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Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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Is Buying and Selling Domain Names a Good Business?

 

There’s a reason why domain names are perceived to be synonymous to web addresses. They are like real estate on the web. If you have one, it’s like you own a piece of the web. Just like real estate, they are something you can buy and sell for profit. Some are even registering (buying) domain names and selling them on a regular basis, just like making estate investments to be sold later on.

How can you make money from domain names?

Before answering the question posited in the title, it might be necessary to understand how making money from domain names work. Basically, it’s about looking for a domain name to register or buy and selling it. The process is not exactly as simple as that, though, so consider going over the following points.

  • Choosing a Domain Name to Get - In choosing a domain name to buy or register, you have to look for something that will likely be used by a business or someone who wants to put up a website. These include business names, generic terms for products and services, and names of upcoming events. These names can be combined with other words that are likely to be used by organizations, businesses, or individuals.

As much as possible, the domain names you get should be short. They should also be easy to remember. Also, it is advisable to limit your choices to traditional top level domains (TLD) such as .com, .net, .biz, .org, and popular local TLDs such as .us and .ca. There’s a multitude of new TLDs now but not many buyers are interested in them and their prices are not that attractive. Besides, if potential buyers want to use new TLDs for their sites, they would likely get them straight from a registrar and they are also likely to compromise with the spelling just to get the domain for a low price.

  • Undervalued and Expiring Domains - Your options for domain names to buy are not limited to domains that have not been registered yet. You can also look for already registered domains that appear to be undervalued. Some domain owners (or hoarders) accumulate too many domain names that they fail to properly evaluate the potential of some of the domains they own so they sell them at low prices. You can find expiring and expired domains at sites like ExpiredDomains.com.

Be careful in buying expired domains, though. Some domains may have been abandoned after the site they were once associated with were shut down due to illegal activities or copyright violations. It would be advisable to avoid these kinds of domain names as they are unlikely to attract buyers or fetch a good price.

  • Where to Get Domain Names - Domain names can be obtained from domain name registrars. You just have to use the registrars’ domain name search tool to check if the domain name you have in mind is still available. If it’s available and the price is good, you can proceed to registering it. Some domain registrars offer cheaper domains on commitment, as seen below on LCN’s site:

 

  • Pricing Your Domain Names - Nothing stops you from unilaterally deciding on what price to set for the domain names you are selling. However, if you are not sure how much to sell your domains for, consider getting appraisals. There are several sites that do these appraisals such as Sedo.com and DomainIndex.com. You may need appraisals to avoid understating or overstating the value of your domain names.
  • Selling Your Domain Names - To sell your domain names, you simply have to communicate with the interested buyer and agree on the transaction. Obviously, you need an online payment system to be able to do this. You may also sign up for an account at domain auction sites or marketplaces. You will not be able to directly transact with a buyer with these but you will likely find more potential buyers.
  • Making Money with Domain Names without Selling Them - It’s not only through selling that you can make money out of domain names. You can also park a domain name, wherein a dummy page is set up for it and filled with ads. If someone stumbles upon the dummy page and clicks on the ads, you earn something. This does not yield a lot of revenues, though, except for highly popular domains. Similarly, you can also build a website or blog for your domain name and fill it with content and ads so you can generate ad revenues. These are a good way to make money out of your domain names while waiting for a buyer.

How much can you make?

It’s difficult to come up with a standard price or even a price range for the potential earnings in buying and selling domain names. The prices vary widely. However, according to the most recent publicly available market research from domain buying and selling platform Sedo.com, the average price for all of their domain sales in 2013 was $1,893 while the median price was $577.

Is domain buying and selling a good business venture?

Domain name buying and selling can get you money but it’s better as a side business or something you just do an auxiliary revenue generating activity. In other words, don’t think of making it as your main business or investment. Not many become successful in the domain buying and selling business. Domain names may be comparable to real estate but they are far from similar when it comes to profitability.

Moreover, there’s the issue of cybersquatting. You can get into legal trouble if you registered a domain name and somebody accuses you of getting the domain in bad faith. The cost for your legal defense could easily eat up all the earnings you have accumulated in buying and selling domain names.

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This post does not aim to discourage anyone from getting into the domain name buying and selling business. However, it’s important to be aware of the different aspects of it to avoid too optimistic expectations. There are other ways to make money online that deserve more attention.

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