Why Domain Investing is Dead

In 1837 Hans Christian Andersen published his classic tale “The Emperor’s New Clothes” – the story of an entire population maintaining a pretense that the emperor’s clothes can only be seen by those not hopelessly stupid.

It’s not difficult to see the parallels between this and the current state of the domain investment industry – where owners are discovering their portfolios can’t generate real cashflow and have little prospect of delivering capital growth.

Domain industry advocates will no doubt disagree with all this by citing a handful of premium domain sales.

A few events over the last few months, however, provide solid evidence that the domain investment party is officially over.

Firstly, Sedo – arguably the largest domain marketplace – acknowledged in their 2011 9-Month report that both their Domain Trading and Domain Parking businesses are in decline. We saw further evidence of this earlier this year with the exodus of key sales staff from their domain business. And, despite all the fuss and publicity, they’re still trying to find a buyer for teaparty.com.

Secondly, we’ve seen some of the industry’s most prolific commentators abandon the cause – or at least shift directions. Examples include Rick Latona doing this a few months ago citing that the domain bubble had burst as far back as late 2008, and Rick Schwartz just last week announcing that he was leaving the domaining pond to “jump into Rivers and Oceans”.

Thirdly, any remaining revenue being generated by a domain’s parked page is under constant threat from updates to Google’s algorithm. Even last week’s search update specifically called out that detected parked pages will no longer appear in search results (see point three at Google’s InsideSearch blog).

As a result, we’re seeing an increase in whole portfolios of domains being put up for sale on Flippa.com, as owners become increasingly keen to sell their portfolios to buyers who are more likely to develop these domains into websites. This is in stark contrast to even 12 months ago, when we would field calls from domain owners expecting “multi-million dollar” yields off largely worthless domains.

What Happened to Making Money Off Domains?

The underlying premise of making money off domains is intoxicatingly simple – you buy a domain which generates click revenue while you wait for someone who is willing to pay you a premium to turn the domain into a website.

Basic economic theory, however, indicates that you can only extract a premium when you’re adding value.

The market now realizes that the guy who registers the domain is not adding anywhere near the level of value as the guys who define the business model, develop the user experience, build the brand, create and manage the content, attract the users, refine the monetization … and so on.

As a result, the folks who are building websites are squeezing domainers down on price in recognition of the fact that domains are simply a commodity, while the skills to build a profitable website are seemingly scarce. This means that pretty much the only people making money off domains right now are registrars who cash in the renewal fees each year.

So What’s Next for Domain Owners?

This is an important question for traditional domainers willing to concede that domaining alone no longer offers much value.

The first option is to roll up your sleeves and get your hands dirty. Take one of your domains, put your shoulder to the wheel and turn it into a website. Sure, it takes more time and effort than owning a domain, but the sense of ownership and financial reward is also higher – and you’re more likely to be actually producing something of value.

Another option is to have someone else turn one or several of your domains into websites. There are a number of these services on offer, ranging from venture-funded DomainPower through to smaller operations such as LintonInvestments and Epik. Just be sure you’re not spending more than the site will be worth.

Finally you can drop your domain portfolio altogether and buy an existing website. This is not as daunting as it sounds – just be sure to do your due diligence. There is a wealth of resources available to assist with this – including our own Pro Guide to Buying Websites.

Fortunately for domain owners, a lot of the wisdom and mettle gleaned from domaining transfers relatively well to the real world of websites. This includes recognizing an opportunity when it arises, using third party tools to evaluate these opportunities, reading and networking widely to learn new skills, and understanding the role of a quality domain in a web-based business.

So go ahead, stop pretending and take the leap into the real world of websites. Oh, and maybe reconsider your renewals on those long-shot domains that you aren’t willing to turn into websites – they’re worthless. Much like that emperor’s new clothes…

This post was guest blogged by Andrew Knibbe from Flippa.com.


67 thoughts on “Why Domain Investing is Dead”

  1. hybriddomainer1 says:

    Interesting article, not sure Rick Schwartz said he was leaving domaining. He said he was going to stop blogging daily. The end of the article makes too much of a blanketed statement imo. They are not all worthless. Domains still provide a low, non technical barrier to entry. They can provide for a tremendous roi just from buying for $10 to $20 and selling at $250 to $500. Every sale does not need to be for $X,xxx to be worthwhile.

    It does make sense to be diversified and websites, just so long as you can verify what they are making, are another area worth looking into.

    Best of luck

  2. This is an interesting blog entry. Everyone tends to point towards development as being the pot of gold at the end of the rainbow. 🙂 Although I agree that developing domains is important, I also agree that there is still money to be made in the traditional sense of registering and flipping. I’ve been able to flip a few names this year, profiting me more money than I have made in the stock market in the last few years. Regardless of how you look at it, domain investing has not died it simply has transformed itself. All industries mature, the domaining industry is one which has existed for quite some time and has had its fair amount of growing pains.

