Domain Investing Isn’t Playing The Lottery, It’s Investing
A comments to another post on Minus.com selling for $115K inspired this post which is about the business of domain investing.
Here is the comment that sparked the idea for this post:
“”yeah like you can pick and predict the next lotto numbers”
“these forums and threads need to have stories of people losing money.”
“I want to see stories here headlined, “Another 300 people lose over $10,000 this month”
“I guarantee you for every lotto winner there are 1000s of people losing money; unfortunately, silently, because all these stories are all one sided, choosing only to show the lotto winners.”"
This commentator is not alone.
They look like domains as a lottery ticket, where if you get lucky you sell one once in a while.
Wrong.
If you want to think of domain investing as a hobby or as a shot in the dark, a lottery ticket that’s your choice but its not a business plan.
Just like the lottery those who play it most are the one’s who can afford it least.
Domainers who think this way are most likely to registrar crappy domains thinking they may get lucky once and hit it big.
Domain investing however is like any other kind of investing.
If you buy shares of stock do you think of it as buying a lottery ticket?
Or do you do research on the company, figure out the market, look at the charts and the fundamentals?
Or do you just pin up the Wall Street Journal stock quotes page to the wall and throw darts and buy whatever the dart hits?
Domaining is no different.
Buy wisely.
Spend wisely
Invest for the long haul.
Yes you may get lucky and sell a domain a month after you acquire it but its not going to happen with regularity.
If you buying a domain with knowing you would have to sell it or drop it when the expiration is up, you probably shouldn’t buy it or register it to begin with.
Now a lot of people what to talk about timing and/ or luck.
Hey if you have enjoyed success in your life you probably have had some good timing and/or luck and/or karma and/or God on your side, or whatever you want to call it at some point.
No doubt.
But also you make your own luck to some extent.
Wise decisions led to luck.
The more good decisions you make, the more likely you are to be lucky.
Yes there are lottery winners.
1 in 14 million I think are the odds for the Florida lottery.
No Bueno.
Don’t forget that many people who have won the lottery have lost it all later in life, gambling, drugs, divorce bad investment.
Bad luck following good?
Or just bad decisions making for bad luck.
If all you’re going to depend on is luck to get you through life; well then good luck to you.
For the rest, do your homework, make a plan, stick to a winning plan, adjust a losing plan and work really, really hard.
And may the force be with you.
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@Robert
“You have to realize since I have 750 LLL.Co s I have had to become an expert in LLL.”
I don’t mean to be a stickler but didn’t you just post recently that you had 360 .CO domains?
If so, how can you have 750 LLL.co domains?
Just curious.
Cheers
Never mind…. I see that you wrote “renew 360 more of my .Co domains”
I missed the word *MORE*.
Sorry about my assertion.
Cheers
@Gazzip, Im just happy one person agrees with me after 8 years LOL
I agree with your assertion Josh to a point. Even if you have done your research and buy out a domain that makes X dollars per year… it does NOT necessarily mean that you can make it do the same.
In my opinion, it is all speculation until the point that the dollars are in hand. Once you have dollars in hand, it steps beyond speculation into profitability.
(sorry if I didn’t understand you right…I didn’t go back an re-read it. I am just going off memory)
Cheers
@Jack,
“Even .Com domain names are speculation investments. ”
“Speculation” – Only if you have not paid your “tuition” as I have.
This “.co” nation stuff and every other non.com is scarry for the naive and impressionable.
The Internet is a lot more (and less – if you are a non.comer ) than what so many newby friends want it (and try to WILL it) to be.
Do not confuse Passion with Reality (legal opinions) non.comers as you buy something for the purposes of reselling it which will ultimately end up “unused” on the fireplace mantel.
@Brian, I am not sure what your “tuition” consisted of but I assume time, money and experience?
I have spent several years, millions and millions of dollars and plenty of experience in resells to know every name I buy is still a spec.
You can take the biggest domainer in the world and every drop he buys is a spec, his past success and energy may help achive better ” odds ” so to speak but it’s still all spec.
There are many pieces of wisdom in this discussion. Will it become the young domainer´s schoolbook?
I wish there was a domainer school to avoid expensive beginner´s mistakes and withdrawal by frustrated domain offspring. Is there even need for a real domaining profession with certification? There are great information resources like this blog and shining examples of successful domainers. But are these enough for a sustainable industry base?
Domain Investing Isn’t Playing The Lottery, It’s money game of investors
I nominate this discussion thread as
“The Discussion Thread of the Year”
@nr – “domaining is such an easy way to make money. i would rather hand reg 1,000 domains for $8 than to have one $8,000 domain. its good to have some more expensive names also but quantity is very important. just selling one or two of the 1,000 domains per year would cover the renewal fees of all of them. i agree that domaining is not playing the lottery, it is investing. there is always going to be an element of luck to any investment whether it is domains, stocks, real estate or whatever but its mainly all about skill and hard work.”
