10 New Reasons You’re Not Making Money in Domain Investing

Mar 18 2013

I know this has been done a million times but I’m going to try and get past the cliche’ reasons and move into some areas you may not think about.  After going over the thousands of emails and questions I’ve received I put the answers into a list of 10

1.  Thinking that your life and surroundings represents the entire world:  While I agree that doing what you know is a great place to start, there are too many people that forget they live in this tiny tiny little portion of the world.  Domains are worldwide with billions of potential buyers.  There are just too many domainers that are going up to bat lacking skill, experience, and are swinging with a wet noodle. Yet they think they know what they are doing.

2.  You’re a gambler:   Many of the people in this industry are addicted gamblers.  Not in the traditional sense, but the sense that they are putting up huge risks for big returns.  Buying thousands of names like scratch off lottery tickets.  They get high off the auctions and have to keep adding names to the portfolio on a daily basis.

3.  Trying to make a living on the “credit cards in the middle of the table dinner” style of domaining.  When my friends and I go out to dinner we all put our credit cards in the middle of the table and the waiter will randomly draw one out of a hat.  The card drawn pays for the whole dinner.  Not a big deal at a dinner of 4 or 5 but I have to admit I’ve shit bricks at the 30 person dinners (I’ve never been drawn).  If you’re buying 50 domains hoping that one sells for enough to pay for others you’re doing it wrong.  Each domain needs to be able to pay for itself or why would you buy it.

4.  You are passing on 500% returns.  aka Always swinging for the fence.  How many times have you passed on excellent returns because you thought you could do better later?  And then you didn’t.  Again, you’re swinging for a home run with a wet noodle.   If someone comes in and offers you $500 for a name you hand regged 6 months ago and you pass, then you better have gotten in early on some great term because otherwise you’ve missed a chance to make a profit

5.  You’ve forgotten that the end result is to have cash in your pocket.  I pay my bills with money, not domains.  Sure, you want to get the very most you can for your domains but the reality is that some will go up and some will go down.  Nothing is for certain.  Your domain is worth what someone will pay for it next week. After that it has risk.  You HAVE to make profits along the way.  In my opinion, if you are not making annual profits on your past domain purchases you are doing it wrong or you are building a portfolio.  But you can’t build eternally.

6.  You forget that relationships drive business.  This is where so many people are clueless.  Businesses that do well establish relationships with others that can help them make money. Not one time deals ,but long lasting relationships.  They help and receive help from others.  They play favorites and are a favorite.  Morgan Linton and I have done well not because we have the most money, are the best name pickers, but because we know who to work with.  Some get pissed because we get special favors but if you’ve seen our pictures it’s obvious they’re not doing business with us because of our looks.  It’s because like all good businesses, we help those that help us.  Every time you criticize an industry member you are burning a bridge.

7.  You are using other domain investors to value your name.  I’m not sure you are going to get the best opinion of value from a fellow competitor?  That’s essentially what you are asking for if you ask another domain investor’s opinion of your domain. You have to understand why an end user would buy a name.  I use my wife or random people at work to test whether a name has value.  If they “that’s a great name” I know that it has value.  If a non domainer gets the value then I am more likely to get a business that understands it as well.

8.  You’re reading too many opinion articles and not enough data.  You can’t read too many sales reports.  The more you understand which domains sell for what the better domain investor you will be.  I’ve started putting up the daily sales instead of my regular article because it has more value to you than me flapping my mouth.

9.  No buying strategy:  Do you have an end goal?  An exit plan?  What’s your business model?  Is it buy low and sell higher?  Congrats you’ve graduated from 2nd grade business class. There has to be a secondary plan beyond the “sell it for more than I paid for it” method. Most domain sellers are known for something.  It could be as simple as good quality names like Berkens and Most Wanted.  Or solid keywords like Elliot.   I’m known for 5Ls and short domains.  The more you are known for something the better chance people will come to you looking for those type.  You are not going to sell all of your domains. It’s a fact.

10.  You are buying based on price rather than quality of name.  The saying “it takes money to make money” doesn’t just mean you have to have money.  It also means that many people think differently if they don’t have enough to do things right.  We all know that regular maintenance on a car will help you save money in the long run on repairs.  The savings will be more than the cost of the maintenance.  Yet people that are tight on money skip it.  The same goes with domains.  Many people will buy ten $100 domains rather than one $1000 name.  They feel like they are spreading the risk.  The don’t feel like they’ve spent as much because it’s $100 at a time.

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Outsmarting the Dumb, Outworking the Smart

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  1. Joe

    I agree with you on #7. Most of the times I ask my girlfriend, mom or dad, who I think are a good representation of the general public, to judge a certain domain and it works.

    As for #10, one of the golden rules I live by is to never put all eggs in one basket.

  2. Arthur Askey

    Stop kidding yourselves.. find something else to sell.

    Domaining is dead! (ask Sedo)!!

  3. jayjay

    #4 once 😡
    #8 Amen 😉

    Overall a great reality check for those who need to see domain investing as it really is – arbitrage trading.

  4. OuMun

    #4 guys. You all should get it tattooed on your forehead. Because that’s the point of the game. Enough said.

  5. Perry

    Hi Shane,

    Great article and insight.

    #9 though–end game… How vital do you believe this is?

    There are lots of arbitrage businesses. If you are buying low enough and selling for high enough, what’s wrong with not having an end game?

    I understand that being known for a niche will present additional opportunities. But in the end, it’s all about making money. And if your business model is buy low, sell high, maintain virtually zero overhead and scale the process, isn’t that successful enough?

    Of course, it is far easier with solid domain names, but I feel as if that’s an education every new domainer goes through. Some graduate and make money; others flunk out and continue buying lottery tickets.

    (All that said, I’ve been trying to determine my own ‘end game’… How to invest in domain names beyond a quick 3 to 4 figure flip… But then again, not sure if there’s anything wrong with that per se…. Anyway, I’m really just curious for your insight here).

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