    Domainers like myself have entered into the affiliate marketing space, transforming our portfolios into bread winners.

    1. Good for you Jason. I’d suggest your sites now have more value than they would as pure-play domains. @jasonthompson

  3. dburkinc says:

    its definitely a article that touches on some issues. I always wanted to get in the bulk buying of domains. Because domains that already get traffic can turn into websites that have more tragffic

  4. don says:

    The thing that is dead is parking and having tens of thousands of domains that no longer cover there registration fees, domains and brands are evolving, I think there is still an upside for domains to be sold, the sedo report is one thing, but there are still lots of 5-10k sales posted by afternic which seem to support a solid buyers interest in getting a good biz name, selling for 6 and 7 figures probably harder to see reported these days.

  5. DomainShane says:

    Domain investing is not dead. The easy money may be dead but domain investing is going to be around quite a while. Hard to not read bias in the article from promoting developed names, Flippa’s business model, to the advertising deal they have with Linton Investments, it wreaks of promotion over facts. Schwartz left blogging to do business rather than spend time writing about it. When somebody that used to make great money selling domains tells me they can’t any more makes a post, I’ll start paying attention. Again, it’s not the easy money it used to be but there is still plenty of money to be made.

    1. Hi DomainShane.

      Don’t get me wrong. There is value in great domains. My point is that it is frequently not as high as the owners expect given that a great domain is but one ingredient for a successful online business. For veteran domain owners, they may still get a price they’re happy with but I’d argue that, in many cases, it would be lower than for the same domain a few years back. To this end, most new investors buying a domain today are going to have a harder time unlocking strong returns or capital growth. @DomainShane

  6. Just to set the record straight…..I have not abandon the cause at all. Quite the opposite as we are in the maturing stage now. I am just shifting my focus from domainers and the industry of domains to the movers and shakers in the business world looking to make their mark and needing one of my domains to help do it. The industry of domaining is thriving like never before. Beyond my wildest dreams. Just NOW taking center stage. Will that shake out a lot of folks that invented a bag of smoke? You bet! Good riddance.

    As for Google’s change, it may not be popular but this change is long overdue because paying for domain traffic that is not PURE type in traffic is crazy and I have stated so many times over the years. So I am happy that Google will eliminate that traffic because that makes REAL type in traffic from domain names more valuable and those that really do have that pure traffic will do quite well now that the crap is being removed. You can shut off the search, you can’t shut off the pure type ins.

    Rick Schwartz

    1. Thanks Rick.

      Sounds like we both agree that, as far as industry life cycles are concerned, we’ve passed the growth phase wrt domain investment in general. Maybe we’ll need to agree to disagree on whether or not we’re in a period of maturity or decline … The important question is “where to next?”.

      My bet is we’ll see more people following your lead and providing greater value-add for their domains – in the form of advice to business builders, or otherwise via related services such as content development, seo, social media etc. Agree it will be a shakeout. A good thing in my book.

  7. Google Knows says:

    EMDs are still very valuable, as they are far easier to rank for competitive terms than the rest. These domains do have a reason to be valuable

    1. Hi – I’m not trying to say domains are not valuable. My point is that if you’re going to invest in an EMD, you’re likely to pay a premium for it which won’t necessarily yield cashflow or capital growth on the outlay. Someone able to take another domain and make it rank for that search term will get a greater return.

      1. PRLuv says:

        @Andrew Knibbe This is what I do. Great post, by the way.

        I’m a single father in school for marketing after being wounded overseas. In my spare time, my hobby for the past couple of years has been ‘investing/buying’ a few EMD .coms and building websites on them. You build traffic, you build fans, you build a connected network with a fan page and Twitter account linked up… All great things when it comes time to post a ‘for sale’ ad.

        Not to mention, often a visitor/subscriber can easily turn into a buyer.

        Obviously I’m not doing anything on the scale of these big guys…but it’s a good point. Spend just a little bit of time making the site appear unique/original/not spam, and it can pay dividends. I sold RecentUFOsighting dot com for $500 a couple years back after keeping it updated with relevant stuff, having a fan page and twitter; the new owner ended up parking it and it’s for sale now for what I know. I’m doing some fun arcade sites like MiniGamesForKids dot com that could easily be set and forget sites, but it’s fun to really DEVELOP and build a site. Maybe it’ll be posted for sale or sold in a year or two, maybe not. But I get far more out’ve it being mildly developed than not at all.

        It’s like gardening for me, these things turn into pretty plants or something that bunches of other people stop by to see and enjoy. 😉 Or something, LOL.

        /end novel

  8. Google Knows says:

    i forgot to say that it mainly applies to .com and .net domains.

  9. thechow says:

    Domain investing for common keywords is not dead at all.

