Is there an optimal portfolio size?

[Havela]

I have been pondering over an interesting subdiscussion in the 'Brandable' thread for the last couple of days.

(Here it is: http://www.namepros.com/790532-brandable-domains-2.html#post4482299)

I know the domainers on this forum swear by completely different business model when it comes to portfolio size.

Some go for as few as possible ('buy one domain for $500 instead of 50 domains for $10') whereas others seem to maintain hundreds or even thousands of domains.

I believe that when you reach certain numbers, it will be impossible to maintain a profitable business, as is properly illustrated by the post by stub which I linked to above. With hundreds of thousands of domains, how can you even have the time to push them before they come up for renewal? You would have to hire people, which costs money too. Nor would it be possible to maintain high quality throughout the portfolio.

On the other hand, if you do no active selling and have only a few truly great domains, I do not see how you can live off it full-time either; it would have to remain a hobby.

So is there a figure in-between which is optimal for full-time domaining?

Elliot Silver is a successful full-time domainer who according to his domain homepage has "hundreds" of domains and who says he likes to move inventory quickly.

Morgan Linton is another person who lives comfortably off his domain sales and has several people working for him. He says he still oversees the purchase of every domain, which means that he cannot have too large a portfolio.

Federer is a third person who seems to be moving inventory really quickly and have few domains at a time, but he appears to be going through quite a large number of domains during one year and is operating in a different price range from Elliot.

So is a couple of hundred high quality domains optimal?
Or are there too many viable business models to generalise?
What do people think?

 

[DU]

The best way to make money from domain sales is to not hold any domains .. just as the best way to make money in the stock market is not to have any long positions.

 

[PNW]

From my own experience, names with the lowest acquisition cost (reg fee) produce the highest profits plus being in many places at many times increases sales opportunities. On a side note, I disagree w/ DU's stock market position. Slow and steady (long position) is the most stable. That is not to say you shouldn't be aggressive at times, especially in your earlier years.

 

[Fingerpod]

I would think that you should have 10-20 domains and make sure they are good. I personally would never register a few hundred domains unless I was going somewhere with the idea.

 

[Havela]

From my own experience, names with the lowest acquisition cost (reg fee) produce the highest profits

I agree that reg fee domains produce the highest ROI (if you are able to sell them) - but not necessarily more money in the bank. Selling e.g. one domain acquired at $1000 for $2000 gives more profit than selling 10 reg fee domains for $150. Plus you would have to account for all time spent on emailing buyers. I might very well be able to sell my reg fee domains for low $xxx which gives an excellent ROI, but it takes a few hours to find prospects and email them and that is hours I could have spent on my other businesses.

Having said that, personally I purchase low-priced domains because I am not able to predict their profitability yet (if ever). It is all fair and well to buy $xxxx domains if you are fairly certain that you can move them for $xxxxx (like Silver does), but I don't know that.

Speaking of, I see many people recommending newbies to buy one domain for $xxx rather than 10 for $xx. But what if that one domain is worthless - how would a newbie know? There are countless of worthless domains being advertised at $xxx (e.g. by other newbies). It takes long time, lots of reading and possibly also building the right connections to sell domains in the range of $xxxx - $xxxxx :imho: Better get some feeling for what people want first.

(For instance - one of my first lessons: Don't buy anything else than .com. I know it's a cliche but it's so so true. Nobody wants my .net or .me domains. Hacks might possibly become more popular, but it is more of a gamble to find the desirable ones.)

 

[Kate]

Speaking of, I see many people recommending newbies to buy one domain for $xxx rather than 10 for $xx. But what if that one domain is worthless - how would a newbie know?

That's the problem, newbies don't know what to buy so it's difficult to act on this good advice.

It's difficult to answer your question, because there are different business models. People like Federer move inventory fast. Others hold out for the best end user offer. Some buy domains for resale, others make money from PPC.

The very large domain portfolios like Frank or Buydomains may be viable only because of their critical mass. The overall quality may be average or low, but they make enough end user sales to sustain their operations.

