I bought my very first domain name back in 2007. Since then I have sold [and bought] quite a few domains for five-figures and have obviously learnt a lot about negotiating and the domain industry. Here’s some of my advice FOR FREE.

Is domain buying profitable, can I turn it into a business? That’s a question I hear a lot. Let’s take a look at some real calculations.

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First, Some Real-Life Calculations

I spend approx 3,000 USD per year on domains renewals (not including premium domain purchases), sometimes more. That may be a lot of money for some, but when you run a six-figure business you can afford to spend 3,000 without even noticing a big change in your profit margin. I’ve been in business for approx. 5 years now, so the total I spent on domains thus far is between 15,000 and 20,000 USD. That’s a lot of change. However, I also sold 4 domains for 5-figures each where my ROI was 100,000% and more. Yes, you read that right, my return was 100 thousand percent on several names.

So, to answer the initial question – is buying domains profitable? I would say, it depends. In my opinion, it’s a lot more profitable when you’re buying names for own development purposes rather than just re-selling names.

Today, I own domains such as webmaster.net and quite a nice portfolio of 300+ names, so I believe I am more than qualified to give you some advice and teach you a little about what I have learnt so far. I am by no means a master of domaining, but I am a tough negotiator, a constant learner and most importantly I have a business sense that most beginners completely lack. But you can get there too, you only have to keep learning.

So, how did I manage to get that kind of ROI? More about that later. First, let’s take a look at things I did NOT do.

NEWBIES: Stop Buying Useless Domains

This goes out to all the newbie domainers out there: Stop registering useless names! The forums over at namepros.com, a specialized domain forum, are filled with threads of domains that are worth less than their actual registration free (short: reg fee).

So, in order to figure out what names are pretty much useless, let’s first define a ruleset.

1 Stop Buying Domains Including “The”

The first newbie mistake is buying domains that include “the”. When Zuckerberg started Facebook, it was called TheFacebook. Guess what, they dropped it. “The” will never be included in any domain used by professional agencies and companies. It is a sure sign that you don’t understand the naming process yet.

Bad Example The 24.Png

2 Stop Registering Domains Including “24”

Domains including 24 have little value. Period. Never ever register them! Sure, there was a time when it was trendy to have a website that included 24, but only because that was the case 500 years ago, doesn’t mean anyone gives a damn these days.

Simply stop doing it.

3 Stop Registering Info Domains

Ok, please get this. No one in this entire universe gives a damn about info domains, unless they are high premium names, such as casino.info, texasholdem.info, poker.info or other extremely sought-after keywords and even then they won’t fetch a 1/10 of the DOT COM equivalent. As a rule of thumb, don’t register any other extension aside from .COM when you’re starting out. After a few years, you can look at other speculative extension, but DOT COM is the only viable domain extension out there. NEVER register any other extension for the first 365 days in this industry. Yes, it’s a frigging industry and you have to treat it like a business or you will lose a lot of money. Excuse my tone, but I value my readers and want to protect YOU from wasting money on useless names that could be used better elsewhere.

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4 Stop Buying Dictionary Names

Stop registering useless dictionary names. The internet has been around since the late 80s, do you really think there is still a dictionary name left that is worth registering? The answer is NO.

5 Stop Cybersquatting!

More and more people think it is a great and easy way to make money practicing cybersquatting. An example of cybersquatting for example is registering the name facebook, addidas, google, or other company names e.g. facebook.company, addidas.company or similar.

Yes, it may be less expensive to pay some random dude $1000 instead of having to open a dispute with the respective domain authorities, but you are also risking major lawsuits that can cost you 50,000 and more. Sure, if you don’t have any money, they can’t get anything from you, but that doesn’t mean they won’t try!

Simply don’t do it – it’s morally very uncool and very annoying for companies around the world. It’s unprofessional and you won’t get away with this. Stop doing it.

6 Stop Buying Trademarked Names

Aside form cybersquatting, beginners always register trademarked names. I actually registered a trademarked name when I started out a few years ago without noticing it. Luckily, the trademark owners would only ask me not to develop this name instead of suing me without asking questions. Do your homework. Go to http://www.uspto.gov/ and enter your name there! It won’t take more than 5 minutes and will save you a lot of legal trouble and headaches.

7 Stop Buying Hyphenated Names, Think About The Commercial Purpose

One of the names I sold throughout the years was to a multi-million automotive company. In hindsight, I should probably have asked for more, but I also understood that they had a budget and intended to use the name for a particular marketing campaign. Most beginners don’t even get that far in the first place, because they register names out of the blue without thinking about the commercial purpose. What is the commercial purpose of the name you intend to register?

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Most companies do not want names with hyphen. In Europe, a few selected markets actually prefer hyphenated names, but in the US where DOT COM names rule you won’t be able to sell those names. Don’t register them!

8 Stop Listing “Exact Searches” For Extensions Other Than DOT COM

I don’t care how many people are searching for “wrenches” or “onlineb0ddy” or whatever keyword if the domain extension is .info and not DOT COM.

Stop listing the exact searches, unless you are listing premium names.

9 Keep Learning!

One of the best ways to understand the industry is to simply check out what has sold, every week, if possible every day.

Read the industry journal dnjournal.com and subscribe to various domain newsletters including the Daily Domain Newsletter by brannans.com

If you do that, you are already one step ahead of the competition. You will see what sells and what doesn’t!

Over the years, I have registered a bunch of crappy names and even this year I let quite a few names drop. Keep learning, no matter how “experienced” you are. Only arrogant idiots believe they are experts at something. There is always someone better than you. Always. Keep learning, keep improving. Make mistakes. Make mistakes twice – but DON’t make mistakes a third time. Sometimes it takes time for a lesson to sink in, but when you’re making the same mistakes over and over again, something is going wrong.

10 Build A Portfolio!

Once you know what sells, you can build a portfolio around it. Let’s say you noticed a pattern in recent sales, for example there were frequent sales of names about a certain topic. Write it down! Look for patterns. Professional traders on WallSt look for patterns all day long, domainers should too. Spend some time looking for sales patterns and you are another step ahead of the competition because you actually understand the market better than the competition!

11 Learn Negotiating!

I suck at selling, I couldn’t even sell a bottle of water in the middle of the desert, because I suck at articulating.

First the good news: Negotiating in the online world has its own rulesets. You don’t need to be particular good at articulating to sell something digitally.

Now the bad: You still need business sense to be successful. Some develop a keener sense than others and at a much faster rate. This ‘business’ sense is what will set you apart from the competition.

In order to learn negotiating, you should practice. A LOT. I don’t care what you sell, but you need to start selling. I got a lot of my negotiating skills from virtual worlds and online games with virtual economies I played as a youngster. MMO’s such as Guild Wars or Lineage 2 have huge economies with huge marketplaces. In order to strive in the virtual worlds, you absolutely have to be good at trading. For me, it was really my first crucial lesson in trading and negotiating that would help me become a tough negotiator.

Persistence and patience are two of the most important virtues you can learn when it comes to trading. When and how to make counter-offers is really an art by itself and I could probably fill 100 pages about sales letters and closing a sale.

12 DEVELOP, DEVELOP, DEVELOP: Creating Residual Income To Invest

You need money to make money is unfortunately very true for domaining as well. Sure, you can still manually register names and get incredibly high ROI’s, but it is far easier to invest into premium names that cost a few grand and then resell them at much higher prices. The demand for premium names that have been registered for 10+ years is much higher than the demand for hand-regged brandable names.

13 Buy For Yourself

Most of the names I register these days are for internal development purposes. Since my business has become much more streamlined (I wrote a little about that here), I no longer register as many names, but I noticed that there is quite a demand for names that I had intended to develop myself. When you see a great name and you already have an idea to monetize it, there’s a good chance someone else may see that exact opportunity and may send you an offer to acquire the name.

But, please, keep the rules above in mind. What is the commercial purpose? Have similar names sold in the past?

14 Keep Trading, Keep Learning

Guess what I did with the money I earned from my first domain sales? That’s right, I invested it right back into better domains that I always wanted to acquire, such as webmaster.net, which obviously is not a DOT COM but fit my branding strategy. “Webmaster” also very nicely fits the extension DOT NET, which is another factor to consider when buying domains.

When I decide to sell a name, I make sure I no longer need it to avoid seller’s remorse and any of that and I picture what other name I would like to swap the name for.

Obviously, trading for other names can backfire if you trade for names that are worth significantly less. Make sure to do your homework before you acquire something supposedly valuable.

15 Premium Names Always Sell

DOT COM is king, that’s right, but don’t ignore other extensions completely.

As mentioned, what you need are premium names. Premium keywords such as casino always sell at much higher rates, no matter what the extension is: There will always be interested parties. In order to understand what ultra-premium keywords are, please take a look at a list of the highest domains ever sold. Do your homework!

Only consider ultra-premium keywords such as “loan”, “software” or “poker” – that’s the prime virtual estate you want to own.

business.com sold for $150,000 in 1997. Today this name is easily worth 15 million (yes, I value this name higher than sex.com, which sold for $13,000,000 in 2010). 2014 is not 2010. I am convinced we will soon see DOT COM sales well beyond 20 million, which makes investing in premium DOT COMS at the moment very lucrative.

Sidenote: The highest non-com name ever sold was possibly kredit.de (loan in English) or a similar ultra-premium keyword.

I don’t think we will see a lot of new gTLD sales, but I am convinced a few premium keyword domains will sell for $100,000 and above. In today’s market it is difficult to stand out and using a new meaningful extension such as dot estate can help to drive traffic. Traffic is the real currency of the internet.

16 Hang Out With The Right People

I see thousands of people hang out in the wrong forums with the wrong people. Forums like WarriorForums are great don’t get me wrong, but chances are you will end up buying tons of useless info products and you will never meet the people who are actually successful at what they’re doing. Read niche forums such as namepros.com and keep reading niche blogs (hint: such as webmaster.net) instead and pick up tricks from the real pros who actually know the industry. More and more guru blogs provide sponsored blog posts that won’t really help you to develop your skills or motivate you to make progress. Avoid them.