Emma You Are Wrong: Domain Investors Are Not at the Bottom of the Entrepreneurial Chain

May 28 2012

The other day I wrote a post about the characteristics of successful domain investors.  I received a little more feedback than I expected. Most positive, some responding with domain investing is a bunch of snake oil.  One such person was named Emma.  Emma wrote the following

This is all crap. My advice to domainers is: if you have a business concept/idea buy a domain name and develop it. If your concept is good you will make money. We have seen facebook, instagram, pinterest, godaddy, linkedin, bebo, techcrunch and thousands of other websites making millions/billions yearly, and these websites sit on web addresses that are not even premiums, not even salable. These domains would not sell in their life time if they were to sell them undeveloped, no, even for $1. If you don’t have a business concept/idea and you don’t have a premium name that you are willing to sell 15 to 20 times less than the estimated/appraised price then please quit this business because you will waste your life. You will die without selling a single domain name in your life time. I know many domainers plan on leaving their domain names to their children, but I tell you this: your children also may not sell any domain name in their life time. Developing a domain name and make money is easier than selling domain names. Remember: Frank Shilling and Rick Scwartz started domaining since day 1 of this business but they don’t make billions a year, not even 1 million a year, and see facebook, godaddy, linkedin, bebo, alibaba,paypal, youtube, google, instagram, pinterest, tecgcrunch, diapers.com, how much are they making? millions and billions. Develop, develop, develop, develop, develop and don’t let Frank Shilling and Rick Scwartz luck/lottery of 90s confuse you. I or you may not have been around when thing started. Don’t read their posts because you are not as them. They count on their premium domains names to make money, by selling them, and you have none, so do what people in your situation would do: develop.

Emma needs to have a little lesson on fruit because she is comparing apples and oranges.  I am going to use the old real estate analogy for the millionth time because domains are the real estate of the Internet.  Emma is basically saying that land owners have no value until a builder or developer comes along and puts a building on the site.  My undeveloped 2 acre property on the coast of Laguna Beach is worthless because it has no home or business built.  She is saying that the builders create the worth.  I would agree with the statement that the real money is made building a business but she is dead wrong in saying that owning domains will yield nothing.

Yes domains are sold to those that need them for a business or to others that speculate. The speculator probably will sell it to another speculator.  An action that most likely will be repeated until a final end user buys it. But isn’t land bought and sold every day using the same principle?  Land doesn’t have much more usability than a domain.  You could grow crops on it but the return of crops to cost is minimal.  It’s probably closer to parking yields than most realize.  I can buy farmland for $10K an acre and the cash rent is $300 a year.  A 3% yield.  I get 3% out of most of my domains parking even in today’s bad market.

Yes, Pinterest, Twitter and all the other billion dollar companies are built on hand registered domains.  I have always agreed that a company does not need a category killer domain.  That is what branding is all about.  But that does not mean that ALL domains have no value.  Just because you can succeed without a killer domain doesn’t mean that one is not useful or advantageous to a company that chooses to use a name that is a common term.  That’s throwing the baby out with the bath water.  Building a company and selling domains are completely different business models.  They only intersect when that company needs a piece of land to park their business.  In many cases what domain they put that company on is not important.  The product or service is so superior that people will find it regardless of name or url.  There is no need to invest in a name that won’t leak traffic or make it easier for people to find.  They are not worried about Google ranking.  But many are.  And they need quality domains.

So Emma, I’m sorry, but you don’t understand this business.  You don’t understand the value of a domain.  You don’t realize that like land, it is a first come, first serve system.  Those that got in early got things at a cheaper price.  Land is the same system.  I do not get pissed at the guy that bought land cheap in 1950 and lets it sit with no buildings.  I do not call him and ask him if he wants to sell it for the 1950 price because he has not developed it.  I understand.  And last but not least, you know nothing about Frank Schilling and Rick Schwartz.  They both make over a million a year.  Frank probably makes that from his share of Internet Traffic parking alone.  That is NEW money,  that is not from selling any domains or assets.  That is generated from the value of a domain.