As for the so-called successful, full-time domainers, I think we may be surprised if we knew the actual figures. I'm sure some are not that successful :gl:

The majority of domainers are individuals, not businesses. Individuals are not subject to the same pressure as corporations and tend to be less realistic and more laid back when it comes to decision making...

There are many ways to skin a cat, and the ability to make good decisions is more important than the size of the portfolio. Answer: that depends :gl:

 

[SpareDomains]

I have always been in the 500-1000 range, 99% .com. Most bought expired for reg fee. Not a flipper so I tend to hold for years. Buy for $8, sell for 1-10k usually which sometimes takes a year or two for the "right" buyer to come along as I let them come to me. Get a ton of offers but the key is an offer from the "right" buyer.

Over the last few years developed quite a few sites so busy managing those so an occasional $8 into a few K helps finance my next development.

Depends on your financial position. If you need to eat from domaining then maybe flip away as profit is profit. If you don't need the domaining money then develop some profitable sites which is my current model and let the buyers come to you on the domain sales end. Obviously quality domains makes this model easier as your inbox seems to fill up on it's own. Never been a flipper as it's getting harder to replace gems you sell off cheap these days as competition continues to increase. Would say start slow, try a model for a year, analyze and if your starving change your model up as the quality of the domains determines if you can be passive instead of aggressive. Best profits come from the buyer knocking on your door first and playing a passive game but if the quality isn't there not gonna happen much.

 

[Havela]

As for the so-called successful, full-time domainers, I think we may be surprised if we knew the actual figures. I'm sure some are not that successful :gl:
(...)
There are many ways to skin a cat, and the ability to make good decisions is more important than the size of the portfolio. Answer: that depends :gl:

Wisely spoken, as always.

I have always been in the 500-1000 range, 99% .com. Most bought expired for reg fee. Not a flipper so I tend to hold for years. Buy for $8, sell for 1-10k usually which sometimes takes a year or two for the "right" buyer to come along as I let them come to me. Get a ton of offers but the key is an offer from the "right" buyer.

This is interesting. Are you really able to sell reg fee domains passively for $xxxx after a coupla years? Good for you Wish I knew how to do that...

As for development I have had no luck with that yet. I was inspired by a few posts by Morgan Linton, but so far I've not been able to get the hang of it, I guess my heart just isn't in it. I earn more from parking than from my adsense sites (this is not to imply that I earn much from parking...). Everyone is able to put up a wordpress site, write some articles and add a little adsense here and there, but I think getting people to click on the ads is an artform in itself.

 

[Name Trader]

I have too many domains. I'm always striving to halve my portfolio. I can cut out about 1/3rd of my domains when they expire. But it's the dang-est thing. I replace them with new ones (hopefully of better quality.. because I've learned more) every day. I usually break-even every year or a couple of grand (or so) either way. Sometimes, well quite a lot, Huge Domains picks up a number of my drops (at least 15% on average). Now I'm not saying that they can see something in my dropped domains that I couldn't, they could still be crap for them also. But his script model does pick up a lot of keyword domains. But based upon the stats I gave in the message you quote, I think he's going bankrupt very quickly. Of course the stats could be totally wrong.

So I think it entirely depends on your business model, and your cash flow. Most domainer models don't work if you are strapped for cash. You are much better always going for quality rather than quantity. And as you say always, always buy only .com. I've had an expensive excursions into many other tld's and sold almost none, in .net, .org, .biz, .info, .us, .cc, .ws. About 10% of my portfolio is non-com. I'd like to get that below 5%. the closer to zero the better. But you can afford a little speculation.

To answer your question directly. I think there is no optimum level for the number of domains you own. It depends on every domainer's strategy. But you should buy quality domains only. And you need some cash flow. Quality is obviously a relative term it means different things to different people. To me, quality is only .com, one or two words, 12 characters or less, words make sense, no TM, no extra letters or hyphens, should be business orientated (no personal blog domains for example). Of course I own domains which break each of these requirements. Probably because I'm not strict enough with myself.. But I'm getting stricter

As sdsinc is always saying. You should only buy domains that people (I'd say businesses) really want.

