Ins and Outs of Domaining Business

Mushfiq

The Internet opens up an entire world of ways to make money online, and while it can be a bit overwhelming or create “shiny object syndrome,” those who work past this to learn a skill can make a very good living online.

While not talked about as often as flipping websites or doing SEO work, domaining is one of the skills that many people have learned to make a full-time online living. The right domain name can be very valuable even without a website built on it.

Let’s dive into the pros, cons, and modern realities of the domaining business.


What Is Domaining? 

Domaining is the practice of buying domain names at a cheap or regular price and then selling them for a profit. This can happen from guessing a trend before it happens (like adding e- to words: ebooks, esports, efile, etc), picking up brandable names a startup eventually wants, or simply locating domains with good histories that fly under the radar.

A domain that is only worth $10 to one buyer might be worth hundreds or even thousands to another.

Unlike website flipping or building a niche website for long-term, domaining can be more unpredictable when it comes to timelines. I’ve talked to individuals who had offers for a domain name after a month, and other domain names get put up to auction multiple times for years before finding someone willing to pay a high enough premium price.

Domaining strategies can take several different forms, but all of them can be very profitable over the long haul when done well.


How To Make Money in Domaining Business

The simple answer is to buy low and sell high, but that’s not very specific or helpful, is it? Making money domaining doesn’t come from buying a lot of names and just waiting. Making consistent money from buying and selling domain names takes a lot of skill and the right combination of long-term patience and short-term marketing & outreath.

For some domaineers this means searching for overlooked expired domains that previously had a website and thus have a good link profile.

Others will be searching for short brandable domain names that are available or could easily be a startup name. Gather enough of these, especially shorter domain names, and those could lead to a big sale down the line.

There are also domaineers who focus on snappy names in specific niches like outdoors, sports, or other hobbies. That first-hand knowledge can lead to knowing what slightly longer names are more likely to do well with hobbyists in that niche.

Some domaineers practice all of these strategies at once to give themselves the best odds of having something that will make them a profit whether via auction or private sale.

1. Domain Flipping

Domain flipping is buying domain names with the hopes of being able to flip them relatively quickly for a decent profit. This method of domaining requires more attention and active work, but getting multiple quality domain names as new trends emerge can lead to a major payday.

The most successful domain flipping campaigns keep potential buyers in mind as they acquire domain names and have a plan for outreach.

Important factors to look at are:

  • Quality of the TLD
  • Unclaimed names in new or rising industries
  • Jumping ahead of trends
  • Potential targets to outreach with a domain when you’re buying

This takes time to get good at, but focusing on good domain names in emerging trends, and having potential buyers in mind from the get-go, can dramatically increase a domainer’s chances of success.

The other form of domain flipping that can result in a (comparatively) fast sale are previously used domains that flew under the radar before becoming publicly available again. These have links pointing to them and the better the link profile, generally the more valuable the name.

If the domain name is brandable and easy to remember then all the better.

2. Traditional Domain Investing

With traditional domain investing an investor is willing to hold onto a good domain name for years if necessary, putting premium domain names up for auction with a stated minimum and willing to wait for the right buyer to come along.

For sites that have a backlink history, setting up microsites can be a great way to put up ads and bring in some passive income while preserving the “link juice” that the domain name has. Make sure to include clear signs on the microsite of the domain being available for sale!

Domainers may buy premium domains they feel are underpriced, or search for regular domains that are memorable and have serious branding potential.

Domain backordering is a common expense with this strategy since it gives an investor the inside opportunity to buy good expired domain names before they hit the auction circuit or the open market.

This can become expensive with many backorders not coming to pass, but it only takes one or two neglected renewals to potentially land some incredibly valuable domain names.

Traditional domain investing does require working capital and a budget as some names may need to be held for many months or even years before finding the right buyer for that heavily profitable sale.

Keep in mind that an average sell-through rate is 1-3% for domains in year one, according to this study. It’s a range that is commonly repeated in the space.


What Is The Average ROI On a Domain Investment

Figuring out an average ROI is difficult and varies based on strategy. Reading about a single .io, .co, or .ai of a domain sale to a VC-backed startup that couldn’t get its preferred .com for tens of thousands of dollars is inspiring…but it glosses over the expenses, all the time held, outreach, and everything else that goes into making a domain sale work.

Since only 1-3% of acquired domains sell in one year, the math tells us that many domain names don’t sell and so figuring those expenses out to have an average ROI complicates things.

The numbers vary greatly from comment to comment, and an extensive study but many domainers aim for a 10x average when listing prices.

Among domains that sell, it’s not unusual to see a domain name bought for a couple hundred sell for a couple thousand. Or a domain name bought for one thousand and sold for nearly ten thousand.

For every $20,000 sale a full-time domainer makes, there are dozens upon dozens of sales in the background of $20 domains going for $200 and $100 domains going for $1,000 to fill out the revenue numbers and make it work.