  10. Steve Jones says:

    Is it getting harder to make money in the domain industry? Sure, for most people. Not for everyone though, and it’s certainly not a dead model.

    To counter your points:

    Sedo has been on the decline largely because Afternic/BuyDomains and GoDaddy as an aftermarket have been on the rise. Also, they’ve made mistakes on UI changes and while they did fix some of them with their last UI update, it’s still not as good as it used to be.

    As Rick Schwartz indicated, he’s not quitting domaining. Rick Latona may have shifted focus to sites vs. domains, but 1 person does not an industry make. Examine some of the other major figures like Michael Berkens and see what else you find rather than looking for only the negative.

    Regarding Google’s algorithm change, I recently posted why it wasn’t a big deal. It allows them to simply find parked domains easier. They’ve been delisting parked pages for quite some time now and parking has been on the decline for years, so there’s no news there – they’ll just be hitting more of them now. Parked pages haven’t been able to secure major rankings for 3+ years now except for extremely rare cases. In that time, no one familiar with domains and parking has been expecting to buy domains, park them, get search traffic and become rich – anyone who has didn’t do their homework first.

  11. GabrielRamuglia says:

    Are you smoking crack? I’m the first person to admit that domaining doesn’t add value, it extracts value, but so what? Taxes extract value, extortion extracts value, and both of those still make money. Does a property owner “create value” when they lease land to a developer? Not really, they simply own the thing that has value, and if they were smart they bought it before anyone realized it was valuable. For developing a propert, the low-risk profits lie with the land owner, not the developer. For the developer to make money, everything has to go right, product, market, team, everything. Land is land, someone will always want it if it’s a good location. As long as you don’t overpay for it, you can make money with land, it’s that simple. Much like a real-world parking lot, if you’ve got a good location, just park the name and make money. Saying that you should develop the domain into site to make more money is complete crap. Most high quality names will make more money parked than they will with legitimate traffic to a real site, and with less risk. A “real site” always has the risk that people will stop visiting the site. Look at myspace, nobody uses that anymore, it was “worth” a whole ton of money before, but not very much now. Look at onlinemortgage.com, do you think that’s adding any value? No, but I guarantee having mortgage related parked ads on there is going to make a ton more money than trying to build this out into a site.It’s like the difference between building an attraction, and owning a gas station on the side of the freeway. So long as people drive on the freeway, you’ll make money with that gas station. It’s low risk, and there’s good money. Even better, in domains, there’s only one “gas station” (domain) on that particular freeway (keyword). You own a monopoly on that name. Compare that to building a theme park in North Dakota. You have to build a park from scratch, and convince people to show up. You’ve got real ongoing costs, huge up front costs, you’ve got to market the property, market the location, competition risk from Orlando, competition risk from someone opening up another park next door, you’ve got to hire a bunch of people, build rides. And for what? Why even bother when you can make more money owning the gas station leading into town on the way to the theme park?

    I can agree the easy money in domains has already been made. But to say that domain owners should roll up their sleeves and move to silicon valley and start making the next twitter using the names that they own, let’s get real.

    1. Great reply!

      I like your comments and [email protected]

    2. Hey Gabriel. No, not smoking crack and I’m going to leave any debate on the merits (or otherwise!) of tax as its fundamentally different – its imposed by a government rather than part of an open market such as that for domains or websites.

      Your property analogy is an interesting one but also one that supports my argument for two reasons.

      Firstly, there are many more landholders (domain sellers) than there are developers (website builders). Someone looking to build a website in a given niche has a number of passable options on hand for the domain and can thus purchase off the domain owner looking to sell for the lowest price. The domain owners have no such luxury as they know that people looking to seriously develop a website are few and far between. To this end, prices fall. The notion that there is only one domain for any given niche is a throwback to the hey day of domaining. Look at the leader in almost any niche and you’ll see a domain that was passable rather than the only option possible.

      Secondly, while location may be incredibly important for a theme park, domains have less importance when it comes to a successful website. A focus on great/compelling content, traffic/marketing, retention and monetization will get you further than obsessing over the nuances of the domain.

      Finally, I agree with your last comment. There is little chance of success if you try to build a website for EVERY domain that you own. My point is that from an objective investment perspective, its worth deciding which domains are inherently valuable, then seeing which of the others are worth turning into websites (be selective), and then letting the remainder go. You’ll be in a stronger position for it. @GabrielRamuglia

      1. GabrielRamuglia says:

        @Andrew [email protected]

        Thanks for replying back on this. Although I think you have a logical argument for what you’re saying, I still don’t think it quite captures the reality. A lot of developed properties starting to use marginal names is because the developers decided they’d rather spend money on branding rather than fork over huge cash to domainers. That doesn’t really negate the value of domains, it’s more of a reflection that anything worth registering is already registered. Hand registering domains is not going to make you much money these days, since nearly everything worth registering already has been, and that’s why I agree that the easy money has already been made. It’s really like, the gold rush is over, and the industry is more mature, with the larger players quietly making money, and some opportunities for smaller players to pick up undervalued domains from people who don’t understand the value of what they own, and then resell those names to people who do understand how to properly monetize those names. Obviously that’s a much different dynamic than the land mine approach of register-and-hope, so I would agree that earlier dynamic is coming to a close. Because the register-and-hope dynamic is closing out, and a huge portion of the value is being concentrated in fewer players, it’s easy to look at that and think that domaining is dying, but really it’s not.

