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strategy What Domain Names to Acquire – Can a Prospectus Help?

NameSilo

Do you use something like a prospectus to help guide your acquisition and retention of domain names?

  • This poll is still running and the standings may change.
  • Yes.

    10 
    votes
    18.9%
  • I use the idea, but it is not written down.

    18 
    votes
    34.0%
  • No, but I like the idea, and I am considering writing one.

    16 
    votes
    30.2%
  • No. It would just be wasted work.

    votes
    17.0%
  • This poll is still running and the standings may change.

It is too easy to acquire domain names. There are so many enticing names sitting in auctions, closeouts, or available to hand register. In fact a whole section of NamePros regularly offers names of every type and price range.

There are far more attractive names than any one person can reasonably acquire. So how are we to know what names to take, and which ones to leave?

I want to suggest a simple guide to help. But I don’t have it. You do.


The Answer Is Within Us

The phrase, We have met the enemy, and he is us, was made popular through a Porky Pine and Pogo cartoon used in a 1970 Earth Day poster. The roots of the phrase actually date to the War of 1812.

The idea expressed in the phrase applies to many aspects of domain investing and life. Our own emotions, impatience, fear of missing out, overconfidence, lack of confidence, or various cognitive biases, can lead us to make poor choices on what to acquire and what to let go. Sometimes it can send us into domain investment train wrecks.

I know far too well the pull of promotions or recommended names from auctions or closeouts. It is easy to be attracted by low acquisition cost, aged domains, high automated appraisal or a recent sale of a somewhat similar name. This may cause us to overlook negative factors, perhaps even to ignore the fundamental question of who would benefit from this domain name.

If knowledge about what we should acquire, and what we should pass up, is within us, why is it not obvious? Maybe it’s because we never write it down.

Do you have a domain name prospectus?


The Domain Name Prospectus

The idea of a prospectus is common in the world of conventional investing. For example, each mutual fund will have a prospectus that indicates basic facts about the fund, who the managers are, the track record, and most importantly clear statements regarding what the fund invests in. The prospectus will show the split between equities in different regions of the world, durations and ratings for the bond component, whether the fund invests in other asset classes, how much cash the fund typically holds, etc.

A prospectus for a domain name portfolio might answer the following, and other, questions.
  1. Approximately how many names are in the goal portfolio?
  2. What is the target sell-through rate and average net sales price?
  3. What percentage of the portfolio will be .com?
  4. What other extensions will be held, and in what approximate percentages?
  5. What types of domain names, single word, multiple word, brandable, acronym, numeric, alphanumeric, phrases, etc., will be in the portfolio, and in what percentages?
  6. What is the split between investment worthy, that is long term hold, and more speculative domain investments?
  7. What fraction of the portfolio is to be held in liquid assets, easily sold for at least your acquisition costs to other domain investors?

Example Acquisition Statements

By going a step further than the overall portfolio questions posed in the previous section, it is possible to define precisely the domain investing targets for the year ahead.

Below are sample statements to illustrate what I have in mind. Note that these are just examples, and are not intended as a listing of what any particular person should invest in.
  • Hand registrations of made-up brandable names, no longer than 9 letters, in the .com extension. The goal is to acquire names broadly applicable at least one of the following sectors: online education, health, delivery, or technology.
  • Closeout-priced .com names that are no more than two-words in length, with the structure adjective+noun, and that include at least one of the following, or closely similar, keywords: cash, online, shop, loan, buy, rent, solutions, services, pro.
  • New extension domain names where the match across the dot is very strong, making an expression that when searched in quotation marks yields at least 40,000 Google results. The name must have an acquisition cost of less than $20 and a renewal price of less than $30 per year.
  • Single word, and very rarely two word, .net names where the word(s) make sense with the .net extension. For example fishing.net or startup.net. Acquisition price should be up to 1/10 of projected selling price.
  • Single word .co domain names, only in common nouns and verbs, where the .com is either developed or priced more than $50,000 and at least one other extension leads to a developed site.
  • Common single word .org domain names applicable to an area where that extension finds adoption, and when the domain name can be acquired for $150 or less.
  • Single word, standard renewal, domain names in the .delivery and .express extensions, in words applicable to at least hundreds of possible users around the globe.
  • Numeric names in the .cc extension that are up to 5N, but only when there is a sequence (e.g. 56789 or 12121) or some other pattern that is easily memorable. Acquisition costs should be less than $50.
  • Single nouns in the .io extension where the noun is both common (more than 10 million Google results) and applicable to branding use. Acquisition costs should be $200 and less.
These statements are similar in structure to what people post in the requests section at NamePros. If you have a soundly written prospectus, then you already have request statements ready.