How To Choose Domains To Invest In

Successful domaining is part art, part science, and a lot of work and outreach. Focusing on three main themes can help increase your success rate when scouring online resources for good sellable domain names.

1. Domain length

The shorter the domain name, the higher the demand. There are exceptions, but this is a rule of thumb that holds up. Shorter domain names tend to be easy to memorize, are easier to brand, and in higher demand.

A rare three or four character domain name will almost always be in high demand. Even in multi-word domains, focusing on shorter ones will yield better results.

2. Keyword strength

While the days of exact match domains (EMD) ruling Google’s rankings might be over, a domain name with a good keyword is going to still be valuable. Having a keyword in the URL still has SEO benefits, especially when getting backlinks.

A good keyword-based domain name can also be good for branding, adding value to the name and making it more likely to catch the attention of a website builder willing to pay.

3. Memorability

How easy is the domain name to remember? If the name or potential acronym is hard to remember, that isn’t a good sign. On the other hand, if the name is snappy and gets stuck in the head, that can help make a domain name sell.

Memorable names are important for branding and will be in high demand in every niche. This is a major factor in finding winning domain names.

4. TLD (Top-Level Domain)

There are certain top-level domains that are simply more respected, more valuable, and more sought after than ever. While .com is still king, and it’s not even close, TLDs that are very popular with VC-backed startups include .io, .co, and .ai.

Finding quality domains using these TLD extensions will strongly move the odds in your favor of finding a motivated buyer.


How To Get Started With Domain Investing

There are a few major bits of advice that most domain investors agree are important, especially for beginners just getting started.

1. Define Your Budget

Remember those numbers of 1-3% average sales. You will want a budget that allows you to acquire many domain names and hold them as you learn the ropes. 

Considering how long most domain names will need to be held to find a buyer, it’s very important to have a budget that allows you to buy and hold, but still have money free to pursue opportunities that arise.

Understand how much you can afford to spend, and stick to that budget. Don’t make the expensive mistake of chasing the big sale outside of what you can afford.

2. Choose a Profitable Niche or Industry

Certain niches just pay more. Certain industries require much more of an online presence. Take a look at these and figure out where you are comfortable learning the trade.

Staying in a profitable niche or two that interests you and that you know will help increase your chances of success while learning how domaining for profit works.

3. Tools Needed To Start

There are a few tools that beginning domain investors will want to learn about. Estibot is a popular domain tool focusing on appraisals & investment. 

Another tool that is really powerful but underrated is Spamzilla. This is a powerful tool for finding expiring domains with backlinks and history that slip through the cracks and are there for you to snatch up as they become available.

While not restricted necessarily to one tool or registar, it’s a good idea to find a back order tool or domain auction place to become familiar with. GoDaddy’s auctions only cost $5 a year for membership, and learning how to place a backorder is an important skill for becoming a successful domainer.


Truths About Domaining You Must Know

While domaining can be incredibly profitable, there are three major truths that new investors need to keep in mind.

1. Domain Flipping Won’t Make You Rich Overnight

Buying and selling domains is not a get rich quick scheme. Building the right skills takes time, and for the truly huge sales it can take years to find the right buyer. 

Domain flipping can be very profitable but it takes time to build up a profitable portfolio just as it takes time to hone your skills. This can be profitable but it’s not going to happen fast.

2. It Is an Active Process

Even with the “traditional” method you need to set up auctions, reach out to startup companies and webmasters, and otherwise set yourself up for success.

If you were imagining just buying domain names, sitting back, and waiting for offers to roll in, then you’re in for a very rude awakening.

Domaining is not a passive income setup – it’s an active online hustle.

3. It Takes Time To Learn

There are many skills to learn to become a better investor. You need to learn how the best tools work, which niches you can find opportunities in, how to track down motivated buyers, and more. Each niche has its own little idiosyncrasies that need to be learned and mastered for investors to thrive.

These skills can be learned by anyone, but it does take time and investment.


Actionable Takeaways

Whether a beginner to buying and selling domain names or someone with experience buying and selling domain names, there are some 

  • There are two main models of domaining: long-term investing and domain flipping and both are viable options
  • Top level TLDs like .com, .io, and .co are the most important
  • The average percentage of domains sold within a year is 1-3%
  • Domaining takes skill and experience to get good
  • You won’t get rich right away – it’s a process

While there’s plenty to keep in mind when getting involved in the domaining world, this doesn’t change the fact that plenty of opportunities exist. Follow these tips and takeaways, and you’ll be well on your way to learning how to become a strong domain investor.



Mushfiq

Analyzed by Mushfiq S

Mushfiq has been buying, growing, and selling website assets since 2008. His first exit was in 2010. Since then, he has done 200+ website flips with multiple 6-figure exits. Learn more about Mushfiq.


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