I was recently reading an article about domain names and the prices that some of them are fetching and it occurred to me that this is an area where we should start investing. That’s not to say that I believe that I will pick five figure domain names to sell, but it seems to me that I should be able to make a nice return on investment with them with little risk.
Cost: Each domain costs me $6 a year. Since we already have a server for the main and satellite sites, there is no cost to place the site up on the web.
Risk That means that the potential loss on each domain is $6 if I can’t sell it, but the risk is even less than that. If I create a page with an explanation about the name and get it live fairly quickly, I’m confident that the domain will pay for itself through advertising during the year. In fact, I’d be surprised it any of them end up losing money. To break even, all they would have to do is generate $0.50 a month, something that I think all of them can do.
Time Cost: The real cost with these will be time since I will be spending time on the domains instead of other things I could be doing. That being said, even the time cost will be a minimum. Unlike the satellite sites, I would have no plan to build them into a site on their own. I would simply put up some information about the domain much like I did for MacInteltoshes which would maybe take a half-hour at most. There would be some time involved in trying to find the name, but I usually pick them when reading articles and something inspires me to see if a domain name has already been taken and I have no plans to spend hours inputting names to see what I can find.
Return on Investment: My thoughts are that we can receive a 1600% return on our investment. Although I have no idea what we can get for the domains, I would assume that we can sell them for an average price of $100. Of course, I hope that some of them sell for much more, but I’m also sure that there will be other that won’t sell at all. If we can average $100, that puts our return on investment at 16.666 times the cost. As we do this a bit more, I should get a better idea of what we can expect to earn per domain, but I feel that $100 is not being overly optimistic.
Knowledge When investing, it’s always important to have knowledge in the area you’re committing the money for investment. While I do not have any direct knowledge in the actual sale of domains, the satellite sites and the recent MacInteltoshes site give me a good indication of how it will go. This is really only an extension of what we have already been doing and seems to fit well with the overall development of all the websites Nate and I have been doing.
My Plan: The plan is going to be fairly simple and straightforward. I would like to purchase about 10 domains a month and shoot for selling a minimum of one a month. That will make the entire business cash flow positive for the first year. Once the first year is up, I will take a look at any domains that haven’t been sold. If they have covered their cost in advertising revenue, I will keep them and if they don’t, I will simply let them expire. This should allow us to build a fairly large portfolio of names while staying cash flow positive through the entire process.
Other Options: Since we are finding that are site manager test is going well, we would probably be interested in forming partnerships with those interested in creating content for a particular name we have that can be incorporated into our satellite site or blogging system. While I don’t think this will be an option that we will actively promote, it will be one that we will certainly consider if we feel it would be a good partnership.
It will be exciting to see how this turns out. While we will be starting out investing in only new names, if we find that it’s profitable and get a better feel on what names can command, we will likely move into purchasing already established names. That’s a bit down the road, but certainly a possibility. It seems to me to be a fairly low risk investment strategy with a potential of quite high returns. We shall see how it goes…