In most cases the specification should include
  • extension
  • type (e.g. two word or alphanumeric)
  • sector(s)
  • length
  • acquisition cost
  • renewal cost
You may also want to include exclusions, such as no hyphens, or additional considerations, such as domain age or automated appraisal. Giving examples can promote understanding if your prospectus is intended for someone other than yourself, such as obtaining feedback from a trusted friend.

Simply writing down a prospectus, that should not take more than a page or two, is a good exercise to clarify your domain investment targets.


How This Might Help

Every time I browse a domain list, whether auctions, closeouts or available hand registrations, I see domain names that appeal to me. It is really hard to resist them. I think having a clear list of what I want to invest in could help convince me to pass up names that I should pass up. As has been said, success in domain investing is as much knowing what not to acquire, as it is what you do to actively sell.

To illustrate, referencing my examples in the preceding section, perhaps I find a nice numeric .cc but the auction price goes past $50, so I stop bidding. I come up with what seems like a great brandable .com, but it is 14 characters long, so would not match my specification. I really like a match across the dot in some new extension, but it is a premium acquisition at $200 per year, so, according to my example specification, I would pass it up. The prospectus helps talk me out of acquisitions.

Some may find it helpful to have a list of domain types that you have decided never to invest in again as part of your prospectus.


Exceptions

But what if there is a really great opportunity that does not match the specifications? Any guideline is exactly that, a guide, not an absolute prescription. As long as one has carefully researched and considered the pros and cons of the name, it makes sense to sometimes ignore the rules.


Prospectus And Monitoring

Just as a mutual fund prospectus includes more than a specification of what the fund invests in, looking at, for example, past performance, you may want to periodically compare the prospectus goals and your actual performance.

If the goal was 2% sell-through rate, was that achieved? Did your average sales price match your goal? This blog post on domain investing by the numbers provides an introduction to parameters you might use in a periodic portfolio assessment.

The advantage of having a prospectus, is that it provides both a road map for domain investing, and a way to see how closely your planned investments matched your goals.

It makes sense to at least annually revise the list of what you invest in, looking at both your own performance and that industry-wide, as well as new trends.


Coherent Portfolio

If you sell only on third party marketplaces, or the associated registration streams, it may not matter much if the names you invest in seem to be all over the map with no unity in your portfolio. However, if you maintain your own website, or reference your overall holdings on a marketplace, it will come across as more professional to have coherence within the portfolio. For example, a mix of adult names with brands intended for banks will shake confidence in your holdings. The prospectus can promote discipline to move toward a more unified portfolio.


What To Keep

As well as acquisition choices, each month we face renew or liquidate decisions. The domain name prospectus can help guide which domain names you currently hold are consistent with your goals as set out in the prospectus.


A Tip

While recognizing that NameBio includes a minority of the entire set of actual retail domain sales, it might be useful to compare your prospectus statement with NameBio-listed sales of $1000 and up. This will give you an idea of what fraction of sales are in areas not represented in your current prospectus specifications.


Final Thoughts

I welcome reader comments. Do you use a written summary of what you invest in for guidance in acquisitions, and if so have you found doing so helpful? Please also share tips on writing good prospectus statements.

While it is helpful to get ideas and views from other people, ultimately our success will come from within ourselves. The prospectus is a tool that may help clarify goals and approaches.

Note that none of the specific name examples are my own, nor is mention here intended as endorsement or promotion of any domain name. They are simply used for illustrative purposes..
 
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The views expressed on this page by users and staff are their own, not those of NamePros.
Bob,

Good thinking and thoughtful commentary.

