page title icon 3 Types of Domain Name Investors: Flipper, Buy & Hold, Trend Riders

Doron Vermaat Doron Vermaat is the co-founder of domain name investor platform, Efty. He is a prolific domain investor who owns a porfolio of domains and also blogs about it. Prior to Efty, he served 10+ years in senior sales and business development roles. Check out Doron's LinkedIn and follow him on Twitter.

Before we buy a domain we should have a concrete plan for selling it. For veteran domainers, this is an almost instantaneous calculation when they consider a domain purchase. Beginners, on the other hand, may need to write down and think through their plan beforehand.

In either case, a practical plan should include both a buy and sell price, a list of potential customers, and preferred methods for transactions (sales venue, payment process, commission and escrow fees, etc).

This process will be different for different types of domainers. In this write-up, I go over the 3 types of domain name investors:

  1. Domain Flippers
  2. Buy and Hold Investors
  3. Trend Riders

Let’s get into it!

Domain Flippers: Wholesalers, Geo, Targetted Flippers

My definition of a domain flipper is one whose business model consists of a short hold time. In other words, turning over domains quickly for a modest profit.  The plan is usually to turn the asset around in less than a year and often within a few weeks or months.

There are several ways to make (or lose) money flipping domains. 

1. Wholesale Flipping

The first one is to buy a domain for less than the current wholesale market value and then resell it for a higher wholesale price.  This is difficult since competition keeps wholesale pricing fairly consistent. But there are exceptions.

We saw a lot of people practicing this style of domaining when the Flippa marketplace had its heyday 4 years ago. People like Ali Zandi were turning over multiple domains per month for handy profits. They would buy domains at misc. platforms and then create elaborate auctions at Flippa and earn 10% to 50% profit on each domain they flipped.  But that mini-bubble burst and to the best of my knowledge very few, domainers are flipping domains in this manner on a regular basis, today. 

It’s a style, that in my opinion, is a difficult path to follow. It requires repeated and impeccable judgment throughout the purchase and resale processes. Wholesale prices vary and the same domain can easily sell for 20% more or less on the same platform within a few months. Very few people have what it takes to consistently flip domains in this manner and to earn enough to make it worth their while. But it can work if you do it right.

Examples of wholesale domain flips:

  • OTKA.com sold for $935 on February 12th, 2018 at NameJet and again on March 20, 2019 for $1,370 at NameJet. A 47% gain.
  • LEFS.com sold for $2,600 on February 10th, 2018 at NameJet and again on March 18th, 2019 for  $710 at NameJet. A 73% loss.
  • Prospects.org sold for $180 on June 26th, 2018 at NameJet and again on February 15, 2019 for $421 at NameJet. A 134% gain.
  • GoodMakers.com sold for $3,500 on May 31st, 2018 at Sedo and again for $687 at DropCatch On February 26, 2019. An 80% loss.

2. Geo Domain Flipping

Another kind of flipper that we see today is one who hand-regs, geo-focused domains and sells them for under $500 to small, local businesses. These include domains like TusconFlowers.com and SantaFePlumber.com.

These domainers ID the exact companies in advance (usually a minimum of 10) that they are going to market the domain to.  This is a crucial step in their business plan. These kinds of flippers do not buy unless they have multiple potential buyers ID’d in advance.

They also have a well-planned execution strategy consisting of aggressive outreach to key players at each company via email and phone.  Another key to their success is low pricing (usually under $500) and flexible transaction terms including transferring ownership before getting paid.

These two types of flippers rely on high sales volume to make their low mark-up business model work.  That means successful, full-time, wholesale and geo, flippers typically sell several domains every week.

3. Targeted Domain Flipping

This kind of domain flipping is the most speculative and therefore has the most potential for profit and loss. Targeted flipping means buying a domain with the intention of a quick sale, to an existing company, at a retail valuation. These types of domain purchases appear in the Namebio daily report several times a week. 

Examples of targeted flips

On March 22, 2019, RoyalPay.com sold for $3,900 at DropCatch. It appears to be a common law, trademark belonging to the Royal Solutions Group at RoyalSolutionsGroup.com. However, the domain could be an upgrade for the company at RoyalPay.eu or the firm at RoyalPay.com.au. 

There are many pros and cons to this type of domain flipping.

