marketplace.

    TIP
    If you are directly selling domain names from your website, it is probably wise to consider using a third party to handle the transaction, at least for higher priced names. One option is to use Escrow.com. Sedo, Dan and others also offer services where you can bring in the lead, and they will handle payment and transfer. When you are just using the marketplace to complete the transaction, the commission is less than if the name had sold directly on the marketplace.

    There are three main general-purpose domain name marketplaces, as well as many smaller ones.
    You can list almost any domain name at these sites, and each marketplace has between about 10 and 20 million domain names listed.

    Afternic and Sedo both have networks of associated registrars that you can access if your name qualifies for a fast transfer listing. I will cover that topic in detail in part two of this series.

    It is common to list domain names simultaneously at more than one marketplace. Some argue that it is safest just to have a buy-it-now price, allowing instant purchase, at one marketplace, with make-offer only option at the others. That is because should two people buy the name simultaneously, obviously you can’t provide the name to both. Other investors feel that the chance of this happening is so low, they do list buy-it-now at several marketplaces simultaneously.

    Is Your Name Brandable?

    If your name is brandable, meaning it is most suited to a new business using it as their main name or brand, then you should at least consider listing on a brandable marketplace. While, in general, brandable marketplaces have higher commissions, usually require exclusive listings, and sometimes have evaluation, logo or listing charges, they also provide a steady stream of potential purchasers specifically looking for brandable domain names.

    Traditionally the main brandable marketplaces were:
    BrandBucket and SquadHelp each have more than 100,000 names listed, while BrandPa have nearly 25,000 currently. That is far fewer than the general marketplaces, partly because the brandable marketplaces only handle names that could serve as brands, and partly because they are selective in what they accept.

    BrandBucket has been around the longest, and is well known in the corporate naming world.

    SquadHelp has grown strongly, and one advantage of having premium listings there is you can propose those names in naming contests.

    BrandPa use an automated system for domain acceptance and pricing. This has the advantage of providing an instant decision.

    There are two newer brandable marketplaces that you should consider.
    A newer and smaller brandable marketplace is Rooted, that currently has a few thousand names listed.

    Over the past year, a new type of hybrid brandable marketplace has evolved, Alter. Alter has been agile in making changes in response to suggestions and analysis (see the official NamePros discussion on Alter). At time of writing, Alter had grown to more than 30,000 names listed.

    While anyone can submit names to Alter, Alter search favours names that would be accepted on brandable marketplaces. Initially Alter provided logos with accepted premium names, but now you can design free basic ones using their software, pay a modest fee to have them design a professional one, or submit your own professional quality logo, which they will review before posting. Alter has recently developed an AI-powered automated appraisal system to help you with domain name pricing.

    You can choose to have Alter automatically list your names on a number of other sites including Dan and Sedo and a network of registrar sites. The names list at those sites slightly higher than the Alter price, so you still, upon sale, get paid the Alter price minus the Alter commission.

    TIP
    If you are considering any brandable marketplace it is a good idea to spend some time searching their listings to get an idea of the sort of names they handle, as each brandable marketplace has a slightly different focus.

    Is It 60 Days Yet?

    When you newly acquire a domain name, it will not be possible to transfer to another registrar for a period of 60 days. That is mainly intended as a deterrent to domain theft that might shuffle the name rapidly through several registrar homes. It also means, though, that a buyer might have to wait for a considerable period to obtain the name at their desired registrar, and might not be willing to wait.

    Many registrars invoke a similar lock after a change in registrant details, while some do not, or have a shorter period. Here is the ICANN statement on the 60-day lock.
    TIP
    Note that in almost all cases you can still sell, and transfer, domain names at the registrar marketplace where the domain name is registered, even in the first 60 days.

    Have A Plan

    Even if you are only doing domain investing as a small side-gig, I think having some sort of business plan, that you review periodically, is important. Your plan might include answers to some of the following.
    1. How much do you plan to invest in domains in year one?
    2. What sectors and niches do you plan to concentrate on, and why?
    3. How do you plan to acquire domain names?
    4. Where do you plan to list domain names for sale?
    5. Do you plan to sell exclusively retail, or a mix of wholesale and retail?
    6. What costs do you anticipate in year one?
    7. How much time do you have available for domain-related activities?
    8. What are reasonable targets for sales numbers and dollar volume, and profit, after year one?
    9. If you are able to make a profit, do you plan to put it into additional domain investments, or take it out?
    10. Who could you get advice and feedback from?
    11. What advantages do you have, based on your education, experience, and knowledge?
    12. Are you able to potentially lose everything that you are investing without serious hardship?
    Not Too Fast

    While I wanted to keep this article mainly on objective information, and not advice, I would urge you to start slowly with acquisitions. By all means get a few domain names so you can start experimenting with settings, listing, landers, etc., but try to not invest much until you feel you know the market, and feel confident that domain name investing is for you.

    TIP
    Want some additional advice about domain investing? Check out Simple Ideas to Guide Domain Name Investing.

    Next Week

    Part 2 of the article next week will cover the following:
    • Categories of domain names
    • Domain name pricing
    • Lease to own, payment plans and domain rentals
    • How and why you might want on fast transfer networks
    • What are DNS settings?
    • Domain landers
    • DNS records and domain verification
    • Ways to transfer a domain name
    • Tracking interest
    • Revenue from domain names
    • Other ways to make money related to domains
    • Outbound vs inbound
    • Ways to gently promote your domain names
    • Easy ways to create your own marketplace

    Update on Sep 30, 2021:
     
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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 110th blog post on NamePros. View all blog posts

    Home Page:
    https://namesthat.win
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  5. Comments (36)

  6. syedzaheer

    syedzaheer Upgraded Member Gold Account

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    Thanks for informative article
     
  7. Devanos

    Devanos Cude.org VIP

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    Valuable informations
    Thank you so much BOB

    Waiting for part II ...