 

[biggie]

Some go for as few as possible ('buy one domain for $500 instead of 50 domains for $10') whereas others seem to maintain hundreds or even thousands of domains.

So is a couple of hundred high quality domains optimal?
Or are there too many viable business models to generalise?
What do people think?

:talk:

finding someone's success to admire, without knowing how they got to that level for them to be found, to be admired, may only lead to more questions. which only they could answer

in other words, you don't know what they brought to the table, when they came to the table or how their tables are set-up.

you don't know what they keep in the pantry or what seasonings they add before serving what you chew.

point is and credit due to them, but common sense approach should start with a budget.

what biz model is your choice and there are many directions to proceed, but have a plan.

my personal advice, buy income producing domains.

imo...

 

[Havela]

Thanks for that honest and insightful response, stub.

I can cut out about 1/3rd of my domains when they expire. But it's the dang-est thing.

I agree. I really don't like letting them expire and work hard to avoid that. I would rather sell them for $0.99. However, better let them expire than renew a worthless domain. I will be really strict on renewals. Those that I can't move in a year should be pretty promising to be allowed to stay.

Btw, do you plan to move into domaining full-time at some stage, or is it just a hobby for you?

But based upon the stats I gave in the message you quote, I think he's going bankrupt very quickly. Of course the stats could be totally wrong.

Yup, those stats are scary. The thing is, with hundreds of thousands of domains you will have to move a lot of inventory all the time to earn money. Which means you will have to sell actively. Which means you will need to hire people. Which means you will need to earn even more money to sustain the operation. I just don't see how he can make it work. It would be interesting to see the real figures behind the business though.

In fact it would be interesting to learn more about all the business models mentioned. Silver works alone, I think, except for development? Whereas Linton has 5 - 10 employees handling his entire domain business. I think both of them make significant earnings from development. I think I read a while back that Silver is earning more and more from development and less and less from domaining.

 

[fm1234]

My portfolio sized has fluctuated over the years. I topped out around 1,200 due to a crippling addiction to Bill Eisenmann's blog lol. I have sold, given away or let go to attrition almost all of the ones for which I couldn't envision a clear strategy that didn't involve the phrase "domain market" and that has left me with just under 300, and a watch list of about 80-90 names I'd like to pick up if the price was right. I find the work load to be very much manageable at this level, and the income on 1/4 the portfolio is actually not significantly lower than it was at 4/4, which tells me I probably did the right thing cutting it back a bit.


Frank

 

[Havela]

I have sold, given away or let go to attrition almost all of the ones for which I couldn't envision a clear strategy that didn't involve the phrase "domain market"

Probably a good idea :lol:

When I started a year ago I regged everything based on the 'cool name, I'm sure somebody will want it for something' philosophy.

 

[SpareDomains]

This is interesting. Are you really able to sell reg fee domains passively for $xxxx after a coupla years? Good for you Wish I knew how to do that...

As for development I have had no luck with that yet. I was inspired by a few posts by Morgan Linton, but so far I've not been able to get the hang of it, I guess my heart just isn't in it. I earn more from parking than from my adsense sites (this is not to imply that I earn much from parking...). Everyone is able to put up a wordpress site, write some articles and add a little adsense here and there, but I think getting people to click on the ads is an artform in itself.

