Nora Nanayakkara

Good morning,
What a jolly time I had getting to work in London this morning! Ahh, Tube strikes, Sunday-drivers taking their cars into the city for the first time since 1984, wobbly cyclists covered in high-visibility regalia, pinstripe suits with FT’s firmly in fist trying to hail cabs ahead of the queue….fun times.

While I enjoyed a brisk 50 minute walk from Paddington, I got thinking about domain investing, or rather “what advice would you give to potential domain investors?”; my most commonly asked question by far.   So, here are my top five tips for domain investors.

1.  Apply the same investment concepts that you would to your offline ventures.
While domain name speculation is relatively new, the investment strategies from traditional portfolios still apply.  For example, stocks provide dividends and the potential for capital growth in the same way that domains provide revenue and growth potential.  Domain revenue is earned through PPC or CPA advertising and profit is achieved through domain sales.  Keep in mind the two key drivers of stock valuation and apply them to your portfolio:

• Stocks: Future Growth, Domain: Future Value, or Resale Value
• Stocks: Current Profit or EPS, Domains: Current Traffic

2.  Diversify your portfolio
Just as investment diversification is a savvy move in stocks management, domain investors should do the same to spread risk by mixing stable investments (e.g. .com and .co.uk domains) with “new” or “international” domains like .mobi or exotic TLDs with high growth potential

3.  Buy low, sell high

A simple but vital rule – as with any offline investment, do your research!  Look at the traffic stats, traffic origins, traffic drivers or your target acquisition.   Research the domain seller and his business model.  Check out recent relevant sales and explore alternatives (e.g. plural/singular, different extensions, synonyms, etc.)   Use a broker to do the legwork for you if needed, but whatever you do, don’t buy blind and don’t get emotionally attached to your purchases!  It’s imperative that your don’t forget to sell and reinvest when the time is right!

4.  Run a tight ship, stats-wise

Monitor your online portfolio’s performance regularly by pulling traffic stats and analysing to ensure an ROI on  your investment.  At the very least, domains must be working to cover their renewal fees – shop around for the best fit for each domain in terms of advertising.  Many domains will suit PPC or CPA based advertising, while others will need some development to extract maximum revenue streams.  If you are redirecting domain traffic to a site, make sure its traffic is converting at the destination – i.e. that your “technology” related traffic is not redirecting to a site that sells bottled water, for example – it is wasted traffic.  Most parking providers will enable you to draw up weekly/daily stats reports or to pull down stats in CSV or Excel format.  Use these features to monitor RPM and only renew domains that are paying for themselves!

5.  Price Realistically

The best domains are keyword, generic domains with natural type-in traffic, high online affinity and a multitude of online advertisers competing on search engines for that keyword.  Domain buyers will typically seek to ensure ROI anywhere within 24-36 months.  Bear this in mind when pricing and use your traffic stats to calculate a base price for your domain.  You can then build on this base tag using other key value indicators such as SE rankings, brandability, demand, etc.

List your domains for sale at international domain sales platforms and don’t forget to factor in the commission you’ll pay if you sell and the VAT on a sale if applicable.  Be realistic about the domain’s resale value – take a look at the search engine results for the keyword.  If there’s lots of paid advertising, many listings and high competition reflected in the estimated keyword price, it’s likely that your domain will have wide appeal.  However, if your domain is not composed of one-three generic keywords, has low online affinity and does not attract advertisers, you may need to re-evaluate your pricing.  Ultimately, you should be aiming to sell domains and reinvest to maintain a dynamic and competitive portfolio.  It is therefore important to establish the annual sales revenue you need to achieve in order for your investment to provide a return that at least compares favourably to and at best outperforms your offline investments.

A good article that draws parallels between the stock market and the domain market can be found here.