Pros

  • You have a list of potential customers right off the bat
  • You are purchasing a time tested, desirable, brand

Cons

  • The term may be trademarked and there is potential for a lawsuit or UDRP, especially if you have an asking price over $3,000.
  • Companies like RoyalPay.com.au may not be doing business outside of Australia and don’t feel they need the dot com. 
  • The prior owner may have already approached these companies and been turned down
  • The second highest bidder may have been a company rep and that’s the highest amount the targeted company is willing to pay
  • If you contact the target company it shows you are a motivated seller and could give them leverage in the negotiation
  • Even though it’s a good brand – startups may not want a brand/domain that’s the same as existing companies
  • Any verbal agreement you may make with a company, before the auction, is not binding

Get the picture? Targeted flipping of domains is not a guaranteed path to profits.

Advice

  • Have a plan B. Don’t rely just on your targeted companies as potential customers
  • Don’t keep bidding against a solo opponent (it might be a rep at one of the targeted company’s)
  • Don’t pay more than standard aftermarket value

Trend Rider Domain Investor: Pros, Cons, Skillset, Examples

In the stock market, there are different kinds of investors and traders. There are short-term day traders and then there’s a style called swing trading.  In this approach, the trader doesn’t attempt to anticipate every market move but instead takes positions in stocks that have established a clear trend. The swing trader maintains his/her short/long position for as long as the stock stays within its preset parameters.

In this style or system of trading the investor misses out on the beginning and end of the trend but, when successfully executed, he/she will capture the meat of the move and obtain a handy profit.

A swing trader in the stock market has a correlation in domaining. It’s what that I call a “trend rider.”

Whether they know it or not, this niche is where the majority of domainers reside, most of the time, and it’s the place that I call home as well.

Advantages of trend riding

  • Small initial investment
  • Great return on investment (ROI) when a sale occurs
  • An attractive risk reward ratio
  • A larger portfolio dilutes the effect of a few bad decisions

Pitfalls

  • Tendency to get in too early – ie the trend never matures in the marketplace
  • Tendency to get in too late – ie the trend fades and past purchases become unmarketable
  • Tendency to hand reg and buy domains in formats that are not popular
  • High renewal costs due to extended hold time and a larger portfolio
  • Large amount of time spent managing your folio – renewals, transfers, maintaining multiple platform listings, landing pages, bookkeeping,  aftermarket buying and selling, negotiating etc.
  • Over-estimating and over-investing in a perceived trend ie portfolio gets unduly weighted towards a specific niche segment

The Trend Rider skillset

  • Ability to identify mature trends
  • Ability to identify and purchase domains that aptly portray a given product, service, industry or emerging technology
  • Good grasp of current, brandable domain styles and formats
  • Ability to drop domains when they are no longer trending

Trends from the past and present

Mega trends

  • Five Letter Domains
  • Numerics and CHIPs
  • Name styles – add suffix (Bitly, Deliveroo), drop a letter (Pixlr), creative spelling (Lyft)
  • Products and Technologies – VirtualReality, Cannabis, Drones
  • Two Keywords – InstaCart, WeWork, DoorDash, CreditKarma

Mini Trends

  • Double letters — Rradar.com and Saatva.com
  • AgTech – SeeTree, PrecisionFarming
  • Crypto – CoinBase, Ripple, BitStamp
  • Lab/Labs – LabCorp, WeWorkLabs,
  • Crowd/Cloud – CrowdRise, CrowdSpring, SoundCloud

Resources to keep track of trends

  • TechCrunch.com
  • CrunchBase.com
  • ProductHunt.com
  • AngelList.com
  • 500.co/startups

Buy and Hold Domain Investor: Inventory, Advantages, Examples

Let’s discuss the Buy and Hold style of domaining. 

Traditionally it’s a long-term, passive style of domain investment wherein domains are held for years despite regular, albeit sub-par, offers. Trends and fluctuations in the domain markets don’t affect the Buy and Hold domainer who possesses a deep sense of conviction and unwavering faith in his/her asset’s value and their strong potential for very lucrative paydays.

This kind of holder likely has a diverse portfolio of assets, stocks, and even potentially crypto that they treat in the same manner. Understanding the value of what you hold, no matter what is vital after all.

Let’s break down the Buy and Hold strategy and look at the type of inventory held plus the built-in pros and cons of this business model.

Typical inventory

  • Common dictionary words
  • Most 1, 2, 3 and pronounceable, 4 letter domains
  • Two and three word domains with strong synergy, industry demand and “mind share”

Advantages

  • Time management – Fewer domains to manage (name servers, renewals, landing pages etc)
  • Liquidity – Can be sold for 80% to 100% (or more) of initial investment, even on short notice
  • Mega paydays – The average end user domain sale is under $5k and more often in the $2k to $3k range. However, buy and hold domain sales are usually in the $10k to million dollar range.

