discuss Did we get the entire ROI concept wrong?

[abstractdomainer]

Lately, I realized that I have been calculating the entire domain investment ROI pretty wrong.

Here is what I calculated:

Bought 200 domain names at $10 a piece
Sold 3 domain names for $1,000, $2,500 and $2,000. Platform fee and other charges - $500.

Thought Process
Domain 1 - Bought for $10, sold for $1000
Domain 2 - Bought for $10, sold for $2500
Domain 3 - Bought for $10, sold for $2000

ROI - 100x or 10000% on domain 1
ROI - 250x or 25000% on domain 2
ROI - 200x or 20000% on domain 3

That is how most domain investors share their ROI. But is that correct? I don't think so!

Here is what is missed out:

1) The domains which did not sell - I actually made $5,000 over an investment of $1000. So my profit is $4,000 or 400%.
2) The profit is on the portfolio and not on a domain name
3) The profit should be per year (Revenue (Sale) - Cost (renewal+acquisition+platform fee))

So I think any profits (not sales) should be:

1) Reported per year and not per domain name
2) Should factor in acquisition cost, renewals, platform fee, PayPal fee, escrow fee etc.
3) Should factor in the opportunity cost (what you would do and earn if you didn't do this)

Do you agree?

 

[Samer]

i dont know, it’s so subjective.

I think we get a better idea of clear ROI;

if more people share sales!

Samer

 

[MadAboutDomains]

It's like Instagram - everyone puts whatever makes them look best and their successes on there without context of the general humdrum of their boring lives.

I agree that there should be more context to almost everything, but I suppose that people don't want to share it...

I'd love to know how much money people sink into their other domains

 

[Digital Nomad]

Lately, I realized that I have been calculating the entire domain investment ROI pretty wrong.

Here is what I calculated:

Bought 200 domain names at $10 a piece
Sold 3 domain names for $1,000, $2,500 and $2,000. Platform fee and other charges - $500.

Thought Process
Domain 1 - Bought for $10, sold for $1000
Domain 2 - Bought for $10, sold for $2500
Domain 3 - Bought for $10, sold for $2000

ROI - 100x or 10000% on domain 1
ROI - 250x or 25000% on domain 2
ROI - 200x or 20000% on domain 3

That is how most domain investors share their ROI. But is that correct? I don't think so!

Here is what is missed out:

1) The domains which did not sell - I actually made $5,000 over an investment of $1000. So my profit is $4,000 or 400%.
2) The profit is on the portfolio and not on a domain name
3) The profit should be per year (Revenue (Sale) - Cost (renewal+acquisition+platform fee))

So I think any profits (not sales) should be:

1) Reported per year and not per domain name
2) Should factor in acquisition cost, renewals, platform fee, PayPal fee, escrow fee etc.
3) Should factor in the opportunity cost (what you would do and earn if you didn't do this)

Do you agree?

I think your investment was $2000 (200 domains x $10) or am I missing something, but I see your point, good questions!

 

[Lord Antares]

I thought this was a "no shit, Sherlock" thing.

 

[D Haynes]

What do you value your time at? 20 bucks an hour?

Might not stand from a tax return point of view but I certainly consider the time I spend on domaining as an outlay/expense.

 

[bmugford]

In my view you can only calculate ROI on a portfolio wide scale.

If you bought 100 domains for $100 each, you spent $10,0000. If you sell 1 domain for $5,000 sure you made a ROI of 4,900% on that single sale but you also lost $5,000 as a portfolio.

That is exactly why single sales are a poor judge of anything when it comes to domain sales.

You need consistent, repeatable sales to build a business on.

At the end of the year the ROI is calculated simply based on the number (total income - total expenses).

Brad

 

[NickB]

Ugh - is my maths wrong or has the OP got his figures wrong.......

