In 20214, Gannett acquired “cars.com” for a staggering $872 million. The deal took the world record as the most expensive domain ever sold. The title was held by 360.com for a price of $17 million. This proves that domains are invaluable assets in today’s digital-first landscape.
While million-seller domain names are rare, countless domains sell for hundreds and even tens of thousands every day around the world. This presents a unique opportunity to make bucks investing in domains.
As tempting as the idea of domain investing seems, it requires more than luck to earn back, if not more, from your investment. In this short guide, we will cover everything you need to know about domain investing, how it works, and the metrics behind it.
The True Cost of Domain Investing
Before you invest in domains, here are two handy reminders:
One, you need plenty of capital to build a rock-solid domain name portfolio.
Two, you need abundant time to sell domain names.
With that out of the way, the third thing you’ll need to consider is the three tangible and intangible components of domain name costs:
- Cost of the actual domain name, which includes registering the domain name, purchasing premium domains, etc.
- Nominal renewal fees
- Time spent researching, purchasing, and selling domain names
Key Metrics for Domain Names You Must Remember
A critical part of domain name economics is tracking the following metrics, which provide a clear framework for managing your domain investment activities.
By tracking these numbers for each domain, you can make informed decisions to maximise your profits in the domain market. Remember, understanding — and monitoring — these metrics will help you build a profitable domain portfolio.
Metric #1: Initial Investment Cost
What it is: The upfront expense to acquire a domain name.
How to calculate it: Add the purchase price of the domain name to any associated fees or commissions.
Who it’s most useful for: Domain name investors who want to assess their initial financial outlay.
Questions to ask when using this metric:
- How much did you pay to acquire this domain?
- Were there any additional fees or commissions?
Strategies to use:
- Always negotiate for the best purchase price.
- Consider bulk purchases to save on acquisition costs.
Example: Let’s assume you bought the domain “YourBusiness.com” for $500 and paid a $25 registration fee. So, your initial investment cost is $525.
Metric #2: Recurring Renewal Expense
What it is: The annual cost to maintain ownership of the domain.
How to calculate it: Simply multiply the annual renewal fee by the number of years you plan to keep the domain.
Who it’s most useful for: You need to budget for this if you’re holding domains for the long term.
Questions to ask when using this metric:
- What is the annual renewal fee for this domain?
- How many years do you plan to hold this domain for?
Strategies to use:
- Register domains for multiple years to secure lower annual rates.
- Regularly review your portfolio to drop underperforming domains and reduce renewal expenses.
Example: Your domain “YourBusiness.com” has an annual renewal fee of $15. If you plan to keep it for 5 years, your renewal expense would be $15 x 5 = $75.
Metric #3: Average Selling Price
What it is: The typical amount you can expect to sell a domain for.
How to calculate it: Add up the total earnings from domain sales, then divide by the number of domains sold.
Who it’s most useful for: Domain name investors who want to estimate potential profits accurately.
Questions to ask when using this metric:
- What is the general selling price of domains within your niche?
- What do your domain sales earnings look like?
Strategies to use:
- Research your niche market to figure out competitive pricing rates and go for domains with a higher selling price.
Example: Let’s say you’ve sold five domains for a total of $2,500. So, your average selling price would be $2,500 ÷ 5 = $500 per domain.
Metric #4: Sell-Through Rate
What it is: The percentage of domains that you’ve successfully sold within a specific period.
How to calculate it: All you need to do is divide the number of domains sold by the total number of domains you own and then multiply it by 100.
Who it’s most useful for: Domain investors who wish to gauge their portfolio effectiveness.
Questions to ask when using this metric:
- How many domains have you sold within a predefined period?
- How many domains do you own at the moment?
Strategies to use:
- Regularly evaluate your domain sales strategies for revenue and impact.
- Think about lowering prices or exploring new markets for domains that have a low sell-through rate.
Example: Say you sold 10 out of 50 domains this year. So, your sell-through rate would be (10/50) x 100 = 20%.
Metric #5: Time Investment Cost
What it is: The hours you spend managing your domain portfolio (read: researching, negotiating, and so on).
How to calculate it: Track the hours spent on domain-specific tasks, and then multiply it by your hourly rate to get an understanding of this metric.
Who it’s most useful for: Investors who want to assess the actual effort and cost involved.
Questions to ask when using this metric:
- How many hours do you spend on domain-related activities?
- What is the value of your time in terms of hourly rate?
Strategies to use:
- Automate routine tasks (read: domain renewals and inquiries, for instance).
- Prioritize high-value domain tasks and outsource time-consuming tasks to the extent possible.
Example: Let’s assume you’ve spent 100 hours working on domains this month and your hourly rate is $25. So, your time investment cost would be 100 hours x $25 = $2,500.
Invest in the Right Domain with Crazy Domains
A profitable domain business starts with partnering with the right domain registrar who’ll provide you with the best domain to invest in at the right cost.
Sure, you may opt to conduct outreach to sell your high-potential domain names, but you need to keep your domain name portfolio updated at all times—and at all costs (pun intended). Remember, a little bit of planning and strategic decision-making is all that matters.
Crazy Domains has a wide selection of great domains at an affordable rate and invest in for higher profits. This lets you optimise your domain investments, minimise costs, and maximise profits—much like a seasoned domain name investor!
