After just about two years with increased focus in the online sphere of content and technology, I realised that in many ways, digital businesses can be very reflective of more traditional operations. Take for example domain flipping which to my mind is similar in concept to property flipping.
In property flipping, you buy a property such as a house or apartment at a good price and resell it at a higher price. Domain flipping works on much the same principles and can be just as stunningly profitable, if not more so.
Here are some examples of domain names that were flipped for massive sums;
- Insure.com was sold for $16 million
- 360.com went for $17 million
- Insurance.com was flipped at a whopping $35.6 million
Those figures look wonderful, don’t they? But before dashing in and buying up domain names like crazy there are a couple of things you need to know about the domain flipping business.
Learn How to Estimate the Value of a Domain Name
Buying domain names is not as simple as snapping up random names and hoping they all go up. To put it succinctly, there is a subtle art as well as a bit of science behind the madness. The best domain flippers put in a lot of thought and knowledge to their purchases.
If you think putting a price tag to a domain is like gambling, you are wrong. Seasoned domainers put a domain through an appraisal process before investing. Several professionals and companies offer this service. The valuation is based on parameters such as age, length, search popularity, e-commerce potential and likely future valuation.
These are factors you need to consider:
The .something is the extension of a domain name, otherwise known as the top-level domain (TLD).
Not all TLDs are equal and some are more valuable. For example, in considering TLDs alone, a country level domain (such as .za) would not be as valuable as a standard .com TLD.
2. Length of name
While ThisSpaceForSale.com might sound like a good idea, domain names that are shorter often demand premium prices. Take for example sex.com which was sold for $13 million. A single word domain often commands an awesome price.
3. Composition of domain name
Similar in concept to length of name as mentioned above, having a domain name that doesn’t include hyphens or other unusual characters is better.
4. Existing similarities
Going back to the principle of willing buyer, willing seller, the have value, a domain name must have a potential buyer. Consider the permutations and possibilities of similarity the domain name you’re interested in snapping up has and compare that to potential buyers.
Normally, when buying your own domain name, people are encouraged to choose something quick and snappy. The reason for that is because it has pizzazz. I call the appeal of a domain name as it’s pizzazz, since that is the potential it has as a brand.
Think about Nike for example; short, sweet, and today a global multi-billion-dollar brand.
There are of course other considerations when choosing a domain name to buy, so a bit of research and experience is in order before you embark on your new domain flipping business.
Domain Flipping Does Carry Some Risks
Again, like property flipping, there is an inherent risk in domain flipping. I am certain that there are those out there who make money out of domain flipping, but in all honesty, hitting the jackpot with a name is really touch and go.
Even worse are those who don’t go into the business prepared and end up with a bunch of albatross domain names. These are domain names that you can’t even pay someone to take off your hands.
Let me make this clear: Like any other business, domain flipping requires knowledge, experience and a bit of luck. Do not go into the business expecting to turn into a millionaire overnight!
Prepare yourself as if you’d be embarking on any other business. Know the trade, know your own limitations, be aware of capital requirements, etc. In short, treat it like reality instead of a pipe dream.
Getting Started Tips
As mentioned earlier, knowing the potential value of a domain name is an invaluable skill. By adhering to basic guidelines such as those I listed above and through some of your own research, you’ll be able to pick names that offer you a higher chance of flipping them more easily. Remember, a net profit of $100 is still a profit, you must start somewhere.
Aside from places where you buy and sell domain names, there are some companies around that support the business of domain flipping. GoDaddy is one of the bigger names out there that does. There, you can not only trade domain names but also park those you’ve bought. The buying, parking and selling is relatively painless and all you must give up is a small percentage of your selling price.
Size does matter
To be in the domain flipping game, you’ll need to be prepared to hold a significant number of domain names in your portfolio. These domain names need to be parked properly so that even if you only sell a fraction of them, the others may give you an opportunity for some revenue.
Make sure that people know your domains are for sale and what the price is! You won’t believe how many people I’ve encountered who just bought domain names and sat on them, hoping for a sale. How, I have no idea. So, make sure you don’t make that mistake and list your domain for sale along with the right price tag.
Know the right price for your domain.
Not an easy task, but this will make sure you don’t get burnt in any deal you make. Calculating an estimate can involve many factors, such as the value of the name, potential market and more. Some companies such as SmartName can help you value your domains, but are a bit fussy when accepting clients.
GoDaddy on the other hand has a free domain valuation tool that’s open to everyone. I recommend you give it a try first and perhaps use something like that as a second opinion. It’ll help with the learning curve.
Flipping Your Domains
1- How to buy domain names
There are domain names and there are domain names.
The difference is that you must buy the latter on sites that specifically cater to domain names that are already owned. Sort of like buying a used property from another buyer, rather than the property developer.
Domain Market Place
Two good examples of places where you can buy domain names which are already owned are on Namecheap and GoDaddy. Both sites have domain marketplaces that are like property listings. You can browse and purchase them on this marketplace.
Premium Domain Market
Another alternative is Brand Bucket which offers a more selective choice of premium domain names. These domain names are specially handpicked by domain name purveyors and could be a very useful resource if you’re shopping for something unique.
One more example of an upscale domain name source is BuyDomains.com which lists the cream of the crop. Through this site you can just enter the domain name you want and even if it’s not available it could help facilitate a purchase.
Note- My dear colleague Azreen Azmi talked about how to buy a domain name from an existing owner here – do read it if you need the step-by-step guide in buying a pre-owned domain.
2- How to sell domain names
The Direct Approach
In the same way as selling a car, you can reach out to potential buyers and act like the used car salesman. This requires quite a bit of extra research and legwork, but it might be a good way of getting rid of a more niche domain.
For one thing, you can target your sales pitch and skew it correctly. For another, because you know it’s a niche, you can bump up the price a little bit. Lastly, by selling the domain directly, you won’t have to pay a cut to a middleman such as a domain marketplace.
Just like a property listing, except much simpler, domain marketplaces are basically massive lists of domain names that are up for sale. The process of using them is simple. Buy a domain and park it, then list your domain on the marketplace for a price you’re willing to let it go for. Once the domain is sold, the marketplace takes a cut and then passes on the remaining funds to you.
Different domain marketplaces charge different percentages of commission and have their own terms and conditions. For example, some require exclusivity, which means if you’re listing a domain with them, you can’t list it anywhere else. Here are some domain marketplaces to check out. Take some time to find one that’s right for your needs.
A site that brands itself as an entrepreneur’s marketplace, you can get more than just a domain name from Flippa. In fact, you can buy an entire online business through Flippa by browsing as many as 5,000 new business and domains that go on sale here daily.
More than just a domain name marketplace, Sedo allows you to engage the services of a domain name broker. These experts can help you find the right domain names not just for your business, but even marketing or campaign-specific domain names.
Having read through what I’ve written here, I hope that you take away the key element that I’ve been trying to instill, and that is to be realistic. There is absolutely no problem with having lofty aspirations and dreaming of the mother lode but do take a sensible approach as a whole.
If you respect the domain flipping business and treat it like any other money-generating venture that you would enter, you’ll stand a fighting chance. As long as you stay afloat while in the business, there’s always that chance of that ten-million-dollar sale dropping into your lap some day!