200 domains x $10 = $2,000

Platform fee and other charges = $500

Outlay = $2,500

Domain 1 - Bought for $10, sold for $1000 = $990 profit
Domain 2 - Bought for $10, sold for $2500 = $2,490 profit
Domain 3 - Bought for $10, sold for $2000 = $1,990 profit

Total sold = $5,470

$5,470 - $2,500 = $2.970 profit (before applicable taxes etc) .............not $4,000

With $1,970 worth of renewals in the pipe line......

Or am I missing something?

 

[branding]

Or am I missing something?

Yes, taxes.

Edit:

Scratch that... You didn't

 

[bmugford]

With $1,970 worth of renewals in the pipe line......

This is a key point and why you need steady, repeatable sales.

To extract maximum value from domains there is no substitute for time.

I don't think it is really a viable business model to just register hundreds or thousands of domains then drop all of them each year.

Brad

 

[branding]

I thought this was a "no shit, Sherlock" thing.

Of course it is. These posts are just for SEO. Op never posts another reply in his started threads. It's all so obvious.

 

[Lord Antares]

Of course it is. These posts are just for SEO. Op never posts another reply in his started threads. It's all so obvious.

What does he gain with that? Fame?

 

[branding]

What does he gain with that? Fame?

Nah, ultimately traffic that can be monetised. If my assumption is right, it's actually well thought through, nice and subtle.

Ever noticed users randomly spamming a forum with nonsensical posts? Same thing but less subtle.

Best thing is not to engage actually. As engagement on a thread grows, so does the 'value' of their planted keywords.

 

[comRaid]

Nah, ultimately traffic that can be monetised. If my assumption is right, it's actually well thought through, nice and subtle.

Ever noticed users randomly spamming a forum with nonsensical posts? Same thing but less subtle.

Best thing is not to engage actually. As engagement on a thread grows, so does the 'value' of their planted keywords.

Am I missing something here. SEO of what? There is no link in this post connecting to his website or blog.

 

[Lord Antares]

Yeah, that's what I was gonna ask too. SEO for what? Where do you think he leads this traffic? He leaves no links.

 

[branding]

You can push certain keywords related to a subject by implementing them in forum posts. Then use the same keywords/articles on your website. Works well on highly active forums. When you search for something, the forum will give it authority as it's being actively discussed by a 'trusted' source and push your own content up in the search results as the content is unique and similar to what supposedly a lot of people are discussing.

Think of trending terms on twitter or whatever. Place similar keywords on your website with some unique content and up goes your traffic. Search engines log whatever you do, engage in posts about a subject, no doubt on your next search similar content from less authoritative sources will come up.

The reason there are no links is that most forums will flag that as spam and search algorithms will pick up on it and see right through it.

I'm not saying this is what he's doing but it sure does look like it.

 

[abstractdomainer]

You can push certain keywords related to a subject by implementing them in forum posts. Then use the same keywords/articles on your website. Works well on highly active forums. When you search for something, the forum will give it authority as it's being actively discussed by a 'trusted' source and push your own content up in the search results as the content is unique and similar to what supposedly a lot of people are discussing.

Think of trending terms on twitter or whatever. Place similar keywords on your website with some unique content and up goes your traffic. Search engines log whatever you do, engage in posts about a subject, no doubt on your next search similar content from less authoritative sources will come up.

The reason there are no links is that most forums will flag that as spam and search algorithms will pick up on it and see right through it.

I'm not saying this is what he's doing but it sure does look like it.

Hey, thanks for that! Too much of an imagination here.
The aim is only to help as I do my own domain name investment. I do not have any blog or a website whatsoever! A lot of topics come up which I realize I have been doing wrong and hence, rise up to state the same!

How many of you publish an annual report or a PORTFOLIO ROI? None! Everyone publishes a sale - Bought for $2, sold for $10000. But how many did you buy? How many did you sell? No one does! Not even me!

And I got into the same frenzy that I sold a $1 .co for $1200 and so on. On critical thinking, these things come up and I choose to bring them up in the discussion because what we see is partial reality.