Since 2009, how many of these hand reg’s have you sold to that cover your renewal fees? I’m not asking for you to answer in this thread but for you to ask yourself that question.
Better quality domains have some liquidity – a poor domain doesn’t have any. If you spent $8k on a decent domain and couldn’t flip it for a profit, you could perhaps break even or take a loss, but you’ll get something back; learn from that, do more research then get back in the game, albeit with a smaller pot.
A poor domain is a 100% loss – end of story – 1,000 of them can take all your capital, then it’s game over.
MHB, two questions:
1. Is WWMI going public or is this P/E placements Owen is talking about?
2. Would you accept domains instead of cash as investment?
Samit
1. no
1a. I don’t know what Owen has been talking about
2. no
Here is the best example I can use of timing Vs. Luck Vs. having a gut instinct
Last June I headed over to my 1st ICANN meeting.
I felt that the new gTLD’s were going to be approved shortly and thought is was the next step in the evolution of domain names.
Not that the new gTLD process was a new idea, it had been kicked about for a few years, and people were engaged in the process for years before.
Yet I felt the time was coming so I decided to invest the time and money it took to get into the ICANN world and start preparing.
In December I went to Colombia for the next ICANN meeting, then Monte Cahn and I formed RIGHT OF THE DOT, choosing that domain after hearing the phrases repeated time and time again at the ICANN meeting.
So we formed RIGHT OF THE DOT in January of this year and now in June the process that some people have been working on for years is now approved.
So did I have good timing yes.
Did I spot the right opportunity at the right time
Yes
Great timing yes
Good luck
Sure.
Did I call in a favor to get the biggest domainer in the world to give up what I figured out in an instant to be the best possible domain for this business.
Yes.
Was I lucky that Monte’s contract was just ending at that time
Yes
Did I hear about the new gTLD’s years earlier sure
But I didn’t think it was time until last year to get my feet wet and prepare.
So was it luck, good timing, gut feeling or all of the above?
Yes
That is how life works
The difference between investing in domain names and playing the lottery can be illustrated, as follows:
Imagine a probability of success spectrum, where zero (essentially) equals your chances of winning Lotto, and 100 equals the odds that Mark Zuckerberg has of convincing VCs to pour money into a second venture he’s dreaming-up in social media.
An amateur domainers, with good business instincts, may be running in the 15-20 range; meaning that he starts-out with about a one-in-five chance of making a profit over time – provided that he has the capital to make sustained (annual) investments in (a) supporting his existing holdings, and (b) adding new assets to his portfolio.
Experienced domainers may only have an improved position (vis-à-vis the amateur) of 10-20 additional points, i.e., they’re in the 30-40 range. So, even though from a mathematical standpoint it would appear to be a ‘losing proposition’ …it isn’t; because there are things that ANY domainers can do to improve their position on this spectrum, including:
(i) Partnering with developers and designers to build sites atop their best names
(ii) Carving-out a niche or two, where they become the major brokers of names in a particular (worthwhile) space
(iii) Sticking with only dot-com extensions
(iv) Researching (to no end) the latest technology trends, and positioning themselves, accordingly
(v) Thinking like consumers and end-users before they register (or buy) any name – to ensure that it makes sense
(vi) Avoiding (as much as possible) legal disputes, i.e., don’t register names that incorporate well-known trademarks
(vii) Pruning your portfolio on a quarterly basis to get rid of any dead wood
Again, even though there are no guarantees, it’s up to each of us to put the odds in our favor — and move further up the spectrum.
I think to sum up things, the bottom line is:
A few hundred domain investors are making a lot of money. They are skilled business minds and many have had the luck of being in the right place at the right time and made the right domain acquisitions and domain sales.
A few thousand domain investors are making money on some of the domains in their portfolios but losing money on most of their domains.
But the vast majority of domain investors do not know what they’re doing at all, and keep registering the most ridiculous domains imaginable, and have been and will continue to lose money, yet refuse to let go of the dream that they will be the next Frank, Rick, Mike, et al.
I think decent names can still be had for reg fee. Here are some I got today:
flavorizerbars.com
freecadprograms.com
mensthermalshirts.com
quote of the day: MHB “1a. I don’t know what Owen has been talking about”
I quite agree with you. You may make an amount of money with it. Lottery is a miracle.
