A fundamental mistake in domain name investing

This is a fundamental mistake in domain name investing and even experienced domainers do this mistake even without realizing it.

Some people think that the simple the fact of owning many domain names will sooner or later produce enough AND big domain name sales.

Not really!

Owning domain names is the easiest thing in the world. If you have $10,000 then you can register 1,100 .com domains today. (or thousands of nearly free New gTLDs!) How many sales do you think you will get in the next year? Will you make a profit that is worth your time? If you are very good at it and you have the skills and the experience, then you might as well get lucky and make profit. (I am talking about hand registrations here.)

But most of the times that simply won’t happen.

Some people think that Mike Mann makes his sales simply because he has 280,000 domains so by putting high BIN prices on them he is bound to make some sales.

No!

The truth is that Mike Mann has enough domains that are average or good that are priced at the correct BIN price (or negotiated at the right price) and these sales will produce probably enough revenue to renew his 280k domains year after year.

This numbers game is not easy to play and even Mike Mann could be losing money.

Your average or good domain names (together with domain parking) are in your portfolio to produce enough sales to renew your other domains and to fund your new acquisitions. If your domains are better than average you will make a healthy profit. But the premium domains are there in your portfolio to give you PURE profit.

Premium domains are not there to help you make renewals. If that is the case then after a few years you will have none of those. Some people are lucky enough that their premium domains make then enough money (by parking, leads, developing or other revenue) that they don’t need to sell any domain names, ever. This is what Rick Schwartz is doing.

Of course people have different definitions on what they think a premium domain name is and how to calculate value.

For example let’s say you own 50 domains and you have a domain name that you have received many offers in the 3k to 5k range and makes $50 per month in parking. That is an above average domain in the scope of this portfolio. Of course it is probably just an average or good domain and not a premium compared to other domains. But that is a domain name that you don’t want and should not sell cheap.

The optimal of course would be that you will be able to sell 1 or 2 of the other 50 domains per year, be able to replenish your portfolio and make some profit. Otherwise your 50 domains are simply dead weight.

I do admire how Elliot Silver keeps a very trimmed portfolio of 500 to 1,000 domains. I wish I could do that. I am trying though. In the next 12 months I intend to drop about 10%-20% of my portfolio. That is very had work to do but I count each domain I drop as a $100 bill. (10 years of renewals)

So the point is that you should stop carrying domains that are have no potential to sell just because you think that more domains gives you a higher overall probability to make a sale. Only your good domains increase this probability. The bad domains are simply yearly bills.

You should also stop thinking what you paid for a domain or how many years you have it. A bad domain registered in 1997 is still a bad domain and will cost you another $100 if you keep it for 10 more years. So drop that 10 bad domains and use that $1,000 to buy a good one.

Sold.Domains

About Konstantinos Zournas

Konstantinos studied Computer Engineering and Computer Science in London and lives in Athens, Greece. He works on domain names, websites and software development. Has been online since 1995 & domaining since 2002.

23 comments

  1. Very true. But it can indeed be difficult to say farewell to your domains if you have owned them for years.

  2. To the point. Wonderful article.

  3. Totally agree that pruning your portfolio on a regular basis is essential. Good piece.

    Language evolves, hot areas can cool, and new areas (and associated words and concepts) can emerge overnight.

    Case-in-Point…the sale of PayEther.com selling for $45,000.

    https://www.thedomains.com/2017/09/26/sedo-weekly-sales-led-medically-com/

    Whoever owned/sold PayEther.com didn’t get lucky, or win the lottery: They had their finger on the pulse of blockchain, and were brilliant enough to put 2+2 together to foresee that Ethereum/Ether will (soon) be a fundamental method of payment for goods & services.

  4. “The truth is that Mike Mann has enough domains that are average or good that are priced at the correct BIN price (or negotiated at the right price) and these sales will produce probably enough revenue to renew his 280k domains year after year.”

    I’m sorry, K, but that is total nonsense. (Okay, I know that may get a firestorm from you.) I routinely drop “good” and “average” domains that never get the slightest interest except for HugeDomains to pick them up when I let them go, including better domains than what Mann mentions. And even with some of my far better than good or average domains it can be like pulling teeth for someone to want to spend anywhere near some of the crazy prices Mann broadcasts for much worse domains than some of mine.

    It it pure commons sense that if Mann is telling the truth about some of these big prices relative to the quality of the domain that the “numbers” issue of simply having so many most certainly factors in.

    Furthermore, there is the element I’ve never seen anyone mention which is so obvious, and that is the simple issue of the psychology of the “packaging” of his site. Anyone who visits a domain and discovers it listed at his site and then contemplates the matter through the lens of an end user customer can see that if his reports are true then the simple matter of “packaging” also factors in. The whole impression conveyed by the site itself helps persuade people to spend that kind of money on domains that otherwise would not be considered worth much by most.

    And then there is the obvious issue that a fair number of these alleged sales appear to be either genuine trademark violations or very close to it in my opinion and observation, but which the buyers were willing to pay up for instead of challenging. I mean come on – you yourself just even mentioned that he got “LinkedTin.com” for crying out loud.

    “This numbers game is not easy to play and even Mike Mann could be losing money.”

    Yes, I suspect he probably is with domainmarket big time, but perhaps profits are high enough with his developed business sites to cover that.

    • People tend to think that their domains are better than the ones selling.