Drawbacks

Capital investment – These domains don’t come cheap and can cost thousands, or tens of thousands, to acquire. Since they take years to sell a domainer needs to have many of them if he/she has any hope of having at least one sale per year.

The waiting game – Buy and hold means a lot of holding. Years doing nothing. You need to have a supreme level of patience and a long-term view.

Opportunity cost – During waiting periods your cash is tied up.  It cannot be used for personal purchases or other investments such as more domains, stocks, or crypto.

No way Jose – Buy and hold means saying no to lots of offers, even some pretty good ones that are a multiple of your initial investment

Negotiation – These kinds of sales are often not buy-it-now transactions. They can take months to negotiate. They are time-consuming and can be draining if you’re not up to the task. Sometimes deals get very close and then fall through. Sometimes part of your profits can get eaten up by brokers.

He’s your Mann (Mike Mann)

One of the most prolific and high-profile buy-and-hold domainers is Mike Mann. Both praised and criticized for his brash, public persona and unreported domaining expenses, Mike nonetheless provides a plethora of self-reported, buy and hold sales results.

His success lies in an extraordinarily large portfolio (300,000+) and a willingness to wait 5 or 10 years to get his price.  

Here are some sample sales from 2019:

  • StarsAndStripes.org $15,000. Purchased 2/21/05 $350.
  • HometownInn.com $15,000. Purchased 4/2/11 $70.
  • DCDate.com $9,888. Purchased 4/2/11 $70.
  • Comporta.com $19,920. Purchased 6/22/12 $140.
  • TruffleDog.com $9,888. Purchased 6/30/16 $250.
  • Privaci.com $49,888. Purch 11/19/08 $70.
  • TinyTree.com $29,888. Purch 8/15/12 $158.
  • AmVis.com $20,000. Purchased 11/30/10 $70.
  • LinkChecker.com $40,000. Purchased 8/31/07 $11,000.
  • SoftwareBuilders.com $20,000. Purchased 2/21/05 $350.

And some of Mann’s biggest sales from 2018:

  • CryptoWorld.com $195,000, acquired for $15 in 2011
  • BetterFuture.com $65,000, acquired for $350 in 2005
  • VideoDesgin.com $50,000, acquired for $2,700 in 2007
  • RentalsDirect.com $25,000, acquired for $7,500 in 2007

The King of Buy and Hold, Rick Schwartz

No discussion of Buy and Hold would be complete without some mention of the sales generated by Rick Schwartz over the years.

Here are a few to get your juices flowing:

  • 989.com sold for $818k, registered for $100 in 1997
  • 899.com sold for $801k, registered for $100 in 1997
  • Men.com sold for $1.32 mill, acquired for $15k in 1997
  • eBet.com sold for $1.35 mill, registered for $100 in 1997
  • 9595.com sold for $180k, registered for $100 in 1998
  • Property.com/Properties.com sold for $4mill + equity, acquired for $750k in 2005
  • Candy.com $3 mill + Royalties + 10% Ownership, acquired for about $100k in 2005

When executed successfully the buy and hold strategy can result in a cascade of life-changing income and profits.

However, the buy-and-hold strategy isn’t for everyone.  It requires an immense level of patience and the unique ability to turn down lucrative offers even after years of waiting.


Wrap Up

In this three-part series, I’ve divided the approaches to domaining into three styles.  There’s the short term, domain flipper, the near to mid-term, trend rider, and the long term buy and hold, domaining stalwart. 

If you find that your domaining style doesn’t fit completely in any one of these types it’s because life (and business) never fits neatly into artificial categories.  Human behavior is complex and it’s perfectly normal to find ourselves borrowing bits of all three strategies at various times in our domaining career.

However, the one common feature of all three types of “investing” is they are speculative.  While liquid names offer the option to cash out at near break-even (or better) – we all know that they are many hundreds of high-quality domains which have been sitting in the market for decades without an end-user purchase.

So none of these three approaches is a sure thing.

Still, with each domain acquisition, we believe that lady fortune is about to bestow her blessings on us and that long-awaited end-user transaction is going to occur during our stint as the temporary owner of a domain that has previously changed hands many, many times.

In the end, the domaining style(s) you choose will most likely depend on your individual skills and experience, your personal tendencies, and available capital. So choose your style wisely.




Analyzed by Doron Vermaat

Doron Vermaat is the co-founder of domain name investor platform, Efty. He is a prolific domain investor who owns a porfolio of domains and also blogs about it. Prior to Efty, he served 10+ years in senior sales and business development roles. Check out Doron's LinkedIn and follow him on Twitter.


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