    Best Regards
    Devanos
     
  8. MadAboutDomains

    MadAboutDomains Top Contributor VIP ★★★★★★★★★★

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    Hitting it out of the park every time. Cheers Bob! :smug:
     
  9. redemo

    redemo Established Member

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    Brilliant. You can also register developed domains from sites like Flippa. Developed domains are still domains and you can invest in them. Its not a separate industry. Also when researching registrars its a good idea to read customer service reviews.
     
  10. biggie

    biggie GreenFriendly.com VIP ★★★★★★★★★★

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    Hi

    the quote below, does not include all sales
    as it only mentions sales to end-users, with respect to
    str

    one can sell to anybody, at a profit, which would be included in their str.


    Hi
    the quote above, implies that domain investors do not, or are not willing to pay, above reseller price.
    and it may suggest that you must lower your asking price, to suit another domainers budget.

    it also makes an assumption that sales to end users are more than what a domain investor might pay for the same domain.
    as said before, domainers have just as much or more capital to spend, as majority of "low end" end user buyers do.

    just saying...

    imo...
     
  11. syedmairaj

    syedmairaj Established Member

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    Very informative thanks Bob.
     
  12. bismisoft

    bismisoft Established Member ★★★★★★★★★★

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    Great articles with tons of useful resources, thanks @Bob Hawkes
     
  13. bmugford

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

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    As always, great article Bob. Any new investor should read this before getting started.

    Brad
     
    Last edited: Sep 25, 2021
  14. Cryptotoda

    Cryptotoda Established Member

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    Simply Wow...Very commendable article..
     
  15. redemo

    redemo Established Member

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    What is str?
     
  16. bmugford

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

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    Sell-through rate. It is basically the % of your total domains you sell in a given year.

    If you have 400 domains, a 1% str is 4 domains sold, 2% is 8 sold, etc.

    Brad
     
    Last edited: Sep 25, 2021
  17. jhm

    jhm Glazed

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    As always, great article
     
  18. Max1000

    Max1000 Established Member

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    Excellent article as always!
     
  19. jiy k

    jiy k Established Member

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    This is a complete Beginner's lesson on Domaining. Thank You.
     
  20. Networkisnetworth

    Networkisnetworth New Member

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    Thank You, Bob, for this fantastic breakdown for new domainers.
     
  21. jim h

    jim h Top Contributor VIP Gold Account

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    Thank you, sir. The article is as good as ever.
     
  22. tonyk2000

    tonyk2000 Top Contributor VIP ★★★★★★★★★★

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    A great article. I'd add that ICANN has no say in country code tlds - so everybody should carefully check what is the regulating body of a country code tld domain they may wish to purchase (terms, pricing, accredited registrars, etc).
     
    Last edited: Sep 28, 2021
  23. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    Thanks for contributing these excellent points, @redemo -- totally agree that reading registrar reviews is important before you start an association with a registrar, particularly if you are placing high-value names there. There are discussions about many of them here on NamePros, also one of the price comparison sites includes reviews.

    I think with any registrar probably wise to first try it yourself with a few names that are not particularly valuable. You may discover things you like, or don't like, that others had not mentioned.

    I did debate whether to include Flippa. There are both individual names and developed, or partly developed, names sold there. It is particularly suited to developed sites, so those that buy a few names and develop them and then want to sell them should look into it.

    Thanks again for your contributions to the discussion.

    Bob
     
  24. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    Thanks for your contributions based on your long-term experience of successful domain investing.

    I agree with the following. As long as your sales are profitable, it makes sense to include in STR, whether wholesale or retail. This is particularly the case if your business plan includes wholesale sales.
    I would not include names that sold at no significant profit. Various people calculate STR with different inclusions, which is fine as long as they are using it for their own needs. My retail adjective was meant to exclude sales where the selling price is not much different than the acquisition and carrying costs.

    I agree with the following statement, but it is not the budget that I was making reference to, but simply that the domain reseller needs room for the possibility the name will not sell at all or at a profit, and for future costs.
    My rule-of-thumb was just that, an approximate ratio that works for many, but not all costs. It probably is best suited to things like two word .com, brandable made up or blended .com or single word in other extension names, that in general are likely to take longer to sell than say a single desired word in .com or a 4L com with good combination. The ratio in the latter would be less.

    Thanks again for your points, @biggie .

    Bob
     
    Last edited: Sep 28, 2021
  25. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    Thanks for adding this valuable point, @tonyk2000
    Some country codes, for example, require you to renew in advance of date.

    It seems almost every country code is run in a somewhat different way.

    While there are many criticisms of ICANN, at least we have statements re rules, complaint mechanisms, and a mechanism for safely moving domain names in case a registrar goes out of business, which happens from time to time.

    Thanks again for pointing this out, @tonyk2000.

    Bob
     
  26. NewDayBrand

    NewDayBrand Liquidating Domains Currently Gold Account

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    Hello @Bob Hawkes
    Will you post the second part today?
     
  27. Bob Hawkes

    Bob Hawkes Top Member NameTalent VIP Gold Account Trusted Blogger

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    Definitely not today. I am hoping by second half Wednesday, but it may well be first half Thursday. Still quite a bit of polishing to do on it.
    -Bob
     
  28. NewDayBrand

    NewDayBrand Liquidating Domains Currently Gold Account

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    Ok. Thanks a lot for all what you do
    Best regards and be safe
     
  29. jiy k

    jiy k Established Member

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    Eagerly looking forward to. :xf.smile:
     
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