        1. GabrielRamuglia says:

          @Andrew Knibbe With fewer big players paying the big money for domains, there’s less and less reason to use a broker like SEDO, when the players already know who each other are, who wants what, who will pay for what names, if you’ve got that dynamic going on, then there’s much less reason for the transactions to go through these kind of public auctions and brokers. To an outside observer you could say the money is gone, but it’s really just that the transactions are taking place somewhere else. Similarly, parking isn’t going to necessarily make a lot of sense for hand registered domains, but for domains with proven traffic, that obviously is still going on, and in many cases is still very profitable. As the industry has matured, the values of the domains have gone up to a level in terms of years revenue, that just pushes out the smaller players. The bigger players might be paying 5 years revenue for a name, and that’s just a long time to wait to get your money back if you’re trying to break into the industry with a few hundred or few thousand dollars in your pocket. At the same time, a 5 year ROI on a name is a heck of a lot better than buying stocks or bonds, so the bigger players certainly have no reason to claim the sky is falling, they’re still growing their asset base, sucking up value, and making a ton of money. 20% a year on a billion dollars is a lot more than 50% a year on a million dollars, and that’s just kind of the dynamic you’re likely to see here as things mature.

        2. GabrielRamuglia says:

          @Andrew Knibbe Although it does sound logical in saying that you can develop any name and therefore you don’t need any specific name that a domainer might have, in reality it doesn’t really work that way. If you’re looking to brand yourself a certain way, the correct name can be twice as effective as any other name you might consider. For the huge rush of venture backed development, dropping $20k on a name when you need a dozen developers being paid 6 figures, it’s a no brainer to buy whatever name you feel you need. The independent developers aren’t buying domains at $500 let alone $50k, while domainers aren’t going to sell a name for $500 anyway as it’s not even worth their time in talking to you. Ultimately end users simply don’t understand domaining in the first place, and so they’re not in a position to know if they could get a better price for some other domain or not. They just want to tick this box, and they either have money or they don’t. Again, like real estate, the values reflect the income of the people occupying that real estate. With such a huge surge in cash to developers, it only makes sense that more money is going to be put into names from developers rather than less. The fact that a lot of marginal names are being used by new companies is an indication that domains are expensive, not that domains are not important. If domains were really falling in price, developers would buy good names instead of settling for crappy ones.

        3. GabrielRamuglia says:

          @Andrew Knibbe I also completely reject the idea that development is appropriate for the typical domainer. The same way that developers are not becoming experts in domaining just because they need a domain name for their project, domainers are not going to become experts in developing just because it might make a little more money on their names. It’s really two totally separate business activities requiring totally different skillsets, totally different organization, and with totally different industry players. In any case, a domain making $1000 / mo is going to be a lot more valuable than a website making $1000 / mo. A typical valuation for a $1k / mo net website might be $5k – $20k. If you could make the same $1k / mo on parking, that name could go for $30-50k. Add to that the fact that parking, on a CPM basis, makes just such a massive amount more money than an ad supported website, and the hurdle to get over for development to make more than parking is huge. I could end up needing 10x the traffic on a developed website to make the same money I could make parking, which means the type in traffic to a developed website is almost worthless, you’re just throwing that value away. It just doesn’t make sense to use type in traffic to build a base for a developed website. At the same time, you need to make 3-5 times the money on a developed website in order to have that property be the same valuation as a parked page. So in the end, you’ve got to come up with a way to drive 30-50 times the traffic to that page than the parked page gets before you even get the developed website to be worth the same as the parked page. That’s a huge barrier to get over, and a big reason why so many pages are still parked instead of developed.

        4. GabrielRamuglia says:

          @Andrew Knibbe Finally, all the TLDs simply make it more expensive to protect your trademark from squatters and SEO pirates. It does very little to reduce the value of .com’s, as you’d be a fool to develop a serious website on anything other than a .com. The traffic leakage would really kill you, as the person who owns the .com ends up getting anywhere from 10%-70% of *your* visitors simply because they have the .com and you don’t. The value of .com’s is only going to go higher, and all the other TLDs will just be a distraction the registrars use to screw over developers and trademark holders by forcing them to register defensive domains.

