NameSilo

Is Domain Name Investing Profitable?

Labeled as analysis in Domain Industry News started by Bob Hawkes, Oct 26, 2018.

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  1. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent Gold Account VIP

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    The one described in the first post in this thread, or more completely at this link. Thanks for your interest and let me know if you have any questions!

    Bob
     
    The views expressed on this page by users and staff are their own, not those of NamePros.
  2. domainer111

    domainer111 Established Member ★★★★★★★★★★

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    Heavy!

    I guess with gambling, the bookmakers do pay out 80% of their takings. So a good few make in that game. Not sure domaining is so far behind.
     
    Last edited: Oct 27, 2018
  3. wot

    wot Top Member VIP ★★★★★★★★★★

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    Isn't the basics simply if you sell for more than you purchased, incorporating any expenses in the purchase price including lost interest,renewals etc, then you are making a profit?
     
  4. domainer111

    domainer111 Established Member ★★★★★★★★★★

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    It can't be that simple. If it was that simple, then everyone would be using those metrics.
     
    Last edited: Oct 27, 2018
  5. wot

    wot Top Member VIP ★★★★★★★★★★

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    You mean the simplicity of buying something for one price and selling for a higher price is a difficult concept?

    The concept is easy to understand, it's the doing that is the difficult part,not just with domain names.

    Mr Micawber cracked it years ago.
     
    Last edited: Oct 27, 2018
  6. BrandKart

    BrandKart Pick the right name with us ! VIP

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    Why can't a low model that is hand reg sell for an average price $1200? Let say you have 5000 domains, 35000 USD investment , even you manage to sell 1% for $1200 avg price which I think it's achievable, your already in profit per year ....
     
  7. Jay Ha

    Jay Ha Exploring..

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    This probability I will never understand. Reason:
    (Inventory A): a portfolio of 3/4 worders, misspellings, out-of-date keywords, hyphenated, and l33t names. Not to mention the dead ngTLDs.

    This kind of inventory should not have the same probability of selling anywhere close to someone who has (Inventory B): hand-picked names of "quality".COMs ie. dictionary one-worders, 2/3 characters, 4 letters(?), and up-to 5 digit numerics, 2 keywords that go well together, catchy/pronounceable brandables, strong GEOs, and niche names that are in the market now or in the near future.

    Looking through expired lists, 90% of it are names that fall under 'Inventory A'. This kind of names is bringing the whole 'percentage of selling' down imo.
     
  8. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent Gold Account VIP

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    Yes I agree @Jay Ha The figures are the probability (estimate with significant uncertainty) for the whole universe of domain names for sale. Of course some name/price combinations will have a probability of essentially 1 of selling in a year (i.e. will sell for sure), while others will be very near 0. My hope is that these models and figures would provide a reference for comparing our own holdings. Most skilled domainers would justifiably use figures above the average. Some (not all!) newcomers should probably build a model at or slightly below the average in doing their business plan.

    It absolutely can @Brand Ultra.This is just one attempt at seeing what the results would be for different models. People do (at least occasionally) turn hand reg into very high figure sales.

    Nice way to succinctly summarize @domainer111 ! I think the numbers are still uncertain enough to be sure, but I was surprised how close my "best estimate" model came to being break even (it was slightly better than break even). I suspect that does reflect our business overall, a few make a lot, but the vast majority either slightly make a bit or slightly lose a bit.

    Yes. Exactly. Predicting which names will do that is the hard part of course :xf.wink:! The analysis tried to see if overall the industry (or at least domainer part of it) is managing to make a profit. The clear answer? Maybe, Maybe Not ! :xf.grin:

    Seriously thank you all for the input, suggestions and comments. A key part to domain success, imho, is being open to new ideas, but challenging ideas with a critical (in the sense of questioning, not in the everyday sense of being negative re everything). Thanks again.