There are a lot of Emmas in this world.  People that have termed the name squatters which is also a term for people that live on land they don’t own yet we own our domains. We paid for them.  What we paid is of no concern.  There is nothing secret about the registration and transfer of domains and how it works.  Ted Turner owns millions of acres of which most he lets sit with no improvement.  That term would never to be used to describe Turner yet he has done what we do. Buy an asset that he now can do whatever he wants.  I guess Emma thinks he should put a house or business on every acre he owns. Because that’s where the money is.

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Outsmarting the Dumb, Outworking the Smart

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31 comments

  1. Tom

    Emma is a douche who was late to the game, and doesn’t want to pony up, what a sad story this Emma is…

  2. Tom

    Emma gold was about $400 an ounce a decade ago, should I sell you my stockpile of gold for $400 an ounce today? Boo hoo

  3. @Domains

    Her words are harsh, but there is some truth to what she is saying. Come up with a good idea and develop a domain name into an information site or business. It might not be the next Pinterest or Facebook, but there is reliable and steady money to be made with that path. She is wrong though in that there is still money to be made in domaining for people who can acquire the right names for the right price.

  4. Ian

    Nice. You gave her the old what for. Unlikely that Emma will ever change her opinion, but fun nonetheless.

  5. Uzoma

    Emma is right of course.

    If you believe that ‘domain’ is exactly like land, or real estate, then you must be smoking something stronger than Indian hemp.

    Domain is not analogous to land or real estate strictly.

    Premium domains are still great stuff to own, but I mean premium domains

    Any domain relying on Google search, or analytics, is simply fools gold. Google has moved beyond domain names. Parking domains is fr the birds. Search engines are cleverer than ever.

    Shane, almost every piece of land is worth some money, NOT so with domains. They don’t make land anymore, not so with domains. Domains are made every second. So, stop with your hyperbolic fallacy.

    Domains could have been great, but we allowed the big fish to ruin it for everyone. Now, we are just selling domains among ourselves. “Businesses” don’t get it, right? I wonder why. They get land and real estate, how come they don’t get domains? That is because land is not like domains.

  6. Troy

    As a domain investor I have no problem admitting there is a degree of truth to her statement. Want proof?

    Imagine what the would would be like if there were no domain investors.

    A domain would be available until someone decided to build a business on it. They would purchase the domain for less than $10 and build their business. The world would be full of websites for businesses and personal sites as well.

    Adding a domain investor to the picture does not give the world anything additional to what it would have without them. We would still have facebook, we would still have google, we would still have a site on every major domain out there most likely. The only thing we would be missing would be millions of parked pages with owners waiting for a much larger payment than the $10 reg fee to sell.

    I am not saying that domain investors are “cheating”. I am not saying they are “bad”. They are simply like every other human out there, focusing on their own self interest. The big difference is that a doctor focusing on his own self interest also provides a service for others that wouldn’t have been available had the doctor not been present. A domain investor simply jacks up the price for whoever comes after him and as far as I can tell does not add anything to the economy that wouldn’t be there had the domain investor decided to never invest in domains.

    I would be happy to debate this argument with you and perhaps you will have some ideas that will change my mind, but I have thought about this quite extensively and I think the most logical result is the belief that domain investors really don’t provide much of a service to the world at all.

  7. Tom

    @Troy

    Least the domain investor presents the opportunity to the person wanting the domain, if domain investors hadn’t bought up all the quality names, someone else would have, they may not be so willing to sell.

    If the internet is exploding before our eyes, every mom and pop business has a web page, these investors that bought quality keywords deserve to be rewarded. Not every domainer sets a price, I have had emails offering 5 figures on the first inquiry, I have also sold fresh reg domains within the first year of reg for 5 figures, buyers were happy to pay for it, who am I to argue. The marketplace sets prices with supply, and demand, the $10 price tag means nothing once the domain is registered, owner could ask $1 million for it after the face, regardless of what they paid, if you want to play, you have to pay.

  8. Required

    @ tom The trouble is that the marketplace is not allowed to set the price. It should be buyers that determine the price, not the seller. Whichever buyer is willing to pay more than anyone else for a domain should get to buy it. And a guide to the fair price for a domain is the cost to replace with one of similar quality.