        5. Thanks Gabriel.

          This may be a contentious point but I’d argue that most folks building out websites have a greater skill set than most folks just buying domains (both commercially and technically). To this end, builders can extract more yield from the value chain than pure domainers. My view is that domainers should either up-skill/cross-skill to get a larger piece of the pie or otherwise be satisfied with lower yields.

          On your other point, I totally agree that a $1K/mo domain is worth more than a $1K/mo website. However, I’d argue that the $1k/mo domain would generate much more as a website when in the right hands. Sure its not for everyone, but increasing the monthly yield will significantly reduce your payback period, after which you’re rapidly surging ahead. @GabrielRamuglia

        6. This touches on my previous point. Agree dot-coms are best for building out a new site – its just that there is not always only one exclusive dot-com that will work. More dot-com domain options leads to price-based competition among sellers which reduces sell price. @GabrielRamuglia

        7. @Andrew Knibbe Andrew I like Flippa but there are many sites listed there that are not showing much “development skill”

          The other point is those with great domains only need one sale. So they may turn down $20,000 and a startup go with another name. All they need is the one buyer. At $8 to renew its certainly worth holding.

          If someone owns average domains then they need to work hard to sell them but again even if they sell for $200 on $8 investment pretty nice ROI.

        8. aguest says:

          @[email protected] Knibbe

          “domainers aren’t going to sell a name for $500 anyway as it’s not even worth their time in talking to you”

          yes I struggle to think of a more appallingly distorted market than the market for domains.

        9. GabrielRamuglia says:

          @Andrew Knibbe I would certainly agree that there is more skill and hard work involved in developing a website than buying / selling domains, but since when was hard work directly linked to compensation? Just because something is hard doesn’t mean it will make more money than something that’s not. Take a look at a hedge fund, investing people’s pension money for them. What was harder, 10,000 people working for a company who set aside some of their money into a 401k, or the hedge fund earning 2% of money under management and 20% of profits? Should the hedge fund manager go be one of the 10,000 people working for the company that invests with him, or should he keep making 2 and 20 for doing little more than risking other people’s money? Although it’s clear that the activity that “generates value” is what the 10,000 people are doing, it’s the activity that the hedge fund is doing that generates obscene profits. The fact is that being a successful domainer requires quite a lot of skill. You need to know who in the industry is who, so that you know who will pay what amount for which domains, you need to be good at finding people who have valuable domains and have no idea what they’re worth, and you need to be really excellent at negotiating with both of those people to extract the maximum value for yourself when you get the domain moved from the one person to the other. I know domainers who can consistently make a hundred thousand dollars on a deal that takes them less than a week to put together. Does he need to go “skill up” so that he can be a website developer? Get real. The website developer, if they’re really good at their job, takes a ton of risk and puts in a lot of hard work. The domain broker, if they’re really good at their job, takes almost no risk and puts in very little work. Which skillset sounds more valuable to develop?

        10. GabrielRamuglia says:

          @Andrew Knibbe how are there going to be more .com domains available? Is the english language generating new words? Is the alphabet expanding?

        11. @hybriddomainer.com Thanks hybriddomainer.

          Can contend that there may be a few people selling on Flippa who are not strong developers. My thoughts is that there are many more domain owners who would do a better job but have not yet given it much consideration. The $20,000 scenario you describe sounds incredibly close to gambling. The reality is that website builders will contact multiple domain owners and drive down the price to get a final sale. Everyone else is left holding out for a higher bidder than may never arrive.

          The $200 for an $8 registration is good ROI if thats the only domain you’re looking to sell. Holding 12 domains for two years and finding a buyer for one of those domains is not nice ROI – its break-even.

        12. Hi Gabriel. My view is not to rely on new words (hey, its an evolving language right? ;-)), rather, any given niche can only sustain a limited number of profitable websites – however there are more domains for that niche than there can ever be websites. To this end, the domains won’t go for a premium but the profitable websites will. @GabrielRamuglia

        13. GabrielRamuglia says:

          @Andrew Knibbe It’s pretty clear that the number of websites out there is increasing, and the number of available .com’s is not. It should also be clear that the number of profitable websites have been increasing as methods of monetization and the number of people using the web continue to dramatically improve.At the same time, developments such as domain “tasting” and collection of nxdata type in statistics means that the only .com’s that are left unregistered are totally nonsensical. 6 years ago I was able to hand register Vtunnel.com, and the quality of that name helped me develop what became an extremely popular and profitable site site. Even vpntunnel.net was also unregistered at the time and I grabbed that as well. Good luck hand registering a name like those today.Although the prices domainers pay each other for names will certainly fluctuate wildly, the overall trend for end users is one of increasing demand and decreasing supply. In that environment, it’s pretty obvious that developers will need to pay more money in the future to get quality names than they have to pay today.

        14. @GabrielRamuglia

          Thanks Gabriel. Agree the number of websites is increasing while domains are not, however my point is that there are still many, many more domains registered than there are websites. The concept of scarcity (and premium pricing on a domain) won’t kick in until there are far fewer domains left without websites.