      Also his tm names are probably 0.01% of his names. It is not fair to judge him or his sales by linkedtin.com.

      • Well I do think some people have been willing to say in the blogs that some of those domains are not so great, and it’s not for nothing HugeDomains gets most of mine. He is the one who has also been touting the TM or “quasi-TM” sales, and a reg like LinkedTin.com is really as blatant as it gets.

        I know it’s easy to say about oneself, but one of my strengths is what I condemn the most – “appraisal” – because I practice an extreme honesty of mind not for the faint of heart and not bearable to most. And I say a lot of his sales have crazy prices that would normally be almost inconceivable – were it not for the psychological “packaging” factor which would help bring that about if his reports are true.

      • If you glance at the name maybe you can say they are bad or average or whatever.
        But do people take the time to research the names?

      • P.S. And btw my “extreme honesty of mind” unbearable to most and not for the faint of heart most often leads me to a higher valuation for most apparently, instead of the other way around.

      • P.P.S And I mean most other people’s domains, not my own. 🙂

  5. I disagree. When you have thousands more fishing rods (.COM brands) in the ocean, you are going to catch more fish – as long as those brands are at least average in quality.

    I picked up a group of 2700 .COM brands last year that have been producing around $4K in monthly residual BIN sales. Another group of 800 .COMs is producing around $2K in sales. It is all about scaling, pricing in the sweet spot and acquiring the right types of names.

    HugeDomains/Mike Mann have this down to a science – whereby each .COM gives x profit/month/year.

    Both of these investors have highly profitable models. Take Mike Mann’s portfolio…What is 0.5% of 350,000 domains x $2K or $3K? (and after renewals of $2.8M?). Do the math.

    If you are buying the right types of names and pricing them right, you only need to sell 0.5%-1%/per year to be in the profits.

    • Did you read the post? Because it seems we agree.
      You need above average domains to make a profit. I explained that Mike Mann does it.
      People think that Mike registered random crap and just waits for buyers. That is not the case.
      But if you have pigeon shit as they call them then you will not make a single sale no matter how many you have.

      • christopher brennan

        on godaddy auctions huge domains sucks up anything with a bid on it, so he is getting an idea of value because someone else had bothered to place a bid.

        i wonder how many domains do huge domains buy on godaddy auctions as the only bidder or as the first bidder

  6. He has many domains that are above average, but he also hold a very large % of average domains – many of which he acquired for $7-$9 each. “Average-enough” domains often command sweet spot prices ($1.5K-$3.5K) – and if you hold large quantities (many thousands of them), 0.5%-1.5% is a very realistic and typical turnover.

    I know this as I have been buying and testing for the past year. The model is profitable if you know what you are buying – buying at registration fee does not equal = junk quality. There are more gems than most people think that fall through the cracks.

    • What you call average-enough is probably what I call above-average. Above average I call domains that >consistently< sell and bring you a profit every year. "buying at registration fee does not equal = junk quality" No, but junk is what most people buy at reg fees. You must know what you are doing. Mike Mann has many tools to find these domains and so has HugeDomains.

  7. Excellent article! I absolutely agree with what you have said about good or above average domains. Aged expensive domains are indeed meaningless especially if they do not make sense or have useless or old words. Again, I think it is important to have a trimmed portfolio of good .COM domains with high traffic or search results only. That’s why I now try to limit my portfolio to 150 domains or even less and then sell some at right BIN prices first before acquiring still more good domains thus avoiding increasing cost of renewing these. As my enjoyable hobby just like playing scrabble or crosswords during my active retirement, I just pick and list all possible trending names or important two related words before registering more .COM domains if still available and without trademark infringement) from all various readings (technical, big issues, etc.) and following my own proper research!

  8. I receive a fair amount of .Com domain name Inquiries, but a lot of end-users want to buy domains for less than what I am willing to sell them for.
    End-users do not understand the value of domain name nor do they realize the importance of owning a .Com domain to go along with their business.

    Buying a domain name for their business should be the first step, not the last step. Backwards!

  9. Nice article in all ramifications. But one thing is knowing good above average domains as you call it.If one does not know good domains how do you buy the good ones even among the expired, so the most importantbfactor is; I think knowing the good ones matters more and by so doing one can buy from any market either expiring or hand regs

  10. Of course, If you own 300 crap names and you icrease your portfolio to 30000 craps it will not help you much.

    But If you own e.g. 300 domains and you make regular sales it is obvious that if you increase portfolio and pick up the same quality names you had picked up while owning 300 names you will make more sales.
    It will definitely increase your chances…

  11. Has anyone seen Mike Mann’s balance sheet and actual tax returns on domain sales? Huge Domains lets go hundreds of domains ever year due to non sales. If you’re a registry, you don’t pay full or even discounted prices.

    You too can be success story can be applied to any industry. The fact is, all the sales happening across the domain landscape is way too scattered and gives the illusion of a thriving industry while the truth is, most domain owners make didly squat.

  12. Not unless you develop that bad domain name in your 10 years of holding it and made lots of traffic with it then you can sell it at a good price. I see lots of bad name in search result a lot when looking for something. That you only way of selling those bad domain names:)

  13. This was very well said. Way too many people that are new to the business make the mistake of hearing about it on sale and think they can duplicate it easily. The name, the traffic, the industry and potential trans from marketing Abbott really play until a successful domain sale today

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