    Sellers cannot be relied upon to determine fair prices, particularly where those sellers hold a monopoly of sorts.

    The land owner who buys a $10 piece of land and jacks the price up to $5000 will never sell it. Domainers know they may be able to get away with it, because buyers may have an unusually strong reason for wanting that domain above all others.

    The domain may exactly match a business name. Or maybe it’s an entrepreneur who believes that one or two names particularly suit his business.

    The more carefully I hone my idea to the point where I am picking out a favourite name, the more likely it is that the domain buyer may sniff out that he has me over a barrel. It’s a very unsatisfactory marketplace from a buyer’s perspective.

  9. Ex-domainer

    Emma is right but for all the wrong reasons

    Successful domainers might make 6 figures and a couple make low 7 figures a year. Thats the best of the best

    Seems like emma is indeed correct, domainers are quite lowly if not the lowest on the totem pole

    Sorry domainshane its the truth whether you want to admit it or not. Skimming $1k or $2k there is a pathetic way of daytrading with a much lower upside

    Premium domains have a lot to appreciate but 99.99% are not premium and 99.9% of domainers dont own premium domains.

    I guess you could say you are a medium fish in an extremely diminutive pond, and I am trying to compliment you


    1. Post author
      ShaneCultra

      Ex-Domainer,

      Thanks for the comment and I’ll take whatever compliments I can get. I opened the can of worms so I’m willing to hear all and every opinion and appreciate those that share them.

  10. Mike

    Hi Shane, I really enjoy your blog and I admire your drive and business smarts…thats why I was a bit surprised to see this post. Don’t look at the negatives in your comments, look at the positives! Why not do a post about Frank’s comment: “nothing happens until somebody sells something”. Don’t be afraid to take the money.” Stay positive pal! There is more than one way to make money online or domaining…Emma’s comment was actually quite smart, her main point was to develop if you want more profits at this stage of the game! Just look at the recent sales at FLIPPA…some of those domains look like hypenated crap, but they are developed and therefore sell for a nice multiple!


    1. Post author
      ShaneCultra

      Mike,

      Not arguing one bit about the value of a business. There is a reason I started putting up posts about sites selling at Flippa. Businesses drive the world. I do realize this. I am merely pointing out that quality dot coms have their own value. Probably didn’t make my case very well after rereading my post.

  11. Steve

    Emma is right. Once domainers stop being so defensive abo ut their ‘business’ and take a long look at their so called ‘business’ they will understand. I doubt that will happen tho.

  12. Seb

    I’d side with Emma. You can’t make what the big guys are with domains and you shouldn’t expect to.

  13. Jeff

    @Troy

    A bottled water company “simply jacks up the price for whoever comes after him and as far as I can tell does not add anything to the economy”

    McDonald’s “simply jacks up the price for whoever comes after him and as far as I can tell does not add anything to the economy”

    Walmart “simply jacks up the price for whoever comes after him and as far as I can tell does not add anything to the economy”

    Would you agree with these statement?

    Isn’t that how every business makes a profit?

  14. L

    Observation, having lived through a few manias that will be carefully studied by historians, 100 years from now:

    Whenever the word ‘flipping’ enters the popular vernacular- as a core principle of the operating model- that’s a gigantic signal to get the fuck out, credible valuations have peaked and it’s all about the greater-fool.

    Domains have unique stuff going on, but I do snicker at the crippling greed that has overwhelmed some people, that keeps them far, far away from maximizing their potential.

    Potential centa-millionaires are stuck being millionaires.

    Potential millionaires are stuck making enough money to beat working a day job.

    Potential day-job beaters are stuck working for someone else.

  15. speculator

    Unlike shares, our investments can be built out which is a very unique oppotunity. To have a choice is very big upside to investing

  16. GiftedDomains.com

    I had more success with undeveloped Domain Names than developed ones. Don’t know why but selling parked Domains seams to be easier than Minisites or Websites. Also when i am contacting Endusers, selling them an “empty” Domain Name is easier than a Site.

    So Emma is wrong.

  17. DR.DOMAIN

    I do not disagree with Emma.There is only sales and development in this game…as it exists today.Her words only make me more determined to develop more of my modest portfolio.

  18. Neil Armstrong

    Yep, develop – that’s what many of us are doing, but if we can develop on (here’s that analogy again) higher-value land that’s going to get type in traffic and rank faster through the name alone (i.e. its location) it just makes the job so much easier – especially if we’ve found that location cheaper by being domainers – and names we don’t develop we can sell on and use to pay development costs (if we need to).

  19. Chadi Ghaith

    I Do agree with Emma to some extent, yet I’d like to point out certain points:

    Domain Investing, like any investing requires investment dollar and realistic expectations. (Maybe whts wrong in the picture today is the idea of comparing domain names to lottery tickets). You have enough money to buy a good generic domain name for 20k, then you can expect to sell it for at least 25 – 30k. This is more than what you could earn from many investments; but don’t expect to hand register a domain for 10$ and sell it for 10000$.

    2, I would not admit to anything called “domaining” until its taught in universities. However, I do admit to something called a Good Domain Name even if estibot values it for 0$.

    3, Good Domain names are not numbers in bank accounts, they have a unique identity and value that can only become more valuable.

    4, Domain names are transportable assets. If you’ve ever been stopped at an airport for holding more gold or cash than you should be; u’d understand how important it is to have a quality domain portfolio, where u can land anywhere on this earth, access ur holdings from any laptop.

    5, Domain names are like Gold in the nature of investment and like land in the liquidity factor. A Land is too expensive of an investment for average people, but domain names are affordable assets (like a gold chain or bracelet).

    6, If you’re not able to develop properly, for goodness sake PARK; cz just as when u step into a house u wanna buy, the more its vacant the more u like it (cz it gives u more room for ur imagination), while a furnished house can be a turnoff to a potential buyer.
    From my experience, I’ve had better luck selling parked domains than developed ones; and the Golden mean to successful developing is: The Idea should prompt u to search for the right domain, and not u have a domain and it opens your appetite to develop an idea around it. yet, still when u buy a domain, its better to think like a developper than to think like a domainer (which I still don’t knw wht tht is btw).

    Just some thoughts triggered by this post. Thx Shane for sharing.

    Cheers!

  20. Uzoma

    Domain names are not like Land or real Estate. I believe they are more like a canvass, or a painting. You have your Leonardo da Vinci, Michelangelo Buonarroti, Vincent van Gogh, Pablo Picasso, Salvador Dali, René Magritte, Francisco de Goya, Frida Kahlo, Claude Monet, Henri Matisse, Rembrandt van Rijn, Andy Warhol, Georgia O’Keeffe, Wassily Kandinsky, Edvard Munch, Gustav Klimt, and then you have the ones your drew yourself.

    Who the painter is matters. Michelangelo could scribble anything down, and it will fetch beaucoup bucks, whereas when you use Photoshop to make an almost life painting, it’s worthless.

    Domains have been sabotaged by outside forces, coupled with greed from those on the inside. It’s completely a pyramid scheme nowadays, save a few pockets here and there.

    Check out the sales on some independent auctioneers such as Toby Clements, and such. hardly does anyone make any bids. I don’t trust the other auction houses making 1MM sales every other day.

  21. Troy

    Tom,

    “Least the domain investor presents the opportunity to the person wanting the domain”

    In my example that domain would still be available to the first person that wanted it. The only change would be that the person would be a user, not a flipper.

    “if domain investors hadn’t bought up all the quality names, someone else would have, they may not be so willing to sell.”

    That would still make the new buyer a domain investor Tom=) Just one with a higher price tag.

    “these investors that bought quality keywords deserve to be rewarded”

    I am not arguing that point Tom. I am saying that domain investors do not provide any service. Without them the domains would exist and without them the end users would exist. Domain investors just take extra from the end users, thats all. Unlike basically all other businesses out there, with a domain investor no value is created.

  22. Troy

    Jeff,

    You clearly did not understand my statement.

    “A bottled water company “simply jacks up the price for whoever comes after him and as far as I can tell does not add anything to the economy””

    A bottled water company does add value to the economy in a way that we would miss out on if the company did not exist. They take water from water sources, clean it, bottle it, ship it and sell it to people that want the water. If it were not for the existence of bottled water companies you would not be able to purchase bottled water. That is a valuable service no matter how much they jack up the price.

    A domain investor takes a domain that is already created and buys it with the hope of charging someone more in the future. They don’t create anything (like bottled water). Without the domain investor getting in between the registrar and the end user the registrar and end user could still work together. The domainer provides nothing of value by including themselves in the transaction.

  23. Troy

    To clarify, I sell domains and I see very little problem with that. If I am able to acquire an asset for X, and sell for X+Y then that is good business for me.

    My only argument is that domaining is one of the few businesses that I know of where no value is created. To claim they are at the bottom of the entrepreneurial chain is in my opinion a very accurate way to describe it. We are entrepreneurs, but we are not entrepreneurs to be highly emulated. We just buy and sell. Under the hat of “domain investor” we don’t create, or inspire, or imagine like others occupations.

    I have also found many people that call themselves “domainers” tend to “react” to the words of others instead of thinking about them and then “acting” in response. Knee jerk responses are very common, deep logical thought is not so much. But perhaps that is just a human thing=)

  24. John

    These idiots that constantly call legitimate domain speculators (not buying trademark names, corp names, peoples names etc) squatters need to educate themselves before they speak. They throw around terms they hear or from a headline of an article they glance at
    Speculators are needed in every marketplace.
    “The Domain Game” book is an excellent starting point. Reading the handful of excellent blogs daily overtime will help immensely.

  25. Spaceman

    Well, what I don’t quite understand is why there are always so many ‘Emmas’ out there who feel the need to tell people that what they do is not good or is without merit and they should do something else.

    We all do different things. Some are great musicians, some are great lawyers, some like working with their head, others with their hands and feet, athletes or carpenters.

    There are some who make money thinking of a new product, others make their money manufacturing that product, others make their money transporting that product, others again make money selling the product, while others make money writing about the product, some make money investing in the company that makes the product… the list goes on and on. So who in that chain is the one doing the ‘right’ thing and who should be doing something else?

    Some make more money, some less, depends on their choice, their talents, their abilities.

    Look at the advertisement business: some want to make great creative ads, put all their talent and education and resources into starting an agency, trying to land a big ad contract, developing creative campaigns, while others make a good money just by renting their billboards to those companies. Sure, the agency thing sounds cool and has the potential to make it really big. The guy who rents the ad space probably makes really good cash, even though he might not even be able to correctly spell the word ‘advertising’— but who cares? He does what he wants. He had an idea and generates an income. Would you tell him he should be starting an agency because otherwise he’s not ‘worthy’ of having his place in the advertising food chain?

    He probably makes a lot more money than most fledgling agencies in a very competitive arena. Maybe he’ll never make it big, never make billions, but what if he doesn’t care? What if he is happy doing what he’s doing?

    Sure, if he complains about the big agencies making more than he does, well, then he should study and learn and be creative and become as big or bigger as they are, but if he chooses to do what he does, like the domainer does, then why would all those Emmas of the world care so vehemently about what he does??

    Smells a lot like pigeon shit to me!

  26. J.R.

    There we go again …
    Things have no value at all.

    Appraisals are crap:
    Because appraisers don’t know how urgent somebody needs to sell or to buy a domain and because that’s the decisive parameter.

    People express their personal appreciation about something or somebody.
    They do that by saying what they would give or do to have something.
    Usually, that’s money …
    There is no such thing as best fit, Fair Market Price, Under Pricing, Over Pricing, etc. crap.
    Those terms have been invented by people who wanted to Get Rich Quick by luring others to buy all sorts of promotional and whatever nonsense products.

    Domains, as for everything else in the universe, have the value that people pay for them.

    Same domain, other seller and buyer, other time, other place = perhaps same price as the day before, but perhaps totally different.

    Price is mainly directed by purchase and selling motivation = Necessity.

    J.R.

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