          We’re probably at a point here where we’ve both clarified our positions and I think time will be the best judge of whether we’re respectively right or wrong. My view is that, overall, total domain sales unit volume is going to be lower in 24 months than it was 24 months ago. Same for median sale prices. We’ll also see the traditional domaining events agenda covering more and more topics beyond pure domaining (conversions, social media, monetization, SEO and the like) . Just my view. Happy to stand by it.

          Either way, exciting times and thanks for an engaging discussion.

        15. GabrielRamuglia says:

          @Andrew [email protected] Definitely enjoyed the discussion as well

  12. Your first point about Sedo’s staff would be interesting if you had some insight in to why they left. You also never asked the most obvious question “where’d they all go?” The answer in many cases is to other competitors or new companies that are entering the space. They aren’t fry cooks now.

    “As a result, the folks who are building websites are squeezing domainers down on price in recognition of the fact that domains are simply a commodity, while the skills to build a profitable website are seemingly scarce.”

    You seem to be citing this from experience. Can you provide some examples ? As an investor and consultant that helps companies acquire domains I’m not seeing any of this at play.

    “Basic economic theory, however, indicates that you can only extract a premium when you’re adding value.” Here’s some more economic theory : http://tutor2u.net/economics/revision-notes/a2-micro-price-discrimination.html

    Many domain investors have taken the leap you’ve suggested in to development but there’s few and far between who have seemed to pull of the level of success with a development project that they have with domain name investing. Elliot Silver for example even talks about how his development projects do well but how domaining is still a good portion of his business.

    Just like you cited Rick Schwartz and Latona as examples of people leaving the domain business, I’ve also known other domainers who have ventured down the path of development and circled back to domain investing after losing a great deal working on building a business. I don’t knows why but I’d never claim that as reason NOT to develop. Maybe they realize/learn there’s much more to building a site in to a business than throwing up wordpress. Maybe they chose the wrong business plan/model. Maybe they went through an ugly divorce. A few examples like this are no more reason to give up on development any more than your examples are reasons that domain investing is dead.

    Please sell me all your unwanted domains today. I’m buying

    1. Hi DomainNameNews.

      I meant absolutely no offense to former or current sedo sales guys – and they’re certainly not fry cooks now. Quite the opposite. The sales teams in any organization tend to have the best pulse of the industry and their departure usually means larger opportunities exist elsewhere. Case in point is Ryan Colby – left domain broking at sedo to join the team at DomainHoldings which has a much greater focus on domain development and monetization. A more interesting space with arguably greater prospects. This is the crux of my point in this post.

      Interesting that you bring in price descrimination here. To the degree that it could be applied to selling domains, I’d argue that the two required conditions no longer exist: price elasticity has decreased as there are fewer buyers willing to fork out whatever it takes to secure a domain, and the proliferation of TLDs or otherwise homegenous dot-coms for a given nche means there are limited barriers to consumer switching.

      Finally, I’m not saying domain development is especially easy. My point is that the realization of this makes some domains inherently less valuable as the role of the domain in the success (or otherwise) of a given website is reduced. @DomainNameNews

  13. btw, you should just fix the title and then it would be accurate. Let me help you.

    “Pigeon Shit Domains are Dead”

    “Domains that mean nothing are dead”

    “Domains without traffic and mean nothing and have no idea behind them are dead”

    They always were dead. But there was a sub culture that called themselves “Domainers” that really were not and are not domainers. Like calling anyone a “Webmaster”.

    There are 100,000 that call themselves domainers because they post on a forum or a blog all day. Don’t confuse that group with the 500 that REALLY are domainers. Certified, full time, domainers. There is a HUGE difference and that is starting to be seen now.

    Now here is the rub. Some real domainers got sucked in to the easy money of pigeon shit domains and now they own liabilities. That forces them to sell some of their better domains. Guess what, I want to buy their domain. The domain is not “Stressed”, they are “Stressed” and that provides a GREAT environment to buy domains for real domainers.

    Some will point to Frank and say he is selling a lot of domains. Excuse me but that is only half the equation of that. They fail to see he is still buying more than he is selling. That holds true with EVERY single REAL domainer I know.

    Real Estate market is down, does that mean real estate is dead??? Of course not. Domaining is a market like any other but bigger, more widespread and i=s the future. No serious business today can not have a domain name. So that is their first and sometimes most important need. That won’t change for the life of anyone reading this.

    Domaining is thriving, just the domainers with no valuable domains are DEAD! That’s a big difference.