I might also, offer up the term "Investment Policy Statement" as another way to determine-in advance-the criteria required for a new name to make it into the portfolio, level of risk, speculation, time horizon, sell criteria, etc. We use this term in the Finance/Investment world.

https://en.wikipedia.org/wiki/Investment_policy_statement
 
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Hello,
I am new to domain investing and I don't like the idea of focusing on one type of domain names. I learn something new every day and I hope I will keep doing it. Experimentation and losses are parts of the learning process.
The synergy between two words or the beauty of a made-up word can not be limited by search results or predicted by appaisals.
I don't like the idea of putting sticks in my own wheels.
In my humble opinion one should have no rules, while facing himself.
Greetings, Maximinus
 
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Domaining is a whole new world. You cannot compare it to other traditional types of investments. It falls into the branding world. Advertising, marketing, etc. You have to learn what business people want and what would make a good brand. What would make a great business. It's a talent that requires an ear for good names. Sorry, I skimmed over your post because it is long so I apologize if I repeated any of your points or overlooked anything.
 
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Good to have and I am sure most professionals domainer having it even if not in written form. I was bidding some 4L ED auctions, last minutes from $200, it went up closing over $2,000, with numerous extended times, I stoped after my budgeted $300 as I don't think the 4L could sell more than x10 for $3,000. I have much better 4L in my brand4sales.com at much lower price. Auction always very "emotional" and bidders always got arrived away, I regretted many times because having the so called Prospectus written down
 
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Thx for an other quintessential article and always new ideas, you are pushing domainers to a next level.:xf.grin:
 
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Very nice writeup @Bob Hawkes. While the factors mentioned possibly would play a part in a domainer keeping himself in check from overspending there is no science to domaining or absolutes. The best one can expect is educated guesses.

This is a very fluid ever changing industry which means a prospectus would have to be evaluated and adjusted frequently. Even with that, there are no guarantees anything you hold will ever sell.

We have all seen names we would all say DROP to —sell. We have all seen great names go very cheap or never sell. We see trends change all the time.

As an example, I acquired a dropped name in January and it sold on the 59th day after that for XXXX. Was the guy who dropped it foolish or was I lucky? I would imagine it is more of the luck and timing part. There is no accounting for range of taste of the buyers and luck plays a bigger part in this business than most admit.

After years at this, I do stick with certain types of acquisitions. You have to believe in what you are buying or why bother.

Too many new domainers do this register anything and hope it sticks and only hold domains one year which are both recipes for failure imo. Don’t get names you would not confidently keep for at least a few years.
 
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Thanks, BOB for one more time brilliant
 
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In response to the overall premise of " using a prospectus" in regards to domain name acquisition, no, I have never used a personal prospectus per se.

And I'll add frankly, the idea of a written prospectus never crossed my mind although I tended to
" eyeball " potential domain acquisitions using the likely criteria I might have put into a prospectus had I prepared one.

Actually I could envision the concept of a " prospectus " being a key element in a domain investment group or similar fractional domain name ownership group.

Quite an interesting concept Bob, thanks for another great article!
 
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A good enterprise must match a good domain name can!
 
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After years at this, I do stick with certain types of acquisitions. You have to believe in what you are buying or why bother.
@karmaco Without realising it, in your whole post rather than this short excerpt, you've said you don't want one but you have one. It's in your head, not on paper (or screen), and you are experienced enough for it to be a high level (overview) prospectus with just a few lines. That's no bad thing.

@Bob Hawkes I love the idea. I'd have to remember to read it before scanning any lists of names, whether drops, auctions or anything else.

Also, as @karmaco correctly pointed out, I'd need to update it frequently both for market factors and also to adjust for progress in my own learning curve.
 
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Excellent article for domainers, Thanks.
 
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Excellent article, Thanks for sharing
.
 
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@Bob Hawkes always rock in his writing. Thank you Sir
 
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@Bob Hawkes always rock in his writing. Thank you Sir
 
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Dear @Bob Hawkes, My entry into domain industry happened when someone approached me in May 2020 (Yes, 4 months ago) and acquired my domain which I registered for my own startup. At that time I was totally new about this sector and even not aware about NamePros. I sold my domain 20 times higher than what valuation tools GoDaddy and Estibot were suggesting and later on when I found similar domain sold at SEDO auction; I realised that I sold my domain 10 times less than the market value. Now we all can imagine how poorly and off the track projection of these valuation tools were.

