Introduction to the domain business

How do you make money from domain names? This is one of the areas of the web where to make much money you really need to have some money first. This business is very much one of speculation, and you can just as easily lose your shirt as make your fortune. Here's a basic breakdown of the domain name business.

Domain Brokering

There are ways to make money on domains without ever putting money into them. However, this is more difficult than simply selling a domain, because it requires coordinating a buyer and a seller. This is called domain brokering. Furthermore, to sell other people's high value domains you'll likely need to exhibit an expert level of knowledge in the field, because these folks are looking for someone who can maximize the profit from their domains. So this is a bit of a catch 22 for a beginner. You need to be well schooled in this business and have some credibility before many people will agree to let you sell their domains and keep a portion of the profits, and you need money to get that experience buying and selling domains.

Type-in Traffic

These are usually generic words, dictionary terms, famous people/places, pop culture references, or a new fad that lots of people are trying to find. A few examples of this type of domain might be www.internet.com, www.britneyspears.com, www.gorilla.com, or www.2004election.com. Typo's of popular domains, like www.hotmali.com can also be profitable. It's safe to say the market for getting unregistered generic .com/net/org domains is basically over. All these domains were registered back in the early days of the internet. Generic domains are also watched extremely closely by many people in the domain business that have advanced, automated methods of getting the domains the instant they drop. Your chances of registering an expired generic domain name with lots of type-in traffic by hand are virtually zero.

Some businesses exist whose sole purpose is to grab a domain the instant it drops from registration, and sell it to whoever purchased the drop, or to put it up for bid among interested parties. These businesses have million dollar facilities and backbone level internet connections with speeds that make the fastest broadband look like a 1400 baud modem from 1991. Regular folks simply cannot compete, so it's best not to waste time trying. You can either pay these businesses to catch the drops you want, or work around them to make money in other ways. When registering a famous persons name or domains with a registered company name included, you've really got to watch your step. What looks like a great opportunity can often be a trademark issue, and these situations can bite back hard.

Most people make money from type-in traffic domains by finding motivated sellers bargaining for a good deal. They will purchase the domain and may develop it into an information based, service oriented, or ecommerce website. Other people who have money to invest for long periods will buy these domains, and park them at a place like Sedo, that offers a page with links to relevant advertisers. They would make money on a pay per click basis through this company. Parking pages are a very hands-off method of generating income. However, it's far from maximizing profits and more often used when a person doesn't have the time or interest to properly develop a website for the domain. Months or years later they may sell the domain for as much or more than they paid for it, profiting from all the pay per click revenue generated while they owned the domain.

Expired Traffic

These are domains that used to have a developed website, but the owner has let the domain registration expire. Expired traffic domains are usually listed in search engines and have links from other websites, sending traffic to the domain and giving it credibility in search engines. Those in the domain business will buy these names and profit from the traffic. Sometimes they'll develop a website related to the traffic, but generally they'll park the page somewhere like Sedo.

Developed Websites

Many web developers make their living selling websites in different stages of development. Some build the website infrastructure, apply a design, and sell it as is without traffic. Others will develop a website with at least one revenue stream (advertisements, products, or services), work on link building, getting traffic to the site, and getting it listed in search engines. Then they'll have proof of revenue, which they use in pitching the sale of the website. Web marketers will buy these sites, work on the marketing end of the website, and make money from it that way.

More on domains

In the subscribers section, I discuss in great detail the methods to go about actually purchasing and selling domains, including what information to look for when deciding on a domain, how to determine the validity of traffic, evaluating the potential for development, what's important in a domain name, and determining the maximum you should pay for a particular domain. I don't discuss brokering domains because I have no experience in that area beyond what I've heard from other people. If you decide to get into this business, I would recommend having some disposable income to invest. From my experience I'd say have at least 500 dollars ready to invest in domains before you begin. Otherwise the benefits of investing in a decent domain will probably not end up being worth the time and effort your put in.