    Bob
     
    Last edited: Oct 27, 2018
  9. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    There is a considerable gap between typical domainer pricing and typical end user willingness to pay for a domain name. There are end users paying six figures annually for PPC advertising yet their budget for domain names is $xx. Or the real estate agency in downtown West Palm which is likely paying six figures for their office space in a high rent area but operates on a double hyphenated domain name. If we base pricing on ability to pay then any inquiry gets priced at $5k but since most people view domains like cheap electronics ($XX to low $xxx at best) how sensitive are sales to pricing? Registry sales are not what the typical domain investor realizes. Yet we cannot exclude domainer to domainer sales as more than 80% of my sales over the last ten plus years were to either investors or unmotivated end users who did nothing with the acquisition.
     
  10. wwwweb

    wwwweb Top Member VIP

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    Your commission schedule at 10% is much to low, it should be at least 15%, but many exchanges are charging 20-30%.
     
  11. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent Gold Account VIP

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    I do realize that some are higher, but it is also true that a number of sales are taking place at locations like Undeveloped that offer 9% commission, privately via outbound without commission, and on Efty sites, again without commission. Also a number of the registrar marketplaces are 10% and less. My figure of 10% was an attempt at some sort off average over all venues, but thank you for your opinion that it should be higher.

    Bob
     
  12. Ategy.com

    Ategy.com NameCult.com Gold Account VIP

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    Interesting macro view of it all. It's funny that just a few days ago I actually stressed in another thread a huge factor that most people don't consider when building their portfolio is that equally important to profit, is indeed probability of sale. On an individual level this number is virtually impossible to predict .. but it's interesting to see the numbers you assumed in your calculations at a large macro industry level.

    I'm not sure most people understand that your model is in no way meant to estimate individual portfolios and even less individual domains. It's simply meant to give us a global guesstimate of the overall industry. Your model already makes too many guesses and assumptions to be realistically reliable (I don't mean that in a bad way, it's just that obviously most of the information/data required for such a model to be anything even close to accurate simply is not available) .. then the more you get into individual portfolios and domains, the more vastly randomising factors come into play.

    That being said .. older domainers should already have a model of their own using the numbers from their own portfolio .. that shouldn't be too hard if you have a few years of your own sales data ... from that you can get a vastly more accurate profit prediction model (although obviously there is still a lot of randomness and dumb luck involved depending on your names and pricing .. lol).
     
  13. J Sokol

    J Sokol Established Member

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    @Ategy, I agree with what you said below - it seems lot more concrete than the other methods.

     
    Last edited: Oct 27, 2018
  14. offthehandle

    offthehandle . Gold Account VIP

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    Hi,

    I think you have embarked on a good journey. What I am not sure of is your direction. What you might consider in the future is really taking a closer look at “data integrity”. It would be great to see someone analyzing how many sales are to valid end users to resolve to actual websites and not parking pages, and making a list of those reported on weekly sales reports and databases and later fell through or were “discovered” simply between investors. The data on true end user sales for websites gets mixed in with those statistics. Even if Disney say buys a domain and simply parks it, it might be irrelevant as it was a defensive purchase or future project. I have for the past year found way too many “news” reports that when I went to look at the “website”, or “owner” via whois- its disappointing. No website, same nameservers, parked pages, lots of suspect data.

    Often it seems end users do not want their sales price info published, but it doesnt mean the website is to remain a secret. Perhaps it is difficult and so the majority of this data published is domainer to domainer sales. I know many people on this forum consider that a “sale is a sale”, personally imho the wholesale part of this business is irrelevant. Just because someone sells a name to another speculator does not show the health of the internet and web use and development of the actual market.

    Since you really want to look into statistics, It would be nice if you could be highly critical of the data and filter out the “noise”. It would be nice to see a new blog that was really honest about real news of end user websites built on great recent names purchased, not of $xxx,xxx sales sold to well heeled investors or to prop up some brokers or anyone bought names on speculation. I find only a few blogs that report the end user sales for real websites.