This was my first and important lesson which I will cherish throughout my domaining journey. Actually, Branding is more of art than science and therefore indepth meaning, rhythms, appearance play important role in decision making than technical aspects like SEO, Backlinks etc.

Remember in intangible valuation, quality and reputation are main decisive factors than quantity. Unfortunately I haven't come across any tools which can correctly quantify crucial aspects like culture, tradition, society, human behavior etc. This leads incorrect perception and valuation.

It is like old Picasso black and white paintings are selling at million dollar whereas bright young painters are still finding difficulties to pay their daily bills. Here might be the young painter would be better than Picasso but still both's paintings will be prrceived differently and market will decide the valuation. The reason is perception and reputation which is true in our industry too.

I am still building my portfolio which you can see in DAN under my NP username and before acquiring any domain I ask only one question myself "if I would have a company in this sector, would I keep that name for my company and continue for lifetime"

If the answer is yes, I simply acquire that name even if all technical features are against it. Thanks
 
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What a wonderful article! Thank you for sharing!
 
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You are really and absolutely a true Domain analyst and commentator!
 
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@Bob Hawkes excellent article..
Must read for all... especially for people who are beginning into this field.

All are great points and I don't think majority of investors follow anything like this... everyone should!

Thanks for your work and time...

Ravi.
 
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Sorry to have sort of neglected this thread after my OP. Thank you to all who have offered supportive comments and new ideas. I really appreciate it. Here are my reflections on a few of the many excellent points made.

I might also, offer up the term "Investment Policy Statement"
Thanks for that suggestion, and I agree that it is a great term for what I have in mind. In fact, if the statement is just for the investor's own purpose (as opposed to a partner or investment group) it is probably a better choice of term.

I don't like the idea of focusing on one type of domain names. I learn something new every day
I agree and believe in diversification of a portfolio. I also find the finding something new part of what keeps domaining interesting. The idea of a prospectus was not to limit to just a few type of names, but perhaps to limit that we would not collect certain things. Note also that I did mention that even with a broad prospectus I think we should not always follow it for direction.

You have to learn what business people want and what would make a good brand. What would make a great business.
Nice summary of the most important aspect to any potential acquisition.

Good to have and I am sure most professionals domainer having it even if not in written form.
I suspect that is true. The more experienced the investor, probably the lower the need to have it written down.

While the factors mentioned possibly would play a part in a domainer keeping himself in check from overspending there is no science to domaining or absolutes.
I agree. Idea of prospectus is to maybe guide what to search for, but it would not tell you (despite my attempt at catchy lead) what to acquire. I agree that while statistics and science can inform, there will always be much of the art in name selection.

I'll add frankly, the idea of a written prospectus never crossed my mind
@WatchDogue Not just you! As much as I believe in plans and written things, I still do not have a full prospectus written down, although I do have parts of one now, but did not a year ago. It was in reducing my portfolio, with many names that I liked, but committed to get to a lower number, that I decided some plan of what it is I invest in would be helpful. And it was.

It's in your head, not on paper (or screen), and you are experienced enough for it to be a high level (overview) prospectus with just a few lines. That's no bad thing.
Yes, I agree that most experienced investors can, and perhaps should, have it in their head but not necessarily written down. That said, sometimes when we write things down that triggers insights.

Actually, Branding is more of art than science and therefore indepth meaning, rhythms, appearance play important role in decision making than technical aspects like SEO, Backlinks etc.
Eloquent statement, and I agree that we can sometimes get too carried away with the numbers, and miss seeing what is an inherently great name.

I ask only one question myself "if I would have a company in this sector, would I keep that name for my company and continue for lifetime"
A perfect summary. Thank you.

I was somewhat surprised from poll that about 80% think the idea is worthwhile, even if they do not currently have one in written form. More have a written one than I might have guessed. If you have not yet voted in the poll, please do so.

Thanks again, everyone.

Bob
 
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