By Elliot Silver of ElliotsBlog.com
I believe that domain investors need to take a hard look at their domain portfolios and begin developing their better domain name assets. The writing has been on the wall for a while, but I don’t think there has been a better or more opportune time for development. Don’t get me wrong - I know development isn’t something that can be done on the cheap or overnight. It can be a time consuming and expensive option, but I think it is the best long term option for serious domain name investors.
Never has it been easier for companies to claim rights to generic domain names and file a UDRP. It’s simple math for some companies that they can pay $1,500 to file a UDRP and use their council on retainer to attempt to take a name that is worth tens of thousands of dollars. Some claim that because the domain name is parked or undeveloped that the owner registered it in bad faith. As a domain owner, if you don’t spend several thousand dollars defending your valuable domain assets and end up losing the name, you are forever branded as a “cybersquatter,” and Google search results are merciless when it comes to listing people and their UDRP decisions. Companies are learning about the UDRP practice, and they have been filing them more regularly for generic domain names.
By nature, parked domain names typically don’t see a major increase in traffic unless an event occurs, or invention/brand is established where the domain name is relevant to that particular happening. This means that the best chance of the parked domain name increasing in value is if PPC values rise or people pay a higher revenue multiple for a parked domain name. Since the first is highly unlikely, and the second only perceptually increases the value of a parked domain name, the inherent value of a domain name is only based on supply vs. demand models. If two people want a name and have unlimited budgets for it, the value could be very high. Conversely, if nobody is interested in spending the money to buy it, the value is relatively low.
Since I am currently undertaking a development project with Lowell.com, I’ve had the great opportunity to speak with many other people who have developed their domain names. Almost every one of these people have told me about the added revenue that can be yielded with a developed domain name. If you offer products, services or a community, almost anything that will interest visitors, they will return to your site. Monetizing the traffic is one thing, but when you are able to increase your traffic because of the content you provide, you can obviously increase the earning power of your domain name.
When you develop a domain name, you unlock the power of the name. If people are looking for something related to your domain name, but they don’t directly navigate to that name, you probably won’t have the opportunity to generate revenue from that person with a parked name. However, if your name is developed, that person may find your listing in one of the search engines. This would be a missed opportunity with a parked domain name, but an opportunity to convert a visitor through search engine placement.
When questioned about development, some people often lament that they don’t know how to develop their names, lack the capital to develop or don’t have the time. Some also say they wouldn’t know what to build to yield the best results. I see the same people creating sale listings where they include, “this name would be perfect for a baseball memorabilia website!” HELLO!! There’s your development idea. Visit places like Sitepoint , eLance, or Craigslist and post your idea. Seek out developers who are talented in this field and find a good match. Just because you don’t know how to develop doesn’t mean you can’t develop. You don’t know how to fly an airplane, but that doesn’t prevent you from traveling, does it? I am building Lowell.com with a designer/developer, and I am blogging about my plans and strategy as I go. Feel ree to check out Blog.Lowell.com to learn how to develop, or possibly what to avoid when developing.
Another reason many people don’t develop is apparently because they have too many names and don’t know where to start. My suggestion is to find one of your better names, and make an effort to develop it. If your first attempt is a failure, you can learn from your mistakes and try again. The beauty of a domain name is that if it’s a great name, it will be resilient, and will probably still have the same value as it had before you started. In the best case scenario, you’ve built a road map for future successful development endeavors, and in the worst case, you will probably only lose the money you spent on development.
Sure, development is far from easy. There is coding, designing, search engine optimization, copywriting…etc. Tons of things we all aren’t good at. However, just like you are probably pretty smart with domain names, there are many people equally as talented in other areas. I’ve met many people who are willing to give advice and/or assistance in each phase of the project. Seek out the best of breed in fields in which you aren’t talented, and find partners willing to work with you for a fair price. Oftentimes a piece of the back-end will incentivize some of the best developers. Whether that means a revenue share, a percentage of the business, guaranteed future business, or some other type of deal, you can be creative and work out something that is mutually agreeable.
Take a look at some of the domain industry veterans and leaders, and see what they are doing with some of their names now. Sahar (Assista &
FuneralHomes.com), Michael Mann’s WashingtonVC team (Skateboards.com & Snowboards.com) , Internet Real Estate Group (Jeans.com & Chocolate.com), Scott Day (Chairs.com & FantasyFootball.com)…. and many more.
Personally, I don’t think there has been a better or smarter time to begin developing your domain name assets.
- -
Elliot J. Silver
Top Notch Domains, LLC
Lowell.com
I think Eliot has hit the nail on the head with this post. I have started converting some of my domains from simple parking pages to more robust, customized (by me) “parking pages” that provide the viewer with a bit more information - with the hope that the person will then click on an ad.
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!
Sahar -
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
Hi Steve,
This is a great time to buy domains for those with cash in their hands. If I started today with 3K I would spend a month or two to learn what makes a domain a good domain and hunt for one for 3K, flip fast, reinvest, and so on. With enough capital you start to pick and choose what to let go, what to keep.
As for Geo names, unless I understand them well I would stay away from. My preference has always been product related domain names.
Cheers
Sahar
The trick to developing a domain is to get more out of the development, tangible or intangible returns, than is put into it. Tangible returns can be measured by net revenue. Intangible, can be measured by increased traffic (particularly returning visitors), that can eventually be monetized.
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
Elliot,
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