“Don’t be romantic about your domains. Don’t fall in love with them. You’re not a collector of domain names, you’re an investor.” – Michael Cyger at DNAcademy
Last week we talked about money management and its crucial impact on our success as domainers. Small changes in money management can make or break our business. One of the biggest mistakes we make as domainers is renewing domains that have little chance of selling in the next one or two years.
If you had zero end user sales last year then renewals will likely take you further into the hole. If you had a few sales then renewals can still significantly erode your profits. So it’s a fine line to walk.
I’ve heard from more than one industry veteran that an annual sell-through rate of 2% to 3% is a realistic average. Sure there will be exceptions, especially for smaller portfolios, but I think it’s a good rate to use for realistic business planning.
So let’s take a look at how this might play out for someone in their first or second year of domaining.
The two variables are:
1) Were there any sales last year?
2) What was the average sale price?
If there were 200 names hand regged at $8 each, we’d need to sell one name at $1600 or 4 names at $400, just to break even. So we can see here that even a 2% sales rate could be a losing strategy if the return on investment for each sale is low. But, at the same time, one of the mistakes new domainers make is pricing their hand regged domains too high and not generating any sales at all.
I recommend putting hand regged domains on GoDaddy Premium, Afternic and/or Sedo and pricing them in the $95 to $495 range. Setting up landing pages or a 301 redirect to a GoDaddy Premium listing is also a good idea. After several successful sales at those prices one could consider raising prices for a few of the better names to around the $695 to $995 level.
Meanwhile, good quality names bought in the drops for $25 to $100 could be priced at $995 to $2995 and or even listed as make offer if you are a strong negotiator.
If you had zero sales last year then you need to ask yourself three things:
1) Are my names getting their maximum possible market exposure?
2) Are my domains listed at attractive BIN prices that appeal to buyers?
3) Are my domains of good saleable quality?
Hundreds of domainers have portfolios consisting of names with a very low probability of ever selling. We see this almost every month on the Domain Sherpa show. For further corroboration we can look at the GoDaddy expired domain list, any day of the week. There we see thousands of domains that no one will touch. Not even for $5 in the closeout bin.
So what’s the point?
If we weren’t profitable last year then we need to take a hard look at our portfolio and make some serious changes. Domains that show no signs of consumer demand should be dropped without hesitation.
I recommend that before renewing a domain you check to see if it meets one or more of the following criteria:
• Search – Mid four figures in monthly exact match searches per Google Keyword Planner
• Estibot – Valuation of about $1,000 or more
• Offers — Has received at least one inquiry and/or offer in the past year
• Regged – Is registered in the other major extensions like com/net/org
• Targets – It’s a better version of the domain being used by an existing company.
• Appraisal – It’s been accepted at a major brandable marketplace like BrandBucket or BrandRoot with a good listing price.
• Revenue – It generates revenue from parking or Ad Sense etc.
• No Drops – The domain has been continually registered, since its inception, with no drops
• Phrase – It’s a common phrase like: SeeYouLater etc.
In some cases a domain that meets just one of these criteria could be considered valuable enough to renew. One obvious example is if the domain is generating parking revenue in excess of its renewal fee. That’s a no-brainer. On the other hand a domain that meets the Estibot valuation, but none of the other criteria is one you may want to consider dropping anyway. So you probably want your domains to meet at least one of these criteria in order to qualify for renewal.
Domaining is a very speculative enterprise!
The key to success is to accumulate domains with the highest number of potential buyers. Renewing a name(s) that has a very low chance of selling, at a significant multiple of your cost, is just plain counter-productive. It’s better to drop those domains and use your renewal money to buy fewer, but higher quality, domains that meet more of the value criteria listed above.
In the end it’s up to you to decide what’s the proper acid test for your portfolio and your domaining strategy. I hope this list and discussion have stimulated some critical thinking that will allow you to streamline your domain holdings and maximize your profits!
Meanwhile here are some noteworthy names for sale at NameJet this week: