Typo Domains

Typo domains and the practice known as “typosquatting” is the registration of common misspelled domain names. For example, “mortgeges.com” instead of “mortgages.com”.

Some typo domains can generate a lot of type-in traffic but they may not be a good long term investment. Depending on the domain name, there could be several issues ranging from potential trademark and legal issues, through to national security issues.

Trend Watching

Trend watching is a long term strategy and can be very lucrative.

The concept is that you anticipate what domains are going to become popular and register them first. To watch trends successfully, you need good sources and a very creative mind.

The most effective way to start trend watching is to pick a few niches that you are comfortable with. Then subscribe to a few blogs, press release sites and other intelligence sources, then read, read and read! Watch for new standards, technologies, and emerging products. Once you hear of a current trend, quickly buy up relevant domains. Remember that not all trends will pan out and it is important to diversify your holdings so that you are not focusing too heavily on one trend.

When it comes to trend watching, you need to be very careful about the possibility of infringing on trademarks. If you think a domain name could have trademark implications, then don’t register it.

Marchex Model

The Marchex Model came about when the company Marchex Inc, paid $164 million for 100,000 high-quality hand selected domains from Yun Ye. It was reported at the time that the names were generating $19 million in annual revenue. This makes the purchase price approximately 8.6 times the revenue.

The Marchex investment strategy was to:

a) obtain a number of high quality domains in the $1k to $5k range

b) leverage the type it in traffic

While the four figure purchase price eliminates the casual domainer, Marchex face higher risks. However its possible for them to receive significantly higher returns.

How To Appraise

There is no widely accepted definition as to how to perform a domain name appraisal. However the following factors are usually considered in order to get to a fair and reasonable figure.

1. Similar domain names that have previously been sold.

2. Similar domain names that are currently for sale.

3. Keywords and phrases in the name.

Generic keywords tend of have a higher value. Domains in specific niches, such as gambling, financial and adult entertainment, may may sell for more than other types of domain names.

If a domain name has one or two words, then they may be worth more than those with three or more words.

4. The length of the domain name.
Shorter domain names typically sell better than longer domain names.

5. The presence of numbers and hyphens.

Domain names with no hyphens or numbers will be worth more.

6. The industry the domain name will be used in.

7. How much marketing potential the domain may have.

8. If the domain could be valuable to the international market.

9. The entity that would most likely buy the domain name. For example if it is likely that a large company will want to buy the domain name, the value of the domain is based on that fact.

10. Future potential the domain name.

Overall, an appraisal must be honest. An appraisal that is done properly will assist sellers in determining a fair price for the domain name. Depending on the circumstances, the work conducted by an appraiser can also be used as evidence to justify the price to a potential buyer.

Domain Name Appraisers

Finding the right domain name appraiser can be difficult. There are a lot of web sites around that claim to appraise domain names for a fee. More often than not, they dont disclose exactly how they do this, claiming that its a secret science.

In order to bring some transparency to the practice, here are some questions you can ask a domain name appraiser.

Top 5 Questions To Ask A Domain Name Appraiser

1. Do you have a domain name portfolio yourself? If yes, can I see a partial list of domains? If so, why not?

If the appraiser has a domain name portfolio, check the quality of the domain names provided. If there are 100 names and 95% of them are low quality, then this isn’t a good sign.

2. How long have you been in the industry? What did you do beforehand?

3. Are you active on industry forums? eg: dnforum or namepros?

4. Can you provide examples of your work? What names have you appraised? Did they sell? If so, for how much?

If the appraiser says that they can’t discuss the names, because they are under non-disclosure (which could be true), then ask if they can contact three of their clients with a view to gaining permission for you to know about the sale of the domain.

5. Tell me about your negotiating skills.

The idea behind this question is to get an understanding as to how good they are when it comes to bargaining. The appraiser must be skilled in the art of negotiation, specifically in the process of making offers and countering offers.

Appraisal Scams

Domain name appraisal scams are very common in the industry. Here is a typical scenario:

Step 1. A domain name owner receives an unsolicited email asking them about a domain they own. The sender makes it sound like they are interested in buying the domain from them, often for a large amount of money.

Step 2. The domain name owner responds to the email and the sender requires the owner (as a part of the sale process) to submit the domain name to an appraisal service. Of course, the buyer names the appraisal service.

Step 3. The domain name owner submits the name and pays for the appraisal service.

Step 4. The sender disappears, stops responding to email messages, or decides that he/she isn’t interested after all.

What has occurred here is that the alleged buyer, is somehow affiliated with the appraising company. All they wanted you to do is to pay money for an appraisal.

Volume Buying

Volume buying typically involves using a computer program to automatically search for available domains that meet a specific criteria. Domains are then purchased as a result of this search and tested. Of course, domain name registrars have an advantage here as they can taste domain names and return them within the 5-day refund period. As such, it costs them virtually nothing.

The average domainer simply cannot do this without custom developed research tools. Those that you can “buy off the shelf” on Internet web sites are simply not going to work effectively.

As more and more domain investors are using automated volume buying tools, the best domains are taken quickly. However, if you are creative with your keywords and criteria, you could still find a good deal.

What Is An Appraisal

A domain name appraisal is an evaluation of the value of a domain name. This evaluation is an opinion based on factors such as traffic, brand recognition, and marketability. There is no exact science, standard methodology or industry codes of conduct, for domain name appraisal.

Domain name appraisals are often performed by:

•    Dedicated companies
•    Industry experts
•    Domainers (both experienced and inexperienced)

Some charge a fee for providing an appraisal, while others are free.

Alternatives To Appraisal Companies

There are many alternatives to getting your domain name appraised by a dedicated domain name appraisal company. You can:

•    Post your domain name in industry forums and ask for an appraisal.
•    Post your domain in aftermarket sites such as Sedo and Afternic.
•    Use an automated tool such as Estibot.

If you do end up posting in forums, be sure to include as much detail about the domain as possible. The more information you provide, the more accurate the appraisal will be.

Thoughts On Domain Name Appraisals

There are a number of “schools of thought” in relation to domain name appraisals including:

•    Appraisals are a waste of time as they can’t possibly take into consideration all the factors to come up with an accurate figure.

•    A domain name is only worth what “the market” will pay for it.

•    Appraisals are a scam to con newbies (people new to the industry) out of their money and/or their domain name.