    Even $xxxx sales to end users who develop are interesting. All vertical markets have sales and knowing about development segments adds to the integrity market trends and of market growth of the internet as a whole. Glad to see a new blog and data resource. Keep at it!
     
  15. domainer111

    domainer111 Established Member ★★★★★★★★★★

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    But other thing is, most end user projects don't work out commercially. That's the reality.
     
  16. J Sokol

    J Sokol Established Member

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    Thanks for your comments @offthehandle, you make some great points.
     
  17. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent Gold Account VIP

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    Thanks for your detailed response, @offthehandle. I am still thinking about some of the points you raise. I agree that there are many things to potentially look at, so I won't be out of things to analyze for a long time!

    I also agree that an important metric is how many domain acquisitions are being used in meaningful ways in actual websites. While I have looked at the big name past sales in this regard, and James looked at what Mike Mann's biggest price announced sales are doing now, clearly a look more broadly would be interesting. For example, look at some sample from domain names sold a year ago and see how they break down in terms of unused, for sale, in use somewhat (e.g. redirect) or fully used. The long term health, ultimately, of the business depends on digital assets being seen to be valuable, and that requires use.

    This particular analysis, however, was trying to answer the question Is the domain industry, on average, profitable? For that, I am not sure that it really matters how the name gets used, or even if, but only that it legitimately sold. If it was purchased to develop a website, for possible future use, to hold long term as a digital asset, to protect from a competitor using it, or by a domainer to try to sell for more, it is still a sale. While we always need consider biases, I think NameBio is by far the most reliable and broad source of sales data for such an analysis.

    Thanks

    Bob

    ps re
    Thank you! I should clarify that while I have only recently begun writing for NameTalent, that site has been operational for about a decade and there are lots off worthwhile older articles not written by me. I am appreciative that they have given me the opportunity to write there. My own personal blog is about a year and a half old, and I will continue to be active there, with different content. I am appreciative of all who read my analysis/posts at NPs, NameTalent, on Twitter or at my own personal blog!
     
  18. cyborg1960

    cyborg1960 Established Member

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    where meat? only vegetable, huh
     
    Last edited: Oct 28, 2018
  19. E-Promote

    E-Promote Top Member VIP ★★★★★★★★★★

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    Nope, nothing to see here (in domain investing) folks, just keep moving along...
     
    Last edited: Oct 28, 2018
  20. topdom

    topdom Established Member

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    Not profitable because endusers are very unprofessional.
     
  21. .X.

    .X. NameFeature.com Gold Account VIP ★★★★★★★★★★

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    That ^^^^*^^^^^^^^^^^^^^^^^^^^^^^^

    And to add, if a person had put completely insane pricing on their domains, don’t expect to get paid often. This has to be the #1 mistake I see all the time.

    Swinging for fence all the time will only hold you back and cause you to lose leverage over your portfolio, that causing a person not to be able to buy inventory and sit stagnant.
     
    Last edited: Oct 29, 2018
  22. topdom

    topdom Established Member

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    Track buyer IP, and price accordingly. Sedo doesn't allow this. Probably others don't do this either. You need to track visitors yourself.
     
  23. toorjoor

    toorjoor New Member

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    Thanks for good website.
    Please Don't miss my site this is about tours
     
  24. Cdomains

    Cdomains Top Member VIP

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    I have not read through all the posts yet, but did anyone mention accounting for the quality of the domains sold?

    It seems to me this would be a major factor.

    Also, remember domain quality is very subjective, to a degree.
     
  25. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent Gold Account VIP

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    The model looks at the domain industry as a whole not at specific portfolios or names. Clearly quality is critical in probability of selling, and price, for any individual domain name. So the quality reflected here is the average quality of every domain name being currently offered for sale. If your portfolio is better than the average, you should adjust results correspondingly.

    In part 2 (or 3) I am planning to advise on how to use the basic probability formula but for numbers for individual domains and portfolios. This step 1 was to give background on what the average is industry wide.

    Thanks for your question.

    Bob
     

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