Dominic Belley who I interviewed last year around this same time, detailed his second year in the business with a post on Namepros.
Dominic points out that year 2 was not as good as his rookie season. By detailing his second year he does newcomers a great service in my opinion.
Here is his post:
It has been a very tough year for me. What seemed easy in the first year has become a nightmare.
Already at the end of year one I was pretty much only trading 4L.com. I was having success and I wanted to continue on that path. I had to get rid of all my other domains so I started liquidating all of them.
First, I let expire all my 7N, 8N and 5L chips. These were bad investments. I never understood the Chinese market and on these I was just influenced by the market trend. I acted like a sheep and acquired a bunch of domains in these categories. That was a mistake and I did not put more money in chips since. I decided to cut my loss and let them all expire. I had around 80 domains of that nature. Loss $700 there.
I also had around 40 keyword domains left from my first year and a few I bought on GD Closeouts at the beginning of year 2. I added them all on Afternic and waited. I have managed to sell 3 of them. All dot com. PayForValue : $495, VeganCakeMix : $99, StudyPit : $60. I also sold around 20 domains here on NamePros between $10 and $20 in the Bargain section and a few on GoDaddy auction for $35-$50.
I only have 6 non-4L domains left in my account.
Over all, I have been lucky enough not to lose too much money with my bad investments. These few sales on Afternic and NamePros paid for most of my 7N, 8N, 5L and keywords that expired.
Now I want to talk about 4L.com. Not so much about what I did but more about how I feel.
The “what I did” part can be summarized in one sentence: I bought 4L on Namejet and NamePros and I sold 4L on NamePros and Namejet at a higher price. That is all there is to say about that. Nothing magic.
I prefer to talk about the “how I feel” part.
For starters, I realize now that I don’t make enough money for the level of risk I take.
Prices of 4L.com are very volatile. The risk is super high and I had a taste of that in 2016. Prices of 4L dropped drastically.
I bought a couple of chips at the worst time at the very beginning of 2016 in the low $2K. If I were to sell them today, after fees I would take a loss of $1000 on each of them. I know prices will never go back up to where they were so I know I will eventually have to take that hit.
I had a great year 2015, made a lot of money in my first year and I decided to jump up in quality. I stopped buying random 4L and shifted to Western Premium. I decided to invest massively into that category at the beginning of 2016.
There was not many of these on NamePros so I had to start buying on Namejet. I built an inventory of 50-60 Western Premium in the first quarter of 2016 when the prices were high and climbing.
My worst enemy: The 42-day auction lock at Enom.
When you buy on Namejet, most of the time the domain is registered at Enom and it has a 42-day auction lock. During that period, you cannot transfer nor push the domain.
So for a period of 42 days, I had to wait and could not flip the domains and that literally killed me. Just after buying a lot of domains the prices plummeted. I could not try to unload, all my domains were locked.
Once the major part of my domains were finally available for a push, it was too late. The damage was done.
Not only was I virtually losing $2000 on my 2 chips, now I was losing even more on newly acquired Western Premium.
I honestly never recovered from that. Mentally and financially.
I had two choices, either I was selling my domains at a loss or I was waiting for the price to go back up. That is what I decided to do and luckily for me, it happened 6 months later, in August. Bottom prices of Western Premium reached $500 again for only 1 week and I have been able to unload a lot of 4L during that short span. But I did not make any profit there, I was happy just to unload at cost to recover my money.
Actually the truth is that I lost money on most of these “at cost” sales. Being a Canadian, I also have to deal with the currency exchange rate and at the beginning of 2016 the Canadian dollar was very low. When I sold my domains in August it was much higher so I was selling at cost in USD but, in fact, once the money was converted back to CAD in my bank account, I had lost money.
So having the prices of 4L drop drastically added to the Canadian dollar getting stronger throughout the year was a nightmare for me. Pretty much impossible to turn a profit on the large inventory I built at the worst time.
Later in the year I found a little trick to avoid that 42-day lock problem. I started selling domain with a “Pre-Release” notice. So I was able to resell the domains immediately, removing the price movement risk encountered by the auction lock. It allowed me to flip my domains normally and start making real profit again.
In 2015 and beginning of 2016, flipping 4L for a profit was extremely easy, they were still emerging. It’s not the case anymore. Back then, I could buy a 4L and wait a few weeks for the price to climb, then sell.
This time is over. The uptrend is over. Prices are moving sideways.
Now if I want to make money I have to be patient. I have to wait for the right purchase opportunity and they don’t come as often.
I can’t talk for others, but based on my own experience, making money in 4L sector is now very difficult. Profit margins are smaller and there are not as many buyers. I used to only sell on NamePros but this year there was not enough buyers so I had to start selling on Namejet. I am now doing most of my sales on that platform. I have to price my domains higher because of their 15% fees but I still sell domain on Namejet for $500 that I am unable to sell for $425 on NamePros. I tried to contact Namejet buyers directly but never had any reply to my emails.
I wanted to write this summary because my second year was probably my last year as a domainer.
Similar to a lot of other beginners trying to make money in the domain sector, I failed. I did not fail in the sense that I lost money but I failed in the sense that I am not progressing anymore.
So I am here, at the crossroads, completely lost.
I only purchased 3 4L so far in 2017. I am on idle, slowly selling my inventory not knowing what to do next. I know I cannot continue doing only 4L because the risk is now too high. The small profit I make on a flip does not cover the loss I have to take when prices drop.
I wish I could move to generic one word or 2-keywords but English is not my first language. I don’t think it would be a smart move for me, I fear I would put too much money in bad keywords.
So I am kind of trapped in the acronym sector in which I don’t make any money.
People like financial stats and I don’t mind sharing so I will give a few numbers on my activities after two years.
Net profit in cash : $5,950 CAD (around $4,450 USD)
Net current inventory : 29x 4L.com which I currently value at a minimum of $11,000 USD.
All the money I will get from selling my inventory will be net cash. I built this inventory by reinvesting all the profit from previous sales.
The sad part is that my inventory is worth a lot less than what I paid for it, mainly because of the two chips. If prices drop more, my profit will be ever smaller.
The even sadder part is that if I were to sell my inventory at current value, it would give me a net profit of $15,500 for two years. You know what? I had pretty much the exact same profit amounts (cash + inventory value) after one year.
It means I have been struggling like crazy for a full year just to break even.
Is a profit of $15,500 USD good for 2 years selling domains?
It’s not that bad. But it’s not good knowing year 2 has been a zero return year. A lot of work and investment and stress for no profit. Just to recover my money.
This is why I am beginning to think it could be the time for me to leave the floor and put my time and efforts into something else where I could be successful. I don’t know. I will see how things go in the coming weeks.
Sorry again for long text.
I hope some of you enjoyed reading.