From a logical standpoint, I agree with your thought process entirely. Building out a domain makes much more sense then parking. Content on generic domains also improves the quality of the Internet over time. Thus, the more generic domains that are developed, the higher others will value generic domains in general, as more users will assume navigating to the generic domain will actually provide them with what they are looking for. In turn it raises the value of the rest of your (and everyones) portfolio.

However, from a business standpoint, it is not always such an easy decision. Monetization through parking is a very clear strategy from a return standpoint and thus the valuation based off of parking can be clear as well. But the monetization of a developed domain is not always as clear. Rich Finkelstein hits the nail on the head mentioning ROI. If you do not take into account the cost of developing, and your expected return through however you have decided to monetize, development may not always be the right strategy.

Before developing make sure you have a solid business plan. Your costs can be fairly accurately predicted, however your revenue will be very difficult to judge. This is why I think developing a smaller domain from your portfolio is probably a better decision at first (as opposed to your suggestion of starting with one of your better names). The cost of development should not be as much as a larger domain and thus your loss will be less. You say that if your first attempt is a failure, you can always try again. The rate of failure is probably larger than most expect and thus first time developers should protect themselves accordingly.

In conclusion, I still think development is the right thing to do, I only suggest you start a bit smaller before going for the home run. Learn from your first development mistakes and then take a step up to a higher value domain. And always analyze your developement costs and expected revenue prior to beginning any project. I have been following your Lowell.com development with interest and enjoy the development ideas and steps of coverage. I do hope at some point in the future you explain the costs and revenue breakdown to complete the explanation that this development project is the correct thing to do.

Regards,

Conor

Both hours spent and money (initial an ongoing expenses) have to be counted. Most domain investors do not take into account alternative investments, as well as the cost of their own sweat equity. I’ve experimented with many alternatives, and so far have not found a clear cut way to predictably turn a developed domain into a net return on investment (ROI). It is pretty much a hit-or-miss effort.

Developing a domain always makes sense, as long as you have figured out how to get more out then in. Don’t be surprised if you continually lose money, until you come up with the right idea and approach.

Thanks for the blog,
Rich

If you were going to invest your initial $3,000 in domains right now (as opposed to a few years ago) how and where where would you deploy the capital? With PPC losing a little of its appeal - do you see the future in creating mini-sites (4 or 5 pages) or perhaps in developing larger sites? Would you buy and re-sell. Would you focus on Geo names?

I am just trying to get a feel for how I should continue to amass domains and develop my portfolio over the course of the next year or two.

Thanks again for your blog - it’s great - I am surprised you have posted so much since DomainFEST.

SGB

There are really no negatives to beginning to develop names, they may or may not get picked up by a search engine and people may or may not go to that search result. But, no one is ever going to get a search result for a domain name as long as it is parked with a parking company.

Don’t get me wrong, the parking companies are nice, but for anyone with a few domains and a little basic html knowledge, a customized landing page makes much more sense (cents - get it?).

I plan on building out more of these domains once I am able to see which ones are really getting the largest amount of traffic. Find out where fortune is pointing and then pour on the coals!