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Domaining is a fascinating business and investment vehicle because once the
initial investment is made, it is a business that requires minimal attention.
This makes it one of the best models of a residual income business on the web.
However, this is not to say that domaining is easy. Working as a domainer simply
means that you have to invest all your attention, effort and money up front,
while researching what domains to buy.
Definition of Domaining
Domaining is basically the business of buying domain names as an investment.
When thinking about this business, a good approach is to think of domain names
as real estate. Think of them as pieces of virtual internet-land that have some
intrinsic value, where the majority of that value stems from their location and
from their degree of development. Their "location" is akin to their visibility
on the web. Short recognizable names have the best location, and so they are
also the most expensive. The buildings on a piece of land are akin to a website
developed at a domain name. The website is likely to attract visitors either
through it’s content or functionality, and therefore increase the value of the
domain name.
Like any mature property business, most of the valuable names have already been
snatched up and are only available at a premium. Speculative names are still
available, as are names with unproven extensions (.info, .biz, .us, etc.) A big
difference in the domain world though is that new names with potential are
available all the time, as new phrases and trends become popular, as old domain
names expire, and as new technologies emerge.
Monetizing a Domain Name
There are a million way to monetize a domain name if you are willing to develop
a website on it, but since this article is about the purest form of domaining, I
will only address ways to monetize domain names without developing them.
Reselling Domains - As with any piece of property, your domain may be worth more
to someone else than you paid for it. This may be the case if you develop a
knack for coming up with brandable names ahead of time (ie. google, digg,
myspace, zappos), or if you manage to snap up names related to a developing
trend or idea (ie. bird flu, wimax, AJAX). This is a speculative way of making
money from domains, but your initial investment of $6-9 per domain won’t break
the bank and might create a hefty return. Once you buy a few domain names, list
them for sale on websites such as Sedo and DomainState to see if any of them get
picked up. Remember, patience is a virtue.
Parking Domains - On the web, targeted traffic is worth money. Targeted traffic
are simply visitors interested in a specific topic. If your domain names get
traffic (more on this later) you can monetize that traffic by parking your
domains with a domain parking service such as Sedo, DomainSponsor or Fabulous.
You simply register with the service for free, point your domains to their DNS
servers, and voila, you’re done. The service puts up a simple one page website
on your domain that has advertiser links and information based on the keywords
and category associated with your domain name. When visitors follow those links,
you share the revenue generated with the domain parking service.
Finding Domain Names
There are many different strategies for coming up with and researching domain
names to buy. There is plenty of (well researched) speculation out there, but
there are also many domainers buying names with the intention of creating
passive income. For this, the domainers buy domains that receive traffic that
can be monetized.
The simplest way that a domain receives traffic without having a website on it
is through type-ins. We’ve all been responsible for type-ins before when we went
straight to the address bar and typed yahoo.com or money.com or bored.com. Sites
such as cellphones.com and business.com get hundreds or thousands of targeted
visitors a day through type-ins. Often, people will type their search terms
directly into the address bar with .com, hoping to find information of interest.
This behavior is characteristic of an internet newbie, but keep in mind that
there are more newbies on the internet every day, and as broadband becomes more
widely available, this is a trend that is going to continue.
Research time is the biggest investment a domainer makes before buying a name. A
great free tool that I use for domain research is
Domain All-in-One from DomainState. It allows you to quickly check the
availability of domains, as well as look up keywords on Overture and domain
popularity via Alexa. Below are a few strategies for picking and finding domain
names.
Speculation - If you have a good head for names and can come up with
catchy ones that might one day be a company’s next product or brand name, give
it a try. Also try to spot upcoming trends and catch phrases, and register names
related to them. Names in other languages, and names in other Top Level Domains
(TLDs) such as .info, .us, .biz, etc. are also quite open to speculation.
Remember though that speculation is just that, and there is no guarantee of a
future payoff.
Type-in Traffic - Most obvious keywords and phrases have already been
registered, but new ones are coming into the public consciousness all the time.
New music trends such as reggaeton, new global scares such as bird flu, and new
technologies such as wimax present the early bird with an opportunity to
register keywords and phrases that are likely to get more and more type-in
traffic. Keep your eyes and ears open and do a little research every day to see
what is available.
Typos - Misspellings of popular domains get traffic through type-ins.
This includes domains such as gogle.com or yahooo.com, but also less obvious
ones such as celphones.com and homelaons.com. These domains can be lucrative
because you can park these domains using the right keyword and create instant
revenue. For coming up with likely typos and determining their likelihood, I’ve
found SearchSpell to be a very useful tool.
Expired Domain Names - Domain names expire every day without their owners
bothering to re-register them. Expired domains may have hosted websites,
portals, blogs, or businesses beforehand, and as a result they may have incoming
links from other sites and they may come up in the search engines. This means
that they are likely to get some traffic, which you can monetize through Sedo or
other means. Since this is a such a profitable strategy, you most likely will
have to go through a drop-catcher such as Pool, SnapNames, or NameWinner and pay
a premium for the expired domain at an auction. Also, keep in mind that the
traffic numbers at these sites are likely to drop over time as they fall in the
search engine results and users realize the old page is no longer there.
Buying Proven Domains - If you have some capital laying around and are
willing to pay a premium for an income stream, then you can buy domains that
already have establish traffic and income. These domains can cost anywhere from
the 1999 bubble price of $7.5 million for business.com, to more reasonable 5-
and 6-figure prices of proven domains today, to a few hundred dollars for a
domain with a minor income stream. Good places to start looking are SnapNames,
Sedo, and the For Sale forum at DomainState. In this case, your investment might
take a few months to a few years before you generate a positive return, but the
security of an income has always been an expensive commodity.
Next Steps
If you are new to domaining, take time to learn the business and hold on to your
wallet for now. There is a lot of great information out there at resources such
as DomainState and DNJournal. Their articles and discussions are a great way to
avoid many costly mistakes yourself and to learn where to invest your time and
eventually your dollars.
Once you have a grasp of the business and enough confidence to get going, go
ahead and start experimenting! Don’t spend large sums of money up front or buy
hundreds of domain names at once. But do get started buying a few; one of the
beauties of starting in this business is that you can register a domain for the
price of a burger. Check out 1and1 and NameCheap. Put them up on Sedo, advertise
them for sale, see what you get. And if you want to take the development route,
go ahead and put a website up on them.
Be consistent and have fun. Learn about the business daily and try out new
strategies until you find one that you’re comfortable with. Play your cards
right and you too could soon be making money while you sleep.
See
Domaining and Domainers for more info.
Cesar Gonzalez is a young entrepreneur living in LA. His interests lie at
the intersection of the web and its social applications. Check out
http://www.fleethecube.com .
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