How to buy and sell domains in 2012 – My personal strategy

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Any form of investment needs strategy. It is easy to buy and sell anything. The challenge is whether you can make money doing it. Most people don’t take the time to form their strategies before their first investment or purchase. That is why most made losses. Your investment mistakes start from the day you bought the investment, not the day you sold it.

For domain investing, I have been studying the market for the past year but I never made any commitments until this year. It has taught me a lot, especially on how buyers perceive names. Remember, it is not what I think the value of a domain is. It is what the buyers think. To be successful in domain investing, I need to come from their viewpoints, not mine.

The foundation to any domain investment is knowing how to buy good domain names. Without that, any investor is lost and destined to lose money. As I mentioned, investment mistakes are made at the beginning, not the end.

So, what makes a good name? There is no universally answer as it depends greatly on your investment strategy. Depending on who you are targeting to sell to, the definition of a good domain name will change. The only thing that stays constant is that you must be mindful of who you are selling to when making domain purchases. Don’t buy something just because it sounds good to you. Are they names that your target market wants to buy?

In general though, this is what consisttute a good domain name:

  • Easy to remember
  • Easy to spell
  • Relevant to your target market
  • Can be branded
  • Can a business be build on top of it?

With the above in mind, here is how I intend to invest.

  • I only buy .coms. Compared to other extensions such as .net or .org, .com is the most universally accepted and hence desired by name buyers. More desirability means a larger pool of potential buyers to sell to.
  • I target domains that have less than 12 characters. You seldom see companies with long names.
  • I buy names that are 2 words which mean something. One word is usually a descriptive term while the other is a noun or an industry defining term. For example, FastPay.com. Fast is the descrptive term while Cash is a noun and/or an industry defining term that can refer to the payloan or pawn industry.
  • I try not to spend more than 200 dollars per name. I not an expert yet so it is dangerous to put a large amount into a single name. I rather spread my risks and make a couple of hundreds per name. Small sales, if they happen, will give me the confidence to buy more expensive names in the same category.
  • I try to look to new industries and pick up terms that will become prevalent if these industries matured. I will then combine these terms with descriptive words to form the names I want to buy. For example, voice technology might be an important interface in the future. More noucs or terms that describe this industry might be: voice, sound etc. Descrptive words might be: controlled, activated, launched etc. Hence, I will buy names such as VoiceControl.com or VoiceLaunch.com.
  • I don’t imagine that any one of the domains I am buying will be worth a million dollars. My expectation is that some of them can be sold in the 3 digit to 4 digit and even 5 digit region.
  • I will wait for the Internet to get more crowded before even starting to sell. I am confident that each passing year will mean less meaningful names but more demand, hence putting pressure on the prices to rise. The more patient I can be, the bigger the rewards.
  • I might develop one or two of them into real sites to earn revenue. This is simply to provide some cashflows to cover the annual renewal fees as well as to finance the initial purchase cost.

In a nutshell, this is how I will buy and sell domains. I expect things to change as time passes but as of now, this is what I am going to do.

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