This post has been a long time coming, what I say in this post might scare you a bit, but hopefully in the end it will motivate you, and at the very least get you to see things a bit differently. I can already predict that this post will be controversial, that is a wonderful thing, as always I appreciate both sides of the equation so if you have something to say please share your opinion!
I have also decided to split this post into two segments as it was getting a bit too long for one post. In this first part I will be covering one of the main “gotchas” about buying expired domains. In the second part I will focus more on
Most new Domain Investors get started in the industry by hand registering domains. They go through the same painful process that many of us went through in the beginning which usually goes a little something like this. You find out that people are buying and selling domains for big money, you immediately start hand registering domains thinking, “If just one of these sells for big bucks I’m in good shape.” Then as time goes by and you can’t seem to sell a single name you start to wonder what’s going on.
That’s when it hits most investors, the portfolio of gold they thought they had, is really just a collection of domains that sound good to them. At this point they usually take one of two actions – they quit and assume that there are no opportunities left, or they take a different approach. More often than not, the pivot they make moves them into the world of expired domains.
When you first find out about expired domains it can be easy to fall-into the same trap that you did with hand registered domains. You think this is where all the opportunities are so you start buying as many expired domains as you can thinking this time you’ve figured it out. You find yourself sorting expired auctions by “# of bidders” and getting in on all the “hot” auctions.
While there are some great domains and amazing deals to be had in the expired domain space, they might not be quite as easy to find as you’re expecting. You see, what’s happening is that you are now moving into a very emotional game, a bit like gambling, you can easily feel like if you don’t get a particular name that you’re missing out on an incredible opportunity, and this is where the “auction mentality” comes in.
The first thing to know about auctions is that just because a domain is sold in an auction doesn’t mean it is sold for a wholesale price. In fact many expired domains sell for far more than you could most likely flip them for. However, given the excitement of the auction people get caught-up in the hype and often fail to focus on the fundamentals, a very dangerous thought starts to enter people’s head – “if so many people want it, then it will be easy to find a buyer.”
It is this kind of thinking that can leave you with the same mediocre portfolio you had when you were hand-registering domains, albeit at a higher price point now. You see, the challenge with an auction is you never know who you are bidding against, which means it only takes one new Domainer who doesn’t know much about the market to drive the price of a domain unrealistically high. Then, other new investors can see this and mistake it for a valuable name, rather than a name that is being driven up by an investor that cares more about winning the auction, than getting the name for the right price.
Of course this is not to say there aren’t some amazing deals in expired domain auctions. Some of my best flips have come from expired domain auctions but my bidding was based on real market data rather than bidding activity.
This is the “gotcha” that I spoke about in the beginning of the post and something that I think many new investors miss. Just because a domain has a lot of bidders does not mean any of these bidders have done their homework and are making a good investment. I’ll end part one with this, “A domain is not valuable to you if it has a lot of bidders and sells for a high price. A domain is valuable to you can sell it for more than you paid.”
But wait there’s more! I wrote this as one post but it got too darn long to publish as a single post (over 1,500 words!) so please stay-tuned, part two is up tomorrow. Of course I still want to hear what you think so feel free to comment and share your opinion on what I’ve covered so far!