A Guide to Domain Flipping

Whether you just want to buy a single domain name for yourself, or if you're interested in building an online business with a portfolio of domains, it's worth knowing something about why people buy domains beyond the obvious reason of building a Web site.

To a degree, anyone who purchases a domain has the potential for becoming a domainer. If done right and with dedication as with any online business, domaining can be lucrative. You can start with a relative minimum of capital (compared to buying an established online business), then leverage profits in a manner similar to stock market traders and real estate investor/ developers. Some domaining superstars have built multi-million dollar empires by leveraging basic techniques.

On the other hand, if you want to make your foray into domaining simply by purchasing one or two domains, this guide can still get you started and comfortable. It does not cover topics like escrow, and only touches lightly on assessing the price of a domain (for buying or selling) because of how many parameters are involved. Instead, consider joining one of the free forums listed in the Other Domaining Resources section and study their posts on the topics you want to learn more about.

There are a number of strategies by which domaining can be highly profitable. Superstars like Kevin Ham, Yun Ye, Rick Schwartz, Garry Chernoff, Frank Schilling, Craig Lovik, Michael Mann and others have built domain empires, with Ham's portfolio valued at about $300M around 2007. Yun Ye sold a portfolio of 100,000 domains for $164M in 2004. People like Mann profit from registering (new) domains or buying them in volume -- one article claims Mann makes $400,000/month. (Mann also purchased nearly 15,000 domains in a single day in April 2012.)

A lucky few domainers have managed to sell single domains for 7-8 figures -- the highest to date being $35M for VacationRentals.com in 2007, and the second highest at $13M for sex.com in 2010. Sometimes domain age plays a role, other times its the keywords that make up the SLD (Second Level Domain) name that warrants the premium. Fortunately, you do not need hundred-million dollar portfolios to have a viable domaining business.

Whether you plan to buy a single domain or many, there are a few acronyms and terms worth knowing before continuing through this guide. Some are covered in this list; some in other sections. (Note: these lists are not comprehensive.)

Acronyms:

DNS - Domain Name Server. This is a Web service that acts as a lookup for domain names. Every domain name corresponds to an IP address (see below). When someone tries to view a domain name in a Web browser, the domain is converted to its IP address invisibly.
IANA - Internet Assigned Numbers Authority.
ICANN - Internet Corporation for Assigned Names and Numbers.
IDN - Internationalized Domain Names. These are special TLDs that use non-Latin characters.
IP Address - Internet Protocol addresses are a structured string of digit groupings separated by periods -- such as "192.168.1.20".
SLD - Second-Level Domain name. In "google.com," the SLD is "google".
TLD - Top-Level Domain name. In "google.com," the TLD is "com". There are also gTLDs (generic TLDs) and ccTLDs (country-code TLDs), which are covered by some of the reference pages linked to here in other sections.

Terms:

Domain hosting plan - A web service (usually paid, sometimes free) that most domain registrars and all Internet hosts provide. If you plan to either publish Web site content for a domain or set up your own parked page, you will need a hosting plan.
Domain registration - Setting up a domain name that does not exist yet requires registering it with a domain registrar. So does taking over the registration of a domain you buy. In either case, registration establishes you in the public record as the owner of the domain.
Parked page - If you do not plan to publish Web site content to a particular domain, you can either allow your domain registrar to "park" the domain (they get all the ad revenue) or you can create your own parked page through an affiliate partnership with an ad network (you get some ad revenue). In the first option, there is no hosting plan necessary -- which is ideal if you intended to flip a domain quickly. In the second option, you might need a hosting plan, depending on the ad network's requirements, or they might offer that as part of the affiliate partnership.
Subdomain - virtual domains used to partition an SLD. For example, the "mail" in mail.google.com is a subdomain of domain google.com.

It's an understatement to say that there are a lot of domain names registered - over 276M as of the end of Q1 2014 (end of March). At the the heart of those domain are the 750 active TLDs (as of Oct 2014). However, the .com TLD is still the most popular by a longshot, with over 115M domains as of Q1 2014. Second place goes to .net, which is barely better than 1/8th the size of .com's roster. These figures are of course changing frequently, although you get a sense of the virtual real estate, so to speak, of domains. Understanding what is available and what is popular helps in making better decisions about what domains to register, what to buy. (Note: there are links below to several stats page that while not exactly identical in numbers are close enough, given the way such details are collected. Each site has its value in getting to understand domain real estate.)

