How can I make money from domain names?

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Several people have earned millions from the domain name business. Apart from the “big sales” which have been made public, setting up redirections on the name has also yielded a sizeable recurring income for many.

How does this work? And how can you make money from domain names? On this page, I’ll try to answer these questions. I will also share some of my stories and experience in this field. Though, I never got “millions”, I did manage to make a tidy sum from the little investment (the hallmark of domain name business).

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How I made money from domain names

I sold my first domain name in 2005. It got me a measly $500. At that time, I had 47 names in my kitty. The sale hardly covered the cost of renewal of all the other domains I owned.

Though the sale amount was small, I was far from disappointed. The domain name business was something I wanted dip my toes into. The second and third sales yielded much more, $4500 and $3200, respectively. These got me all pumped up.

You see, the investment was minimal. The cost of registering a domain name was $10 per year. Even when I deducted the renewal costs, there was still a decent profit at the end. And the best part – I hardly made any effort to contact potential buyers. They came on their own after checking the WHOIS information.

I now started to look actively for buyers and in 4 years sold all but 6 domain names. In the end, I was quite pleased with the earnings. Anyway, in that time, my other businesses started doing pretty well. I soon lost interest in earning from domain names. Truth be told, sometimes I still miss the excitement – it was great fun while it lasted!

The best offer I had was for The buyer agreed to acquire it for $6,000. But I declined, deciding to set up a web site on the domain name. In the long run, this proved to be a right decision cause the site has earned me much more.

Here are some tips and advice based on my experience for all those who want to make money from domain names.

How you can profit from domain names

The first thing you need to note is that the investment required in domain name trading is very small compared to the potential earning.

Take the example of Rick Shwartz, the “Domain King”, who purchased from a student for $42,000. That’s certainly not a small sum, right? But Rick could “see” the potential in the domain. In a few years, he had sold it for $8.8 million! By the way, the student from whom Rick had purchased the domain name, had himself bought it a week back for $5000 and would have been very happy with the $37,000 profit he had generated in just a few days.

For other interesting anecdotes, read my article on the most expensive domain names.

Minimal investment

Investment in this business is negligible. If you are registering it for the first time, a domain name costs about $10. and 1&1 Online Store, the two companies I trust, generally offer discounted rates by which you can save a few more dollars.

Analyse the potential of the domain name

If you have to buy one from the present owner, calmly evaluate the price and the potential the name holds in future. For instance, Xcerion were able to sell to Apple for $4.5 million.

Be patient

Unless you are in immediate need of money, do not try to sell the domain name to the first buyer that comes along. Rick Schwartz too made this error. After selling to a magazine for ‘only’ $1.3 million, he remarked that the sale price was way lower than his expectations. But at that time he needed the money to purchase other lucrative domain names.

Thus, hold on to the domain name and patiently wait for the right buyer. Or better still, pitch the domain name to potential buyers at online auctions.

Alternatives to the dot-com

Though some will advice getting ONLY the .com extension, other TLDs hold great prospects too. And since more and more extensions are being released getting your hands on a “catchy” domain name has actually become easy. Check out the 10 best alternatives to the .com.

Identify names that have local scope

A domain name with a great potential locally may prove to be a better option than a dot-com. Especially if people in your country like to use country-code TLDs. You can also check out common words used in your native language. These may be more suited for local businesses, right? Find out which things are a hit in your country!

Refrain from domain name squatting

Domain name squatting is not only frowned upon but is also illegal in many countries. It may result in a lawsuit which is simply a waste of time and energy. Domain name squatting is “using an Internet domain name with bad faith intent to profit from the goodwill of a trademark belonging to someone else” (Wikipedia). Thus, registering and then approaching Nike with a $1 million demand may land you in trouble. Just don’t do it 🙂

What are the risks?

The domain name business, like any other, is risky only if you do it blindly. A few people compare the domain name business with the stock market. But I believe that the former is way less speculative.

Unlike stocks, there are very low chances of making losses in the domain name business unless, of course, you purchase one at a very high price. You need to be smart in judging the potential vs. the cost.

Having said that, not all domain names will yield “fantastic” results. A few would barely cover their initial and renewal cost while others will make you a whole lot of money! The potential in the domain names is huge! As long as you are smart and consistent, it will yield results.

Where can you buy cheap domain names?

There are hundreds of companies selling domain names. I suggest, the world’s largest registrar, and 1&1 Online Store. Both the companies offer domain names at discounted prices. They also help you set up redirection on the domain name which may get you a steady income.

Best of luck in your online endeavour. God Bless!

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