I received an email today from a reader that was about domain investing.
Hi, Raymond
Big fan of your blog, but one thing has always stuck in my craw…buying domain names is not investing, rather it is gambling. Why do people like Schwartz and Silver and several others call it investing?
This is something that has been brought up from time to time over the years. I thought it would be interesting to see where everyone stands on the topic of domains as an investment.
To take the straight definition of investing we have:
expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.
“getting workers to invest in private pension funds”
| synonyms: | put money into, provide capital for, fund, back, finance, subsidize, bankroll, underwrite; More |
I have always thought of domain names as a hybrid of investing and gambling.
Leave your opinion in the comments.
Domaining – Investing or gambling?
For domainers who buy domains without experience and without doing research – it’s gambling.
For domainers who are experienced, have done their homework and buy the right inventory – it’s investing.
The difference lies in your capacity of discernment.
If you buy domain names like you would lottery tickets it’s pure gambling of course. Unlikely to pan out well.
Any instrument that you put good money to work is investing ,just like stocks and commodities domains are also and investment. Nothing is guaranteed and anyone of them can go up and down. In the beginning of this century the mortgage crisis was responsible for taking all companies to multiyear lows stocks such as Disney General electric and other blue chips were down more than 75%.Investors lost so much money in their mutual funds that they dident even bother opening their monthly statements. So to say domains is gambling ,I would just say that any investment that does not have a determined end value is gambling ,so when it comes to comparing real estate stocks bonds domains collectibles, its all the same.
Yep! You nailed it Ben.
Good generics are lnvesting I believe, the term gambling is to risk with hope of gain not knowing the outcome. “Risk”
in a short way;
if you sell it,it is investment
if you cant:it is gambling;)))
As Warren Buffett said: “The best moves are usually boring”.
In my model, I know I have to wait perhaps years to sell a domain. You get this domain on the drop and think “yessss!” … but then it tails off as you realise it could take years to sell.
Boring!
All investment is gambling, as there is no guarantee of success.
The best you can do is limit your risk and improve your odds.
Whether you are investing in domains, shares, gold or land, it is all the same.
Buying a lotto ticket is a poor investment compared to investing in other areas as that relies very much on chance, and yet there is at least one investment company that does just that. They buy lotto tickets based on careful research and heavy expenditure…and they are as successful at making money as an investment company that focuses on the stock market.
All investing is gambling. Even buying government bonds and T-Bills etc… Is not without risk. Always the risk the government falls over. Welcome to the real world. Is domaining more of a gamble than other investments? I’d say depends.
Peter Lynch was once quoted as saying “an investment is simply a gamble in which you’ve managed to tilt the odds in your favor.”
So domainers have to ask themselves – Are the odds tilted your way?
Hard to say for most including myself…
when i bought a ticket for a concert next month i was guessing/hoping/gamboling that i would be still alive when the night came
buy a geo+keyword for $10 bucks and sell for $1000 within 2 weeks without ever offering it for sale is like buying a lotto ticket but someone has to win.
but the reality was that i could have sold it for $100 with ease, so is it investing, no. is it gamboling, no. it is merely buying something you know there is a market for. maybe retail would be a better word than investing or gamboling
Domaining should be a mix of selling and investing, not gambling. If you are gambling, then you think you are investing but you are hoping someone is just going to come along and give you easy sales. Probably the toughest part of the job is selling and domainers that are consistently earning good money invest in their portfolios but they hustle to make sales.
All this being said I would like to add that buying in domain auctions against other domainers and or endusers really increases your investment in your favor.In the end the winner competed to with who ever showed up to the ball.After the party it wont be too hard to scalp your tickets to the mass of others who dident know the circus was in town ,somewhere.
I think it depends on the individual and his or her motivations and approach.
Investing – People who buy highly liquid domains that have always been valuable, with the intention of holding them long-term for the right buyer. Dictionary words, LLL.com, etc. This is the top-tier domainer.
Speculating – People who buy what is trending, in the hope of making a quick flip. They still do their research and try to stack the odds in their favor. CHIPs 4L, numeric, popular ccTLDs like .io, top-tier new gTLDs, etc. This is the average domainer.
Gambling – People who buy based on emotion and do an extremely poor job of research and managing risk. They mostly buy for the “action” and domaining is more entertainment than business for them. Hand regs, made-up brandables, obscure ccTLDs, weak new gTLDs, etc. This is the degenerate gambler 🙂
In reality a domainer could make some purchases that would be classed as investments, some that would be classed as speculation, and some that would be considered gambles. Actually a good portfolio would probably have a mix of all three, maybe 60% investment-grade, 30% speculative plays, and 10% gambles depending on risk tolerance and goals.
So I would say domaining is all of the above, and if you’re too heavy in any one of the above categories you may want to consider re-balancing your portfolio.
Sometimes a Gamble can turn into an investment. Here’s a quick example. A friend of mine back in the 80s was offered to invest $100,000 in Starbucks my friend is from Seattle and had the money at the time he didn’t do it even though he was called to the small meeting of 15 investors. He felt it was a Gamble. Obviously it turned into an incredible investment. That hundred thousand today would be worth something like 70 million dollars.
Thats a 700x return. Investing that 100 k in the dow in the earl 80s today would have been 20x today . also the odds if your friend would have put the money in another 10 start ups .he would have gone bust. all this aside .you are descibing monday morning quarterbacking.
Actually you don’t know what you’re talking about obviously. It’s not Monday morning quarterbacking at all. That same friend of mine who as I mentioned lives in Seattle out that $100k in Microsoft which he also felt was a gamble but turned into a spectacular investment.
Gambling.com and Investing.com is a great investment.
GamblingRUs.com and InvestingwithYou.com is a gambling.
Domain names are in the same investment class as time-shares–both involve the buying and selling of leases.
Mak can you explain what you mean I don’t get this Respectfully ben
I mean that “domain investing” is not like purchasing real property–e.g. real estate, gold, art, etc. When you invest in real estate, you own the property. And, the same holds true with stock. When you invest in the stock market, you are purchasing a share of a company’s ownership. You own a percentage of that company. However, when you invest in a domain name, you do not own it–the Registry maintains ownership. You are purchasing a lease on that domain in the hope that you can then sell that lease to someone else. In domain investing, ownership never changes hands.
I agree with Kate — for experienced domainers, it’s more investing, although some purchases may be speculative investing
One thing I’ve noticed in the last year or so, there’s not nearly as much negotiation as there used to be.
You could get an offer of $12 K and finally reach a deal north of $50 K, or an offer of $1500 that becomes a final price of $7500
Not sure if this can be attributed to the GTLDs, cryptocurrency investing, or other factors. This doesn’t apply to super premium domains like x.com, rate.com, oc.com — these domains have high value, and a potential buyer can’t easily choose an alternative
Domaining is an investment, buying something to sell at profitable price, so this is not gamble
We have couple of types of domainers and I will base my facts on two only
1.domain gamblers-inexperience and without research.
2.domain investors-based on experience and much research.
In terms of domain investing what people don’t realize is that you have total control of the price you wish to sell the domain name but you completely don’t own the domain for yourself but the registrars does.