The Hidden Cost Behind Domain Name Portfolios
February 16, 4 Comments - Author: Simon JohnsonA few weeks ago I received an email from someone who had a large portfolio of domain names for sale. This isn’t unusual, but what can be frustrating is seeing the same mistakes and unrealistic expectations, over and over again.
Consequently, I thought there are some interesting lessons for newcomers to the domaining industry, so I thought I’d share them. For confidentiality reasons I’m not going to reveal any information that could identify the seller or their domains. I have also “rounded out” the numbers below:
Parking Revenue: US$3993 per month
Price: 20 months parking revenue
The knee-jerk reaction for many people will be “$4k a month of parking revenue” is pretty good. From my perspective, it was “What’s the COST to me to keep this portfolio going?” After reviewing the documentation, I saw there were 3,300 domains. Of course, what was omitted from the documents was the COST to renew these domains. I know from experience, it costs about $17 per year for EACH of these domain names (they are ccTLDs). So you do the math…
Registration Fees: $56,200 per year
Parking Income: $47,916 per year
LOSS: -$8,284
Doesn’t look so good anymore does it? Now that is assuming that you are buying the portfolio for parking (not development or splitting it up for domain sales etc..).
The reason I’m pointing this out, is that there are many domains for sale at the moment and many newcomers (both investors and bloggers) to the industry.
If you are just starting out, domain investing can be time consuming and hard work. Don’t fall into the trap of buying up big straight away, you will almost certainly lose your $$$.
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Facebook comments:
Can the portfolio be trimmed to get it profitable? Usually it is 20% of the names generating 80% of the revenue.
I am still trying to get my head around $4K per month PPC. I’ve got 600 names and I am lucky if I see $40 (forty dollars) per month.
From the stats I think its a case of a lot of domains getting a little bit of traffic. .50 cents a click here… $1 there… that sort of thing. Its the opposite of the usual 80/20 rule that Snoopy was referring to (which is usually the case).
I think it is important to mention that the revenue of 4k per month is only from parking. There are inevitably going to be some domain name sales which are going to lend greatly to the value of the domain portfolio.