Is a domain portfolio an asset?

[garptrader]

An asset is something with economic value from which future economic events can be expected (can be converted to cash). Individual domain names can be very illiquid and cost money to hold. A portfolio of domains which produces more parking income than renewal fees would generate positive cash flow and in finance a stream of cash flows can be discounted to produce a "net present value." Even a portfolio with less parking income than renewals may still produce positive cash flow if it regularly produces sales which more than compensate for the difference. Many domains do not sell because they are priced higher than any normal end user is willing to pay. In such cases, more realistic pricing might enable more sales and help to produce positive cash flow. Of course domains can be developed into businesses but development requires considerable resources and there is no guarantee such an offer will generate an attractive return.

If a portfolio of domains whether they are .COM, CCTLD or .new GTLD is consistently producing negative cash flow, it would seem at least careful scrutiny is necessary to eliminate the domains which are unlikely to sell in the future. It takes a while to bite the bullet and discard useless domains. Otherwise, the domain portfolio is merely burning cash. Of course the proliferation of new TLDs gives potential buyers many more options.

 

[Kate]

Nice post. What was the question ?

Of course, a portfolio has to be constantly reassessed, trimmed down, streamlined. This is what I do: keep the portfolio lean and at the same time I strive to consistently raise the overall quality.

Quality > quantity.
It's unfortunate not everybody gets it in the beginning

Answer: a domain portfolio is not always an asset, it is often a liability

 

[NameFit]

Domain portfolio is definitely an asset if you have positive cash flow for the past consecutive 3+ years - meaning your strategy is working fine - keep refining it. Though past is not indication of future, but a good indicator.

 

[JamesCrew]

Very well written mate.

Regarding the part where you have discussed about developing domains, I would add that this should be in our (domainers) business plan as well.

Developed domains can be several times profitable than undeveloped domain names. Not to mention the income stream such developed sites can generate are also worth it as long as the site are worked the right way. And the worth of the site and domain name itself increases after time, so it's a good route to go on if you can manage it easily and have patience. Take it as a long term investment.

Of course it involves many resources like time, capital, continual activity and maintenance, but the end results will be worth it.

Start small and then scale it once you have a complete hold of your current web properties and they have started to get response (visitors.)

So if you can manage developing domains, it's also a great business in its own unique way.

Cheers,