Choosing Domain Names – for the beginning domainer (Part 2)

ALast time we took a look at some general things to consider when choosing a domain name, along with some specifics for anyone trying to pick a new name for a business website. In part 2, we look at some additional considerations for the beginning domain investor aka “domainer”.

Despite the headline sales, domaining is not a route to easy money. For every 6-figure sale, there are thousands of domains that are dropped, never having earne a penny for the registrant. Like any other investment, managing a portfolio of domains requires common sense, planning and discipline. A crystal ball and a good understanding of marketing wouldn’t hurt either!

The Basics, reviewed

In choosing names as investments, the basic principles still apply: Shorter names with fewer words are usually better. Typos, misspells, incorrect grammar or word order, hyphens, numbers (especially embedded numbers) all decrease value. The name should match ( or at least not clash with) the extension, and you should avoid names which contain the names of companies, celebrities and brands (unless they’re yours).

For the investor, domain renewal fees become crucial in managing your portfolio. Unless you want to lose money on this venture, your goal should be to have your domain portfolio at least pay for itself (and preferably earn a profit) – much easier to do when your average annual renewal fees are around $7.50 apiece than if they are $35 or more! Not only is a portfolio consisting primarily of .com’s, .net’s and .orgs more saleable, but from a financial standpoint the names stand a better chance of being assets vs liabilities.

Here are some other things for a domainer to consider before adding those names to your shopping cart:

The Competitive Landscape

These items give you an idea as to the amount and quality of competition your name will have as a parked page OR a developed site:

• How much competition exists for the term and the topic in general? The number of Google search results indicates popularity but don’t forget: it also indicates the amount of competition.
• How good (i.e. effective) is the competition? How focused ? – Are your competitors SEO savvy? Are the results focused on one area or a diverse range of topics?
• If the domain is not a .com, what is the status of the .com and other 2nd tier extensions? – Is it a developed site or sitting idle? If it is parked, is it effectively parked or does it suffer from poor or irrelevant keywords and landing page?
• If the domain is hyphenated, what’s the status of the un-hyphenated version? (Same as above).
  

The Advertising Landscape

These items help predict the revenue potential of the name:

• How many advertisers are there for this term (and closely related words and phrases)? Advertising dollars = end user interest.
• What are the PPC bid prices? This indicates the value of the term to the advertisers.
• How focused is the term? Are the ads for one particular thing or a broader variety of items? If the ads are varied it becomes harder to target your visitors

A lot of advertisers and/or high bid prices bodes well for revenue. If there are few/no advertisers or if the term lacks focus (the keyword brings up ads for a variety of goods and services) expect to have a more difficult time finding effective parking keywords for your domain.

Development Potential

Since I develop a lot of my domains, I classify all new acquisitions into one of 3 categories:

• I am going to develop this domain (it may not be my top priority, but the intent is there)
• I could develop this domain (it’s a topic I feel I could develop successfully)
• I will never develop this domain

I won’t bore you with all the details about how I make those decisions, but my criteria include the commercial and competitive potential of the market and the anticipated development costs, including time spent on development and maintenance. Never forget that time spent is a real cost!

Parking potential

Parking is a great source of passive domain income and a good way to fund your renewals. However, unless you have solid, diversified type-in traffic it isn’t something to rely on. Changing search engine policies and algorithms along with fluctuations in bids can send your parked income on some wild roller-coaster rides! Don’t just diversify your names, diversify your income sources as well.

Here are some ways to gauge a domain’s parking potential:

• Advertising – bid prices and # of advertisers
• Can I get relevant links for this phrase? – No matter how much traffic you have, it doesn’t mean a thing unless someone clicks on the ads. Your ads must match what visitors are seeking.
• Search frequency – not to be confused with search results, though the latter will give you some idea if/how the phrase is used.

Here’s a tip: When evaluating search frequency and advertisers on a multi-word keyphrase, look at phrase and exact match numbers, not just broad searches. Phrase matches show usage of the phrase in that particular word order, exact matches show searches for only the given phrase (i.e. no addditional words). Broad match results (searches that include those words in any order, with or without accompanying words) can be misleading.

• Long term revenue vs “one-hit wonder” – News events or fads tend to yield only short-term income.
• If not a .com, what’s the status of the .com and other 2nd tier extensions? A blank page or poorly-parked site on the .com improves your chances of getting traffic on a different extension.
• If hyphenated, what’s the status of the un-hyphenated version? Blank pages, garbage sites or irrelevant parking pages or links on the unhyphenated variation are helpful.

Reselling potential (end user)

• Is the name spelled properly? Is it gramatically correct? – A business is not going to use a name with poor spelling or grammar for their primary domain. However, if the name gets natural traffic, it could be purchased to redirect to a primary domain.
• Is is appropriate for the extension?
• Advertising (see above) – If someone’s bidding $20/click for a particular phrase, it might make sense for them long term to purchase a name which gets type-in traffic for that same term.
• Real potential to bring leads to a business – Aside from advertising, is it a perfectly generic description of some particular business? Does it get traffic? Revenue?
• Extremely popular phrase? Popular phrases (i.e. “Happy Birthday”) are memorable and often have wide appeal.

It’s possible that someone will come along who just HAS to have some name not fitting any of these criteria for whatever reason and are prepared to pay big for it. The odds of that happening are like winning a lottery. You may be thinking “well, what about those 3-4 word names I see companies use to promote a product or give out information?” Sorry, but unless it’s a KILLER name, that’s not how it works. I’ve seen marketing departments of companies who can well afford a 3-5 figure .com go with a .info or other variation of their first choice because it was available for reg. fees!

Reselling potential (to other domainers)

Fellow domainers will be your pickiest customers. However, some names may be of more interest to a domainer than an end user:

• Is it a hot “collectible” name? (i.e. 3 letter names, 4 letter .com’s – whatever is the trend du-jour)
• Names with traffic and revenue – Be prepared to prove it!

Additionally good names in “hot” extensions and shorter names with fewer words are likely to be of interest to other domainers.