What sort of returns can be achived ?

[mark76]

Hi,

I new to this. I'm tying to get an idea of how the domain market works.

I'm interested in the idea of buying domains as a cash flow investment and I was wondering what sort of yeilds could be achived.

I've noticed on sedo that the price does not always correspond with the amount of traffic.
But for example lets say I was going to spend $10000 on a basket of domain names and then park them at sedo. What sort of yearly income is that likley to generate $2000 ?,$3000 ?

Mabey its too variable to say ?

Is the market efficent ?. For example if I know that my domain is returning a consistant income of $300 pa would the market dictate a maximum price I would tend to be able to sell it for ?

Thanks for Any advice and comments.

Mark

 

[Edwin]

Hate to be negative, but it's more realistic to talk about a range of possible returns from $0 upwards. It's quite possible for an uninformed buyer to waste $10,000 on a domain or domains that generate little or no traffic. At the same time, a domain bought for a few hundred dollars can return many times that (if the seller is unsophisticated and the buyer is savvy).

In all such transactions, it's a case of looking where the knowledge lies.

Assuming the domain is "good" then if the seller doesn't know the true value of their domain but the buyer does, the buyer can get a great bargain.

If both buyer and seller have a shrewd idea of value, then it's possible to get a reasonable but not great return.

If the seller understands the value of the domain but the buyer doesn't, the buyer can easily lose a little or a lot of money.

The value of a revenue-producing domain is not fixed perfectly by the market since there are just too many variables involved. For example, is the traffic from typos of an existing site? From old links? From non-English countries? From pure generic typeins? How long a track record of consistent earnings can be provided? Most transactions seem to fall somewhere in the range from 6 months revenue (shaky domain with possible TM violation issues) to 3 or 4 years (solid generic domain with traffic purely from typeins).

There is a disconnect at the very top end of the market, by which I mean that buyers are generally not willing to pay up to the market value of high-quality, high-traffic generics. A truly first-rate generic .com domain might be worth 20 years revenue or more (in terms of its end-user value) yet you'd be hard pressed to find anyone willing to pay more than a few years' income for it. Basically at the top end most buyers focus too much on the revenue without factoring in the inherent value of the generic name itself.