Make sure you check out the first two articles in this series:
Part I – How to make Money Buying and Selling Domain Names
Part II – My 65% ROI Buying and Selling Domain Names
Getting started in domaining or domain name investing can be as easy as going over to your favorite registrar and registering a domain name. But how do you value a domain, how do you know it will make money, how can you get in above the basement floor?
I’ve tried my hat at buying typos, buying what I thought would be good type-ins, and in both cases failed miserably. Unless you have a bit of time for research, or feel as thought you’re a lucky person. Buying domain names like this isn’t going to be the easiest way to enter domain name investing and make money right away.
Bonus Tip: Some might already know this but you can buy massive amounts of domain names (called bulk registering) at moniker.com, and they let you drop the name in the first 4 days for only the $0.25 ICANN regsitration fee. This can be a great way to find domains that make money, typos or type-ins and not spend a lot doing so. I don’t want to spend the time or money doing this but if you got the time, try it out.
Instead you need to search out domain names that already have proven traffic and possibly even proven revenue. To do this you can go to several places. My personal choices are three dedicated domaining forums:
I’ve listed the forums in the order of my preference. Namepros is a great forum that is completely free. You don’t have pay a subscription or membership fee to start posting and dealing with other members in the forum. The second one, DN Forum, is a great forum, but to start a thread in any of the marketplace forums you have to pay a fee. The cheapest fee for this forum is $30. Not bad if you want to get your names to a large traffic very active forum. However, DN Forum will allow you to post in the marketplace forums in response to threads, and also you can PM and deal with users for free. The last forum up there, Domain State, is a good forum, but doesn’t have as much traffic as the other two.
The other forums you can buy names at that are big time are Site Point and Digital Point. These two forums are very very large with many active members but they aren’t domaining dedicated. Therefor, you may be able to find some deals there but there just won’t be as many names as the first three that I mentioned.
How to Buy From the Forums
The way you conduct business at these forums is pretty simple but comes with risk. A user posts a domain they have for sale, listing any traffic or revenue if applicable, and then lists a price or accepts offers. People post questions, post offers, and post comments about the name within the forum thread that was started. This can go back and forth for a while until the seller and one buyer agree on a price or someone can just buy it quickly and end the sale.
Here’s where the risk comes in. Once that is official the seller and buyer usually private message (PM) each other their paypal and registrar information. The buyer then sends the money to the sellers paypal account. Once the payment is confirmed, the seller then pushes or transfers the domain to the buyers registrar account. It’s pretty easy and can happen in less than 10 minutes if you’re quick about it.
How to Reduce Risk during a Transaction
The biggest risk is, what if the seller takes the money and runs? Well, the three forums I listed as domain dedicated have trader rating systems, similar to eBay rating system that allows you to see what users have to say about the seller or buyer from previous dealings. Although most of these ratings are linked to a forum thread so you can look to see if there was a legit sale involved in the comment, the system can be skewed by false trader ratings. It’s up to you to determine if the rating is valid.
Other things you can look at to see if a user is legitimate is looking at the number of posts, the previous posts, how long they’ve been a member, and what else they’re selling or have sold. Most users like to build up their reputation in these forums and don’t like people saying bad things about them.
Another way you can go about reducing or eliminating risk is by using an escrow payment service. These types of services act as the middle man. They hold your money until you receive the domain then send the funds on. That way you can’t cheat the user and the user can’t cheat you. The one downfall to these systems is they usually take a day or three to process payments and most people don’t like dealing with them. Especially for small time dealings of $500 or less. Which most domain names go for. This means you won’t be able to get into a lot of the good deals. It’s up to you though.
Most of all you’ll need to determine if the seller is legit. It can be tough to do but you’ll get better at it as you go along. Also these communities are pretty good at looking out for one another. All three of the ones I mentioned have warning forums and I was once in a bad dealing and was able to resolve it. I’ll talk about that later.
Valuing Domain Names
Valuing a name is all about what it’s worth to you. If the domain name is a type-in you may end up paying a lot for a name that doesn’t receive any traffic or revenue. The reason being is that if it’s popular phrase, catchy phrase, or very brand-able domain name a lot of people might want to buy it and push the price up. Buying these domains isn’t really what I’m in the domaining game for. I like to buy names that already make revenue. Guessing if a name is going to bring traffic and money later on is what speculators do. I’m looking at a more value based approach.
To value names that claim to already make revenue you’ll need to consider several things. First off, the seller usually posts what the revenue and or traffic of the domain name is. They are most likely required to post this per the rules of the forums. They are also usually required to link a screenshot of the stats or requested via PM to provide a screenshot.
Screenshots are all different looking, based on what parking site the seller uses, and you’ll have to get good at determining a good one from a bad one. I like to see a screenshot of the daily stats if possible, and to reduce the risk of a name having large traffic spikes I like to see a couple months worth of stats. Of course these screen shots are jpegs or gif files and can be easily manipulated in paint or photoshop so you’ll have to get good at seeing a fraud. However, as I mentioned in the previous section, these forums are good at spreading the word on a fraudulent seller.
Some sellers have also become accustomed to simply copying and pasting stats into threads via which can look confusing at first like this:
Thu, Dec 21st, 2006 US$ 1.30 58 13 % 22.41 US$ 0.10 US$ 22.41
Wed, Dec 20th, 2006 US$ 0.10 63 10 % 15.87 US$ 0.01 US$ 1.56
But actually isn’t too bad and usually comes with an explanation as most parking sites list their stats in a different order. This one happens to be from namedrive and lists the day, the revenue, the visitors, the clicks, the CTR, the CPC, and the RPM. You’ll get used to these formats and be able to quickly spot the parking site the name is with.
Some people won’t give you screen shots, or won’t provide copy and past stats like those above. They’ll contact you via PM or sometimes post and not be reprimanded by the forum staff for not providing info. Personally I try to steer clear of these people. I need proof of what I’m buying.
Once you have the proper information you need to value the name. To each their own and you can pay what you’d like for a name. I’m going to get into what I try and pay later but most of the time sellers look for a multiple of the proven monthly earnings. The multiple can be 5 times or it can be 100 times. It’s just what you’re willing to pay for the name.
Some things to think about when determining your multiple are, how long will the name be around, what’s the chance for growth, and how long are you willing to wait until you make your money back. Some people can wait a few years. I’m impatient and cannot. I’ll be talking about how I determine my multiple in Part IV.
Sedo, Moniker, and other Domain Marketplaces
You can also buy domain names from places like Sedo and moniker. These are mainly aftermarket spots, meaning people use the sites to sell names. They usually park the names with the site and then enter a price that’s viewable by the public. A price that they’re willing to sell the domain name for. If you browse through these listings you’ll notice that some of the prices are rediculous. But if you need the name, you gotta pay the price.
Since what I’m showing you assumes you don’t need the name, you probably want to steer clear of these domain name marketplaces. But don’t throw them out completely. There is always that diamond in the rough that someone is just dying to give away.