Actually I think I was talking about this:
Half of TVs to Have Internet Connectivity by 2015
http://www.cnbc.com/id/43641280
“Netflix, Amazon [AMZN 213.19 3.70 (+1.77%) ] and Apple [AAPL 349.43 6.17 (+1.8%) ] are obviously banking on the idea that the cloud is going to be a game changer for home entertainment and that your TV is nothing but a big iPad that you shouldn’t touch,” said Patty Edwards of Trutina Financial and a ‘Fast Money’ trader.
http://www.cnbc.com/id/43641280
A very good post. I really love to play lottery and raffles since young age and would say that is one of the most quick way to make money. I am regular reader of latest news on lottery etc. and just subscribed the same for your blog. You have indeed very beautifully outlined the importance of lottery. Once again thanks for this valuable post.
@ Owen
“the cloud is going to be a game changer for home entertainment and that your TV is nothing but a big iPad ”
That is a no brainer – the real task at hand is anti-trust for at least 5 years that I am aware of – i.e. will cable providers like comcast (now xfinity) or baby bell spin offs like qwest (now centurylink) be allowed to regulate how fast a connection a competing service is allowed to use vs. their own movie channels, for example.
Essentially – if it takes 2-3 times longer for a competing service to load a movie vs. the movie service provided by the internet provider – well that is the fastest way to eliminate competition.
@owen -
And forgot to mention that I why I own CheapMovie(s).com – as an eventual competitor to movie services provided by internet / cable providers
Click the link.
How many “domainers” are like this? I mean, we all laugh, but it’s pathetically sad. Here we have a person who just got done lighting THOUSANDS of dollars on fire and now has nothing to show for it but a series of $8-$30 worthless liabilities.
I am hard pressed to identify a single name on that list that I’d take if it were pushed to my account, free of charge, yet he sincerely believes that they’re not only worth registering, but that they can be sold for a profit! Of course, it won’t happen… and once renewal breaks his back, this same person will wander into forums and into blog comments and lament about how domaining is just a “lottery” and how its all just “luck”.
I will never, ever, ever understand why people register names like that but they do- and they’re not uncommon. They’re common. They’re very, very, shockingly common. To them, domaining is playing a massively low expectation, 1,000,000-1 shot, $8 bucks at a time lottery.
Those people need to understand that not everyone is like them.
http://www.thedomains.com/2011/07/03/domain-investing-isnt-playing-the-lottery-its-investing/#comment-88593
“How about everyone cease buying names and dispose of what you have for what you can get and instead buy shares in $200 million offering for 40% stake of Mike’s company. You suck at buying names. He doesn’t. Think the dotcom opportunity passed you by, take a look at having a 40% stake in a million sale.”
@MHB – I assumed he meant you, now I think it might have been someone else.
@owen – I’ve really enjoyed your comments on this post, a lot of home truths there, cheers!
I tend to hold my names 2-3 years before selling them, sometimes longer. Sometimes I get lucky and will do a quick flip. An example was BasketballCenters.com I picked up for $4 and resold it 3 months later for $60. It really depends on the domain holders need at the time really.
We purchased a domain name a few years back for $500.00 and a few months ago sold it for 2k. Was this luck? Yes and No. We were lucky that the guy sold it to us for the price we paid. But the bottom line is that we made a sound investment that we knew in time would pay off. So the reality is that we made our own luck by making a sound investment.
I don’t know about sticking with only dot-com extensions. Our portfolio of 222 domain names contains a lot of extensions like .com.tw and .co.uk. We feel these will continue to rise in value over the years and occasional appraisals confirm that position.
This thread really sparked our interest since we are currently auctioning our entire portfolio online as a single 222 domain name package investment. We’ve spent around eight years building our portfolio trying to focus on unique, generic, and brandable names. Will somebody else see the value we see in our portfolio? Guess time will tell but one thing is for sure, we’ve made our own luck simply by accumulating names that are unique, generic, and brandable.
I think “Pruning your portfolio on a quarterly basis to get rid of any dead wood” is very sound advice. A few years back we dropped around 100 names from our portfolio, really should have dropped them sooner. Had we followed that advice we would have saved some money on renewal fees. I know if our current portfolio doesn’t sell we are going to drop a few of the names because we don’t see any value in continuing to hold them, besides that we will continue to build the portfolio and stick it out till the right buyer comes along..
I think MHB is right on the money when saying “Buy wisely. Spend wisely. Invest for the long haul.” That’s advice we’ve been following for years and really anyone investing in domains should follow that advice. When buying names we always consider the long haul. In 2006 one of our domain names drumseals.com appraised for $238.00 then in 2010 it appraised for $2,300.00. So investing in the long haul can make the difference between making a profit and taking a loss.
This is really a great thread and I’ve enjoyed reading all the post.
If you can’t sell it in a year, then sell it and find another.