Domaintools Domain Count Statistics.
Statdns TLD Zone File Statistics.
Statdns list of ccTLDs.
RegistrarStats TLD Domain Counts.
Verisign Domain Name Industry Brief. Also see Apr 2014 Brief for more domain-related statistics.
IANA Root Zone Database.
IANA alphabetical TLD list text file.

There are many dozens of Web, desktop and mobile applications that you could use in domaining. Though for getting started, just a few types of apps suffice: word trend checkers, automated alerts, name generators, domain checkers. This is a good starting toolkit for domaining, which you can build upon depending on what your objectives are in the future.

Google Alerts. The Alerts tool lets you receive email messages of Web pages recently indexed by Google Search which contain a keyword or phrase that you've specified. This is useful when you are speculating on keywords and want to monitor their popularity on news sites, blogs and so on.
Google Trends. Trends gives you a nice chart whereby you can compare different the online popularity of multiple words or phrases over time, as per Google Search engine. For example, if a keyword you're interested in for domain names has tapered off in popularity, you can see this and stay clear.
Domainr. This is a handy Web tool to quickly determine which TLDs for a given domain name prefix (SLD) are available. Also lets you easily see Whois info for a domain and find a domain registrar.
Domain search tools - Check with your domain registrar; most have at least rudimentary domain search tools on their Web site that will suggest alternate domain names if one you search for is unavailable.
Dot-o-mator. This is probably more for amusement than serious domaining. However, if you are having trouble coming up with a business name (and thus a domain name) , Dot-o-mator might help. Each suggestion links to Namecheap's domain checker tool (Web app), so you can quickly see if a domain is available.
Google Spreadsheet. If you buy just one or two domains, you probably don't need Google Spreadsheet. But if you get bitten by the domaining bug and want to buy more, it's worth keeping track of all info for each domain in a spreadsheet.

Later, if you plan on getting very serious with power domaining, you might want to look into tools that can do automated domain registrations, or which can monitor lists of "dropped" domains, etc.

There are far too many domaining tips and techniques to cover them all. The following selection addresses some of the basic concepts, and the links are to articles with even more information.

Stick to the .com TLD when you're starting out. There are 750 active TLDs at time of writing, but the majority of domain names are registered on the .com TLD. A distant second is the .net TLD.
Avoid domains with brand names and registered trademarks entirely. If you're not sure, research before spending.
Typosquatting -- The exception to brand names is typosquatting, where domainers register names that are spelled incorrectly. However, there is still risk involved. The best typo domains are for regular, non-brand/ trademark words. Typosquatting is one of the key techniques that Kevin Ham used to build his $300M domain empire.
Use full words in domain names, and avoid dashes and numbers unless it suits your requirements. If you expect word-of-mouth promotion, keep in mind that people forget to mention the punctuation of a domain name -- which means they'll end up going to the wrong site. If you do register a domain name with hyphens, try to purchase the equivalent name without the hyphens as well.
Renew domains or registrar for long blocks (5yrs, 10yrs). Some search engines have been known to attribute higher rankings to Web sites on not only older domains but newer domains with long registration periods.
Make sure the credit card on record with your domain registrar doesn't expire.
If you plan to sell a domain, make whois info available. If you need to protect ownership info, make whois info private. (Most registrars charge a fee for this but might waive it for new registrations.)
Arbitrage as it applies to domaining is merely to conduct a domain's purchase and sale with little to no net profit, but to make it a profit while holding the domain. This is often done by purchasing a domain with content and established ad or other revenue, even if small, and then selling after a time at about the price for which it was purchased.
Domain tasting is a technique to take advantage of a registration grace period for new a domain whereby you have a few days to hold it, after which you can drop it without having had to pay. However, during the hold period, smart domainers set up a parked page with an ad network that specializes in this, and try to profit.
Be cautious about domain flipping courses. Research well before spending part of your domaining budget. Much of what you need to learn can actually be found online for free, or for a nominal subscription at a good domaining forum.

