After being shot down numerous times, I humbled myself and came to the stark realization that this is a much more intricate process.
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 before hand. 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).
Without a plan we might acquire a domain with little to no marketability or overpay and lose potential profit.
This process will be different for different types of domainers including what I call flippers, trend riders and investors.
In today’s installment of this 3 part series, we’ll look at domain flipping.
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.
The first one is to buy a domain for less than 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 judgement 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.
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.
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 etc.
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.
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.
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.
- You have a list of potential customers right off the bat
- You are purchasing a time tested, desirable, brand
- 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.
- 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
There are different types of domain flippers each with their unique approach. In part two of this series we’ll examine the style of domaining I call trend riders; domainers that buy and hold for the near term, usually about 2-3 years.
What’s the fastest turn around you’ve had on a domain? Tell us about your best domain “flips” in the comment section below!!
Brandable domains in the GoDaddy closeouts at publication time: