How to (Really) Make Money with Domain Names

When I started writing this, my first sentence was “The time for making easy money with domain names has passed.” It didn’t take me long to realize, though, that there never really has been any easy money in domains.

• Think it was easy to invest $70 each for domains back in the mid-90s when no one could really be sure at all that the Internet was going to be as life-changing as it has proven to be?
• Think it was easy to figure out the drop system so you could snatch up expiring domains before anyone else?
• Think it was easy to work like a dog and max out your credit cards once domain names were a proven commodity?

I don’t think anyone who’s gotten rich off domain names would tell you that it was ever easy. The landscape has changed immensely, but what makes it hard now is just different than what made it hard 10+ years ago.

I can tell you what I know now beyond a shadow of a doubt, though: if you want a low-risk, high-return way to make money with domains today, forget buying and holding. Buy a handful a good generic domains and start right now developing them.

Forget Buying and Holding

I love Rick Schwartz’s model: find top-tier generics at a good price and hold them for a few years until someone wants to pay you big bucks for them. That’s how you make several hundred thousand dollars at a time.

Unless you have significant wad of cash lying around, though, you’re relegated to trying to turn $260 into $8,000. Success stories like that are great, but ask yourself:

1. For every successful domain investment that you make, how many failures would you have?
2. How many deals like this would you have to do to keep food on the table and clothes on your kids?
3. Think you could keep it up consistently?
4. When you’re done buying and selling, what sort of equity would you have to show for it?

To me, domain buying and selling is like day-trading: yeah, you hear about some stellar returns, but the risks are just as high (or higher). For every Frank Schilling or Kevin Ham, there are tons more people who lost their shirts (and more) trying to do the same thing.

The Big, Safe Money is in Development

If you want to make big, safe money with domains today — without laying out big money like Rick — here’s what you want to do:

1. Find some good generic domain names that:
   1. You can get for a good price.
   2. Are in topic areas that you’re passionate about
2. Focus your efforts on building those out and driving more and more defensible traffic to them.

Your only risk is the money you use to buy the domains –which you totally control — and the time you spend building them out. That’s it. What you end up with in return, though, are very valuable assets that any number of people will be interested in — not just other domain speculators.

That’s because most domain buyers today “are not sellers and even more do not develop.” Because of that, developing a good domain means that not only will it still be interesting to a domainer somewhere down the road, it will also be interesting to a much wider range of people who are looking for established businesses and have no interest in playing the domain market.

Anytime you can take an asset from one market and turn it into one with much wider appeal, the value increases by default: more buyers = more demand = higher price.

When You Come to a Fork in the Road, Take It

Like I said, I still really like Rick’s model, and I agree with Andy that Warren Buffet would recommend investing in premium generics. It’s just that I don’t know many people who have Buffet-type money.

So if you find yourself wanting to get into the domain business without cashing out your 401(k), just take the other path. It’s a low-risk, high-payoff strategy that has worked out great not only for me, but for many others as well.

I'm seeing reports around the web now that YouTube is completely down for everyone, but I haven't seen any word as to ...

Wanted to give a huge thanks to Deepak. After updating to WordPress 2.5 several days ago, I only today tried to upload an image for the first time. ...

Great post today by the new owner of Blogging Experiment on "What I Look For When Buying A Website." It's an outstanding look at all the elements of ...