Domain Business? Not For Everyone

How much is a domain really worth?

A domain name is worth exactly as much as a buyer is willing to pay for it. Although self-called experts state that “An expert evaluation of a domain name’s value is critical intelligence for domain buyers and sellers looking to determine a fair market price” domain appraisal is not an exact science. A domain reseller might be successful but only if he learns to spot the rare opportunities where he can buy for a low price and sell in a short time making a difference. It’s a risky business indeed and it’s not for everyone.

Take these Numbers and Facts from SEDO (February 2008):

Domain transaction volume per month: > $6 million
Number of members: 690,000
Number of domains in our database: 11,500,000
Number of parked domains: 3,200,000
Number of domains sold per month: > 1,900
They are telling you that in a year they sell roughly 2,000*12=24,000 domains from a total of 11,500,000. That’s only a 0.2%.
So what happens to the remaining 99.8%? They must be renewed or they are dropped. Nobody adds a domain to SEDO’s database without expecting to sell it before having to pay renewal fees, but only 2 out of 1000 succeed. Their declared monthly transaction volume is >6M, that means an average of 6,000,000/1,900=3,157$/domain. Really attractive end price, but only for the lucky 0,2% sellers…

Those who can’t sell will lose an average of 110M/year in renewal fees. Needles to say that someone struggling to sell may pay for their “expert appraisals” and their “featured places” and spend an extra 50-100$ in his valuable domain.

This is a highly speculative market. There are few winners and many, many losers. An average Joe will certainly belong to the 99,8% losers group. He has better chances to win at the casino compared to investing in this marketplace.

Domain Parking

If you park a domain you get a page full of ads. They pay you for surfers clicking these ads and you may get some money. But they surely get much more than you. SEDO pays 0,03-0,05$/click. A domain, on average, gets less than 3 clicks a month because traffic is restricted to potential buyers (random natural traffic is meaningless). So you might expect to cover 1-2$ of the 10$ renewal fee. But there are better parking offers. GoDaddy pays 60-80% of the real PPC (Pay Per Click) revenue. If you want higher percentages you must pay them a monthly fee. You end up loosing more than without parking. A website owner with a Google AdSense for Domains parking may get better results, but only if the domain name features high average PPC Exact Keywords and there is enough traffic (and Google decides that he is playing by their ever changing rules and pays him).

A New Concept

Domain Share Trading is a new concept for domain investors. A domain is subdivided into 100 shares. Investors buy one or more shares from one or more domains. They earn a monthly revenue proportional to the actual advertising revenues generated by the shares of the domains they invest into. They can sell their shares for a lower price at any moment. But in case a buyer offers more than the last payed price they have to sell or update their investment to the new best price. An investor may decide to buy a domain name and have it transferred. In this case he must pay a total price equal to the sum of each share’s actual price multiplied by a minimum transaction profit factor.

I find domain trading a real challenge. I know people that made millions with domains but I’m not one of them (yet). Personally I need to work on solid grounds and “luck” is not a factor to consider in my business plans. As far as I know this domain sharing concept is original and may lead to new cooperative ways of minimizing risks and costs for domain investors.

You can see an example of how a high PPC Exact Keyword Domain parking page looks like here: [http://www.carquotes.com.ar] (“Car Quotes” PPC:$25.33 Local Monthly Search Volume:450,000 August/09).