Portfolio Management

Like with any investment, domainers often consider spreading their risk across a diverse range of holdings. In this particular context, that means several domain names. While some consider a portfolio comprising exclusively of short domains (which are generally valued dearer) as desirable, the reality is, some domainers find value in also holding keyword oriented domains (e.g. geographic locations combined with services) and international domains to ‘balance’ their portfolio.

With that said, some domainers try to capture lots of  domain names rather than focusing on acquiring good ones which retain their value. Although smaller, cheaper purchases tend to assist domainers with their initial cashflow position, there is a risk that these domains are not favoured by others. In these instances, domainers are forced to either, write off the domain, or pay ongoing registration fees which add up across an entire portfolio.

Cash Flow

As we detailed in our last educational article, flipping domains within a short timeframe (for a profit) is not as easy as it once was. Domainers often sit on a particular domain for a lengthy period of time before selling their name. In the meantime, some elect to monetise their domains by parking them and displaying advertisements.

However, relying exclusively on domains to generate sufficient working capital is easier said than done – this sort of success is usually reserved for domainers who hold a high quality and large portfolio. Making a living from domain name investing is certainly the exception rather than the norm, and even then, many domainers only use the capital they can afford to tie up, or in a worst-case scenario, lose.

Know Who You’re Selling To

While high quality domains are more likely to sell themselves, for most domain investments domainers try to identify who they will sell their domain to – that is, another investor, or an end user.

In the case of an end user, domainers often try to foresee how the domain (including any keywords) might contribute towards the end user’s business, and what impact (if any) there might be if they are unable to attain this – for instance, a competitor gaining an advantage, or lost web traffic.

Another aspect considered by domainers is the likelihood of any preference a buyer may have towards a particular TLD. A business owner who is second to market might be open to acquiring a .net.au domain, however, a domainer may be privy to the lower liquidity level often associated with the .net.au TLD. Domainers who understand future trends and their potential customers often positions them well at the negotiating table.

That’s it for this occasion, stay tuned for our next educational article. If you have any questions, don’t hesitate to contact us.

Best wishes,
The Netfleet Team

http://www.netfleet.com.au

This information on this website is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any financial product.

Domain name investing is the practice where eligible businesses and people, typically domainers, buy a domain name with the intent to make a profit from, or monetise it. Purchases are usually made via auction, catalogue, or private negotiation.

Domainers typically achieve monetisation by either: parking the name and generating income; selling it for a profit; or developing the website to boost the domain’s value. As such, because domain names operate as website addresses, they represent the property market of the internet. If you’re not convinced, consider cars.com.au which sold for a lazy $1.6M, or investmentproperty.com.au which landed $137,500 back in 2011 when Netfleet was involved with the sale.

What domains do domainers typically look for? Usually, a name with great features, notable web traffic, and high demand. Domainers sometimes even generate income by parking their site and leasing advertising space through it. Who said properties were the only assets that could be leased to tenants?

While in the early days of domain name investing domainers found it easier to secure a highly sought after domain, or to make a quick buck by flipping good (and bad) domains, there is now a far greater level of judgement required to make a sound investment. Some domainers have still been able to make a quick buck by catching onto a domain before a growing trend or major news event, however, this requires more than its share of good fortune.

Developing a website is another method which domainers seek to generate a return, albeit is the least common method. Domainers opt for this approach when also using the domain for specific projects or short term business pursuits. Pages with quality content and backlinks are often regarded key factors behind visitor numbers and domain name values.

When making a domain name investment, the factors to consider are likely to differ from those thought of by an end user when choosing their domain name. And as always, one should seek advice from a registered professional with regards to their own circumstances.

Generally speaking however, some domainers opt to purchase a domain without regard for the meaning of the name or any keywords used – instead, focusing on its search engine popularity – or, they sometimes apply foresight towards how memorable and authoritative the name is, as well as how it can be branded by an end user. Domain name investing isn’t without risk either. After all, judging domains is subjective, while cash flow is dependent upon the liquidity of a name – something that varies considerably.

That’s it for this occasion. If you have any questions, don’t hesitate to contact us.

Best wishes,
The Netfleet Team

http://www.netfleet.com.au

This information on this website is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any financial product.