SEO and investing in domains

SEO & Investing in DomainsFor many hardcore webmasters, investing in domains is a part of their every day life. Although they are not considered an actual commodity, there is certainly potential there.

We all despise those people that got 95% mortgages, making 100% ROI within the space of a few years. If only we could turn back the clocks, right?

Remember, at the time, these gains were not guaranteed. Many people put all their assets on the line. They made calculated investments that paid off. The position many people were in then, is similar to the position that domain investors are in now. Their question was then, and is now; is this investment going to make me, or break me?

With property becoming unstable in the UK and the internet booming, could investing in domains be the nest egg that we all dream of?

Background research

Stats to help with investing in domains can be found on IDNX. This is about as close to valuing the domain market as anyone is going to get, for the time being. It gives a good visual overview of the market as a whole (take that into account).

Valuations

Appraisals are fairly pointless; the market operates similarly to unique artwork. When the price that a seller will sell for, is equal to that of the price the buyer is willing to pay, it will sell. Of course, the above could be applied to any market.

That said; compare this to the property market, prices of property will generally be inline with historical pricing. Investors can take the prices of multiple sales in the past, apply the increase/decrease in the market since the sale and get a fairly accurate idea of what the value is.

This is coupled with the fact that houses, using mortgages, are leveraged investments; increased potential gains, but losses too. This is obviously the reason why investing in domains could still be lucrative. As soon as detailed information relating to domain investing is released, the margins will close up; so the time is now or never.

Choosing domains for investment purposes

Here is one of the rules we have been using; if a basic ideas don’t pop into your head for a domain within 5 minutes, don’t buy it. Obviously it gets a lot more detailed than that. The ideas should consist of:

What is the purpose of this domain?

Fetch.co.uk recently sold for £17,500. The idea behind the new site will be a transportation based company.

Who will buy the domain?

Typically, “end-users” will pay MUCH more than other domain investors. Yes, you could flip a domain for 100% profit, but factor in those domains that don’t sell for 5-10 years; you’re probably making a loss.

How will you value the domain?

Each to their own, we have a fairly detailed formula for valuing domains on an individual basis. The formula is adapted based on SEO value, traffic, historical sale prices (of that exact domain and other similar tlds), CPC cost, search traffic and more.

This is our “assumption” of what a domain is worth and by no means fact.

What will you do with the domain?

If the time was available, would you invest time and energy, trying to develop a project and implementing SEO strategies? If not, most end-users are probably thinking the same thing.

The result

Investing in domains has proven to be profitable for some, but then again, so has poker. Like great poker players, great investors fill in gaps in information, the ones others fail to see.

Our unbiased opinion is that there are plenty of opportunities out there, but each opportunity should be studied in depth. Thin the herd, find the great opportunities.

At the same time, hang around for the right price. The same buyer might pay up to $2,000 for a domain that is advertised for $1,000. This was the case for hotels.cd, which sold for $986 (Feb 07) and $2,022 (Aug 07).

Prepared to spend time on SEO? That domain is probably worth investing in…

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