    1. Thanks Rick. Fair call on the title. My point with the title is that a few years back you could make a return by investing purely in domains, those days have gone and pure-play domainers would be wise to consider diversifying. I tend to agree with @DomainsAfrica that it can be incredibly difficult to make serious returns if you don’t already have a portfolio (sure you could buy come nice .coms but in most cases you’re likely to pay a premium that does not leave much room for your margins). For those wannabe domainers, the first step to diversification may involve dropping the entire domain portfolio and regrouping …

      1. @Andrew Knibbe Andrew its the same as Flippa, there are some nice sites there and some that are just basic wordpress install and no real money being made. Someone may reg names for $8 and sell for $100. $100 is not a lot of money but its great roi on $8. People need to decide what their trying to do and do it.

  14. fas says:

    So true, times change, people change.

  15. mainer says:

    Never hear so much sh1t in all my life. Great advert for flipping! Have you seen the crap on Flippa? At least with a name people can decide quickly if they want it or not, and not have to trundle through a load of WordPress sites. Bollocks, thats what I say.

    1. Hi Mainer.

      Sure, running or buying a website takes a broader set of skills than a domain. They’re inherently a little more complex. Its also why they’re generally worth more. In my view, domainers are going to do well when they are able to expand their understanding of what constitutes value in a domain to encompass what represents value in a website.

  16. post free ads says:

    You are always right john

  17. Matias says:

    uff John, I’m an avid reader of your blog and respect your opinions but this article is total bullshit, you should not let this to happen in your blog…

  18. Salmansblog says:

    Agree with you Jonh Chow. Domain Investing is dead. http://www.salmansblog.com/1265/kindle-fire/

  19. Kate says:

    “Real Estate market is down, does that mean real estate is dead???”

    I think Rick is spot on.

    Domain investing is not dead. But those (many) who hold mediocre portfolios are in for a rude awakening. Many people will fail at this game, just like many so-called developers suck at developing websites.

    Domains are not commodities, they are strategic assets.

    A good domain can boost your business, but you will never make it big with a bad domain.

    1. Hi Kate.

      There may be some domains that are a strategic asset but this is not anywhere close to the extent that most domain owners believe. Agree that you may have a lot of trouble making it big with a bad domain, but there are usually a number of good/OK domains to choose from when creating a website … this is why, even with less than 12 months to go until the US elections, TeaParty.com remains for sale. Its a good domain but not the only contender for a powerful internet presence as part of a sound election campaign …

  20. I tend to agree with you but only to an extent. Domaining is dead but for new domainers. The old players who acquired domains 5 or 10 years ago will continue making lots of money from PPC ads or domain flipping. But for the new “domainers”, inspired by the success stories of the past, we are finding a punishing market with all the best domains gone. For us, development works so well that we even imagine why domains should really be parked, like you 🙂 For those who are new in the industry, I suggest they move to development without delay and avoid some unrealistic dreams that you will earn “passive” income from your portfolio of parked domains. And development, to be honest, is some back breaking work….

  21. aguest says:

    “Basic economic theory, however, indicates that you can only extract a premium when you’re adding value… the guy who registers the domain is not adding anywhere near the level of value as the guys who define the business model etc.”

    Unfortunately, as mentioned, given the uniqueness of each domain, sellers have a monopoly of sorts. So economic theory often counts for little.

    Many domains are sold at far above fair market value, because buyers may have worked on their business model or brand prior to negotiations. If one .com particularly suits their purpose, then seller can pilfer this added value.

    As to investing, new TLDs must be adding considerably to uncertainties.

    1. Hi aguest –

      obviously agree that every domain is unique. The disjoin happens when domain owners think there is a potentially successful website behind every domain. This is not the case so, where it does not hold true, the domain has no value. Sure, owners of existing websites on a low-end TLD may be looking to pay a premium for the dot-com version, but this is not the case for the domains in most portfolios. @aguest

  22. John says:

    .Com names are only going to go up in value in time. There are plenty of niches that are going to do well that are available right now as hand regs or drops from people puking them out. If you think the commodities markets got lit up like a candle the past few years just wait and see what happens to many .com names when china, brazil & other parts of asia start throwing their money at .coms.

    1. Hi John.

      Agree there are plenty of niche that are going to do well. My view however, is that there is not just one .com domain that guarantees success (or that any other variant means instant failure) for a given niche. In most cases this results in supply outstripping demand which does nothing to increase price. If you’re passionate about a niche, you’ll get more from a having an active website rather than just buying the domain.

      Not sure the BRIC countries are going to change the trend for domain owners. I previously worked for a large corporate and we bought major stakes in dot-com sites that dominate the realestate, auto and device industries in China. They’ve since been valued at many millions of dollars but their domains would not fetch more than mid four-figures in today’s domaining market.

  23. partnercash says:

    domain investing is just more difficuclt because everyone starts realizing the importance of domains and competition grows and more capital investments is required

  24. Domain investing is not dead. We could say that selling domain is a bit dead but investing in domain is not. As an investment it could be turn to a gold mine if use properly as a new website. I think what you want to relay is correct but your title is wrong.

