You Domainers and Your Black Swan Stories

You Domainers and Your Black Swan Stories

Since the 90’s, the internet has been filled with get-rich-quick schemes and hyped stories of men young and old who’e hit the jackpot in the land of .com’s.

From Shoemoney’s Adsense check to the Million Dollar Home page, at one point or another I’m sure you’ve stared excitedly at your screen and seen nothing but dollar signs.

“Domainers” – people that buy and sell domains as investments and for profit, have some of the greatest stories about making money online.

These modern day cowboys snatch up pieces of online real estate using shrewd insights into markets and trends mere mortals cannot comprehend.  They get to spend their days watching ad-servers crank up clicks that feed their Cayman Islands bank accounts.  Right?

The stories are grand, if not a bit grandiose.  Fast flips and auction steals that triple your money in 24 hours – that’s the life of a domainer.

In fact, stop me if you’ve heard any of these:

1. Guy buys a domain at auction for $100k.  3 months later he sells it for $1 million.

2. Guy logs on in 1995 after reading an article about the internet, and picks up a few domains by looking around his living room.  Couches.com, Kitchen.com, stuff like that.  Before he knows it, he’s making $2,000/day parking the domains. 4 years later he’s selling the portfolio out for $15 million.

3. Guy registers a bunch of four-letter combo domains and parks them.  Along comes a company that needs that four-letter domain, cause it’s their abbreviation.  It’s their brand.  Guy sells it to them for $50k.
All in a day’s work!

And I’m not knocking domainers, or these sweet stories of success.  I can’t think of anything that sounds more like “Free money” than parking some domains that pull in 7 figures each year.  (Maybe that NBA TV revenue deal those ex-owners have).

What’s more important to take note of here is that these stories are few and very far between.  You don’t just show up on Sedo’s door, pick a niche and start printing cash.

Just as any domainer can regale you with stories of the big money flip, he can just as easily identify with the difficulty in making those big scores, let alone making a consistent income from his properties.

So just as I said, those sexy stories are more akin to Black Swans than the industry norm.

Where does it get complicated?  There are many things you could dissect.  Here’s a few:

1. Good-looking domains might not be “money” domains.

Certain keyword combinations may have high search volumes, but they don’t equate to ‘buyers’.  Investing $50,000 in Yellow.com isn’t necessarily as smart as buying YellowShirts.com or BuyYellowShirts.com.

Pure domainers might disagree with me here, and if you’re going for a flip or for parking revenue there is a different wrinkle to the idea.  But there’s no arguing some domains are meant for making money and others not as much.  Even our fair MO.com was hard to position.

2. Parking revenues are diminishing.

Depends who you talk to on this, but I’m going along with the macro trends of decreased ad payouts that have hit parking particularly hard.  If you can’t make as much money by sitting on a domain in 2010 as you could in 2004, then pure domaining isn’t as sexy as it once was.

Rightly, many domainers I’ve talked to are at least warming up to the idea of developing their properties to generate income through sales, lead generation, subscriptions, or even renting them out to 3^rd parties.

3. Monetizing a domain is hard work.

Of course building out a domain is usually not a domainer’s forte.

“The guy that flipped his site for 10x in 2 months?  He didn’t build anything!  Why me, why now?”

While it may not be as sexy of a story, there’s no denying that domainers with great portfolios are in a position of power.  They hold the keys to domains that would make someone like me drool.  Exact match combos in “money” niches can be turned into profitable, fully-functional sites with the right team.

The hard work comes in with SEO, site structure and design, conversion optimization, backend fulfillment (lead selling, products), and the like.  Again, it isn’t the tales of yesteryear when you do it this way, but the money can be exponentially more than is obtained through parking even in its heyday.

4. Selling a domain is hard work.

Too many outsiders look at investing in domains and assume that when they want to sell, someone will be dying to buy their property.  That is not the case.  It takes timing, salesmanship, a little luck too.
And if you’re building out a domain you some day want to sell, the acquiring parties change fast in makeup and in what they expect to see.  Selling a parked domain to another domainer at an auction is one thing, selling a domain to QuinStreet or IAC is much more involved.

Selling domains – not easy.

5. Unpredictable trends.

Like I said above, you always need a little luck on your side.  Trends in the economy, trends in the search engines, what competitors do – all these will affect how much money you can make as a domainer.

Look at the diminishing revenues from parking.  The open reign on foreign TLDs.  Local search integration, real-time search, brand-boosts in Google.  The American recession from ’07-09.

All in All

Domainers are smart businessmen, working in a world that’s more complicated than it seems from the outside.  Everyone focuses on those stories of great success, but I think there’s a lot more to it.

Hopefully a bunch of ‘em catch wind of this post and email me to have a beer some time.  I’m always down for some more Black Swan stories . . . and how to become one, the hard way.