The thought came up while reading the comments on Mike Mann's post (which was researched and screenshots attached btw) that although people may report a number of sales, you have no idea what their renewals are. And while $10,000 sale may look big, is it actually?

 

[bmugford]

How many of you publish an annual report or a PORTFOLIO ROI? None! Everyone publishes a sale - Bought for $2, sold for $10000. But how many did you buy? How many did you sell? No one does! Not even me!

Why would someone? Unless you are a public company that information is for you and your accountant.

What benefit is there releasing that information publicly?

Brad

 

[abstractdomainer]

What do you value your time at? 20 bucks an hour?

Might not stand from a tax return point of view but I certainly consider the time I spend on domaining as an outlay/expense.

That's the right thing to do! Absolutely. If people don't put an emphasis on the time invested and the opportunity cost, this is more of a hobby for them, not a business!

In my view you can only calculate ROI on a portfolio wide scale.

If you bought 100 domains for $100 each, you spent $10,0000. If you sell 1 domain for $5,000 sure you made a ROI of 4,900% on that single sale but you also lost $5,000 as a portfolio.

That is exactly why single sales are a poor judge of anything when it comes to domain sales.

You need consistent, repeatable sales to build a business on.

At the end of the year the ROI is calculated simply based on the number (total income - total expenses).

Brad

Correct but do you see that reported as well? I don't think so! It is just the $10 --> $5000 and so on. Hence, the thread to think from this perspective as well.
While people may think that they are only making $5000 a month sale while their other friends are selling $50,000 a month, the acquisitiin and renewal itself could be very high, which doesn't give the picture. I just wanted to highlight that you may be doing fine/or not fine, in your own game

 

[abstractdomainer]

Why would someone? Unless you are a public company that information is for you and your accountant.

What benefit is there releasing that information publicly?

Brad

Agreed, I am just saying that $2 flip to $20,000 is not the right representation of ROI, as we sometimes think. Not to say that people should share or not, but just saying, $2 --> $20,000 is not a 10,000x return. For people to understand that behind every sale, there could be a portfolio involved instead of a single domain name that sold.

 

[bmugford]

Agreed, I am just saying that $2 flip to $20,000 is not the right representation of ROI, as we sometimes think. Not to say that people should share or not, but just saying, $2 --> $20,000 is not a 10,000x return. For people to understand that behind every sale, there could be a portfolio involved instead of a single domain name that sold.

I agree. You are preaching to the choir.

You can probably find many comments from me in various threads on NamePros, on blogs, etc. where I say something like "You have to account for all the domains you don't sell in a year, not just the domains you do sell".

Brad

 

[branding]

Hey, thanks for that! Too much of an imagination here.
The aim is only to help as I do my own domain name investment. I do not have any blog or a website whatsoever! A lot of topics come up which I realize I have been doing wrong and hence, rise up to state the same!

Call it a creative mind Well if you say so I'll take your word for it. Back on topic then...

 

[Ostrados]

I agree with you ROI should be calculated on your entire investment not on each domain individually. That's said, ROI is not calculated yearly, instead you should calculate total expenses and revenues for each year, then calculated ROI for the whole investment period (ex: 5 years of domaining).

How many of you publish an annual report or a PORTFOLIO ROI? None! Everyone publishes a sale - Bought for $2, sold for $10000. But how many did you buy? How many did you sell? No one does! Not even me!

Very few do that. Read this excellent thread by @Nikul Sanghvi
(Almost) A Decade of Domaining...

@Bob Hawkes described above thread perfectly as "NamePros post of the century" which I totally agree with because Nikul contributed a very valuable and rare analysis. I hope more successful domain investor do the same and share their portfolio wide performance.

 

[karamakate]

( INCOME - EXPENSES ) = PROFIT

Basic math.

 

[MadAboutDomains]

( INCOME - EXPENSES ) = PROFIT

Basic math.

Minus tax