Read more about these and other tips:

It's an unfortunate fact but not all domain registrars operate on policies that put the customer first. They're in it for the business, and for various reasons, some may at some point in time (or even regularly) do things that at the least make you scratch your head as a domainer. In the worst case, it might cost you money if you pick the wrong registrar(s). To avoid this, you could set up your own domain registrar, but you would probably need about $1-2M upfront, including application fees, working budget, marketing, staff, etc. Failing that, at least be aware of a few things about registrars.

Transferring domains between registrars can cost you. The registrar you're trying to leaving can also make the process difficult.
Some registrars cheat you on long-term domain renewals.
Privacy of your ownership details usually costs a fee. (If you're planning to sell, it's best not to conceal your contact info.)
By allowing your domains to be parked, you're helping the domain registrar make ad revenue. Set up your own through an ad network, or create a real landing page with advertising.

Domain registrars are generally global in operation (unless of course they've decided to limit the geographical range of their customers). However, if you prefer a registrar in your own country, ICANN has a table of accredited registrars, the country of operations, when they signed the RAA (Registrar Accreditation Agreement) and which TLDs they deal in (which might be out of date, given all the new gTLDs release in 2014). The ICANN list is sorted by registrar name. Internic has a similar accredited registrars directory which is sorted first by country of operations and then by registrar name.

There are dozens of sites online where you can buy domains, besides fresh new ones from hundreds of domain registrars. There are specialized domain marketplaces that focus around domain buying and selling -- often offering tips to new domainers in terms of best practices. A selection of domain marketplaces are as follows:

Note: this is not an endorsement of any marketplace, only a reference list. It's important to study any marketplace you plan to use, get acquainted with its policies, types of inventory (just domains, domains with content Web sites, online businesses, etc.)

Success in domaining boils down to how sophisticated you learn to be in speculating on new domains, purchasing existing domains, finding the right marketplace and more. It's not possible to cover everything here, so if you are serious about domaining, please check out some of the forums listed in the Other Domaining Resources section. Here is a very light introduction to this very complex aspect of domaining.

You can buy pretty much anything, within reason, on eBay. Domains and Web sites are no different, and sometimes there are bargains because sellers may not be as sophisticated domainers as on domain marketplaces. The flipside is that buyers may not be as sophisticated as well, though that could be to your advantage for lesser-value you domains that you want to sell.
A very basic rule of thumb for a domain name that has either a parked page or a Web site (with content) earning revenue, the simplest pricing model is 12 to 24 months of gross revenue. So if you have a domain earning $100/month in whatever manner, and established for several months (with proof that you can share with a prospective buyer), you might put the domain up for sale for $1200-2400. That does not mean you cannot try to sell for less or for more; it's not a hard and fast rule.
Factor in all costs for your sale price. If you have or plan to hold a domain for a number of years, you'll need to pay registration each year.
For domains you are selling under $10K each, state your price on the landing page, to make it easy on prospective buyers to decided upfront whether they are interested or not.
Instead of dropping an old domain you do not want anymore, consider selling it at dnforum.com to recoup some of your costs.

Ultimately, a domain is only worth as much as someone is willing to pay for it. You can ignore the 12-24 months of revenue rule, and someone might pay whatever you are asking because they want that domain and can afford it. That's likely why Facebook, the social network, paid $8.5 million for fb.com in Sep 2010.

If you're serious about domaining, beyond buying a domain with your name in it, or a casual interest, it's worth keeping tabs on some of the online tools and domaining forums out there. Here are a few to get you started, listed in alphabetical order by SLD (Second Level Domain) name. Take note of TheDomains.com, edited by Michael Berkens, co-founder of Worldwide Media Inc. (75,000 domains) and Director of RightoftheDot.com, which consults on gTLDs (generic TLDs). Note: Some of the forum sites may require registration (usually free) for access to content. A good discussion on a forum can often teach you more about a topic than even a handful of detailed articles.

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