    1. Thanks Dexter. I agree that domains are most valuable when turning it into a website. My point is that you’re not going to be extracting a large chunk of the value unless you’re involved in making it into that website. If you’re buying a domain to build a website, you know that there are a handful of domains that would work for you and you’re more likely to push down on price because you know how much work remains once you’ve bought the domain. I’d rather be the buyer than the seller in this scenario. @Dexter Panganiban

  25. Can you find the domain with good keywords for your niche cheap, you can always build good link Traffik to your original web page, doing SEO tests, ad campaigns, etc.

  26. is a big change we need to reorient to other domains

  27. is a big change we need to reorient to other domains

  28. masterbonus says:

    Is a big change that means we need to reorient ourselves to other domains of interest

  29. Androidized says:

    I am willing to call them domain trolls. I have a friend who brought 13 000 domains ( most infos ) and during the following years he managed to sell some domains for about let’s say 20 000$, well, it got what he invested and he remained with all those domains that he will never develop. They still have some value, but what about when the times come to renew ?

    The effect on the market is that it is very hard to get a good domain to start a new website, and if you really want to get a good domain name you have to pay an amount of money to a domain troll who never did anything good to that domain. ( In best scenario he installer an auto blog plugin ) which lets your domain flagged by google for duplicate content. More, he won’t let the domain go for cheap, he will prefer to wait until a someone fall into trap and give few hundred dollars to him. How long it will last ?

  30. Uzoma says:

    The only sign to show that Domain Investing is dead, is when you type in to register domains such as sex.com, or seo.com, alas! they are available.

    That hasn’t happened yet.

    Therefore, great domains are still a finite, rare item, so is still id demand, hence, valuable. Very valuable. If anything, good .com’s are rarer by the day.

    It’s a weak market now, for resale, yes. And, yes, development is much better than parking. And, yes, Flippa is a valuable service, that can co-exist with domain investing. A lot of the names sold on flippa is crap, the business may be good, but the names are stupid.

    Finally, Google is the big cheese, yes, they determine what happens in the value business, as far as clicks, and parking, and traffic. Even for developed websites too, my friend.

    Thanks.

    Here’s my advice to newbies:

    1. Only buy dot coms

    2. Only dictionary words that you have used more than once a day.

    3. Only buy or register nouns and commodity names.

    4. Only buy or register a name you can develop if need be.

    5. Pay no mind to what domain market places sold this week, well glance at it, but it means nothing.

    6. Have a another job, while domaining.

    Good luck!

  31. iestates says:

    I could write a novel on how ALIVE domain investing really is, but I don’t think this article is worth the time. This isn’t a ‘call for debate.’ It’s a plug for Flippa’s website selling services, which apparently is doing much better than its domain selling services.

    Overall, pretty weak article.

    But for those of you that agree with the author, we too are buying names every day, so send them our way.

  32. danbell says:

    I wouldn’t say “domain investing is dead” that would be like saying company’s logos, slogans, or branding is dead. As long as there’s creative marketing, domain names will always be in demand. I do agree the landscape is constantly changing. Is it for the better or worse? We’ll just have to see 🙂

  33. Samit Madan says:

    These are just ONE WEEK of sales from Sedo, they dying sales platform of a dying industry…

    http://www.thedomains.com/2011/12/13/sedo-com-sells-1-53mm-in-domains-led-by-makassar-com-at-40k/

    I’ve been a developer since 1998, only started investing in 2007, wish it were the other way around honestly, I’d be retired by now.

  34. JohnMarx says:

    This is why .tel domains will be the toast of the future because anybody can develop these domain.

    You don’t have to pay for hosting them and they are ideal for creating directories like for example two sites I found vegasrealtors.tel, vancouverrealtors.tel (I am in real estate business and this is why these two cought my eyes)

    Even having a small ma and pa business you can register your .tel site and have it running in minutes

    The most important part of it it cost only $10

  35. bestbonus says:

    great article…lots of good ideas

  36. domaininvestor says:

    Vim the last great domain suffix/prefix for premium domain names?

    Dictionary.com –

    Vim: lively or energetic spirit; enthusiasm; vitality.

    Finding premium domains names costs a fortune. Finding premium domain names with a good prefix/suffix is expensive.

    What do I mean? Take for instance money.com. Most of us will never afford it. But add a good prefix or suffix, and the task is not much easier. Consider moneytree, freemoney, moneyline, moneypoint, etc. The prefixes and suffixes are good. But, again, these domains are expensive (or unavailable. The only prefix/suffix still available is the word “vim”.

    What’s more, *VIM* domains are cheap and easy to remember. Moneyvim.com and Investorsvim.com are good domain names. They’re in the .com space too. I’m sure there are other or better combinations. But at least “vim” is a real word and I prefer domain names that contain real words.

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