500 domain renewals a year = $4335.00
1 hand reg expired held for 2-3 years= $17.34 - $26.01
1 end user sale= 1-10k

so if you can sell 1 domain for 5k each year then your renewals are paid for and your up 665 for the year plus any parking income, or 2 domains for 2.5k etc... as easy today as it was years ago no, can it be done today yes but "quality" is the key, knowing when to pull the trigger and knowing when to take a pass, best you can do is pull the trigger on the best quality you can which is still an educated guess which may take a few years of experience to have a better educated guess, sometimes I'm even shocked as domains to me that are killer receive a low amount of offers and domains that I like but don't consider my best get a ton of offers, wouldn't tell anyone to run out and register 500 expired domains in a week, slow build based on quality and analyzing/adjusting based on your past performance, so think the reason you see a few with massive portfolios is if only selling to end users doesn't take many sales to hold up the rest of the portfolio, kinda 500 lottery tickets and if you have more than 1-2 winners your profitable.

as far as development goes you need a passion for the subject or else you will lose interest and then it will go stale, should never throw up a half assed site just for the sake of development, what happened with me is one day I was organizing my portfolio into categories which was put off since I have a ton of categories and kinda found a few gems I forgot I owned, so domains I have had 5+ years in categories I like hit the development block and now I do have a good handful of profitable sites, does everything I develop turn out good no but that's okay as it's all part of the learning process, if it works go full throttle, if not you just paid for an education and now you know to skip that category in the future or find a partner that knows how to make that category a success.

 

[oldtimer]

What works in the advantage of big portfolio owners is that the average end-user doesn’t really know what a good domain is, most end-users just buy domains on an impulse when something catches their eye, hence the fact that we are always surprised by some of the domains that are reported as being sold that don’t seem to have anything special about them. If you have thousands of domains you are going to have a small, but steady number of sales each month which will help support your portfolio, not to mention what you might make from your developed sites and parking.

The problem is that the average domainer doesn’t have enough domains to attract random end-user interest, hence all the emailing that they have to do to find a few end-users (if any, although some domainers seem to be better at this or have better luck than others).

Basically there is no limit to what the right size portfolio is as long as it can sustain itself and be profitable, if you are having trouble handling your portfolio then it might be best to trim it down to where you are comfortable with, one mistake that many domainers make is that they hang on to their mediocre domains for too long or even worse they sell some of their better domains and keep the lesser quality ones.

It’s hard to build a portfolio from scratch that is comprised of all good domains, but its easier to trim down your inventory to end up with a quality portfolio.

IMO

 

[Havela]

If you have thousands of domains you are going to have a small, but steady number of sales each month which will help support your portfolio, not to mention what you might make from your developed sites and parking.
(...)
Basically there is no limit to what the right size portfolio is as long as it can sustain itself and be profitable

So you don't think there is a size threshold at which it will be more and more difficult to make the portfolio sustain itself, cf discussion in link above?

It’s hard to build a portfolio from scratch that is comprised of all good domains, but its easier to trim down your inventory to end up with a quality portfolio.

That makes a lot of sense.

 

[oldtimer]

So you don't think there is a size threshold at which it will be more and more difficult to make the portfolio sustain itself, cf discussion in link above?

There might be a natural limit as to the number of domains that one could acquire that fall within a certain domaining model, but otherwise if a model works then it can be expanded without any limit specially if you use some of the automated portfolio management tools that are now available.

IMO

 

[JB Lions]

There is no right answer on this because you can find examples of people with a few hundred to a few hundred thousand, doing well. Some people, examples in this forum, do great emailing end users. Some are making 6 figures a year parking. Some do great with buyers coming to them. Some focus on mainly .com. Some focus on their country's cctld. Some will buy whatever they think will make money. Some focus on specific categories, some any category. Endless.

"With hundreds of thousands of domains, how can you even have the time to push them before they come up for renewal? You would have to hire people, which costs money too. Nor would it be possible to maintain high quality throughout the portfolio."

That's basically Mann's model. Based on his posts on FB and he's very open about it. About 300,000 domains, about 2.5 m in renewals a year but averages about $15,000 - $20,000 a day in sales, profit of a few million a year.

Have to find out what works for you.

 

[Name Trader]

I'm retired. So pretty much a full-time domainer already.

 

[DU]

On a side note, I disagree w/ DU's stock market position.

Perhaps you misunderstand my position. The most profit is made from selling domains you don't hold for very long. (technically you don't actually hold them - like buying a put option at $10 and a call option at $5).

.. move inventory fast.

Sometimes they're moved in negative time.