Three Reason Why Some Domainers Will Miss The Development Boat

Unless you’ve been living under a rock, in a cave, on Mars, then you know that one of the most-talked about trends in Domaining is the shift from Parking to Development. At DOMAINfest last week there was a lot of discussions about development as many Domainers were looking for a better solution than Parking. In a few seminars speakers talked about how many Domainers are seeing their parking revenues decline year after year.

As you know I’m someone who loves analogies so before I go-into the three reasons why some Domainers will miss the boat…I thought I’d share my own analogy. Real Estate is the closest analog to domain names in the physical world and I like to think of a domain name as land. Many Domainers own upscale land in Beverly Hills and Bel Air…with no house on it. Rather than just let the land sit there they’ve allowed people to squat on their land with camping tents and charged them a small fee. Just in case you missed it the people sleeping in tents on the land represent parking.

You see, the land owner is still making money but having squatters on the land sleeping in tents isn’t doing anything to increase the value of the land. Now in 2005, 2006, and 2007 the tent-dwellers paid decent money and the land-owner was happy with what he/she was making. Fast-forward to 2011 and those tent-dwellers are only willing to pay-out 50% of what they did just a few years ago!

So what do you do to create real long-term value on the land? Build a house! With a house you can generate a significant amount of revenue and dramatically increase the value of your land…of course you can’t build a house for free! This leads me to the top three reasons I think that some Domainers will miss the boat when it comes to development.

  1. Unwilling to pay for development. Some Domainers are more than happy to shell-out $500,000 for a domain but when it comes to development they can’t even spare $5,000. If a domain is worth $500,000 on it’s own imagine what it would be worth if it had 2x the revenue and a steady stream of organic search traffic!
  2. Looking for a solution for every domain. Some Domainers are looking for a solution for every single domain in their portfolio. This just isn’t feasible or realistic, the Parking model isn’t working and you can’t mass develop thousands of domains and expect them to become brands. It’s important to realize that with development you can make more money with one or two domains then you’re probably making with your whole portfolio parked now!
  3. Afraid of change. This is an oldie but a goodie. If you’ve been making your money the same way for the last six years and now your revenue has been cut in half you know you need to change, but it can be scary to make the first move. That being said, if you expected the world to stay the same forever then you were selling yourself a dream. The world changes daily, it’s those businesses that adapt to the changes that succeed.

So now take a look at your portfolio and strategy for making money in 2011. Do you see yourself falling-into the same trap you did in 2010, 2009, etc.? If so it might be time to take one domains (not ten, not ten thousand but one!) and turn it into a real online business where YOU not Google controls your revenue.

{ 22 comments… add one }

  • Leonard Britt February 8, 2011, 12:45 pm

    Yes, an important takeaway is that you cannot develop hundreds or even dozens of domains into real businesses. 90% of traffic is on page one and half of that is from the top few positions while a static minisite just doesn’t stand a chance of ranking in the top slots of Google for a competitive search phrase.

    Reply
  • Kevin Davis February 8, 2011, 1:09 pm

    I am liking Visitor Day and have developed a couple on my own.When is your next Visitor Day video.I enjoy your tutorials,K

    Reply
  • Mike February 8, 2011, 2:21 pm

    Nice article. Another thing to note with development is their isn’t much of a downside outside of your time. If you swing and miss at at an online business, one worst case scenario is placing Adsense on the website, which will bring in more revenue than the parking page prior to developing the domain did anyways. This assumes of course that you’ve kept your development costs low until you’ve proven your business plan on the domain.

    Reply
  • James February 8, 2011, 3:11 pm

    Great points Morgan. I think domainers need to understand that development is building a brand and business, not just building a site, throwing up some adsense, and watching the $$$ role in. That works occasionally, but not often and certainly not in some categories. These 100k category killer domains, in fact even most domains you can pick on the drop for 1-2k are not going to rank the way a 500 exact keyword match domain is with little to no work.

    I’ve good a few good stories to relate to you about development from DOMAINfest next time I see you.

    Enjoy Toronto!

    Reply
  • Will February 8, 2011, 5:24 pm

    Re. your points:
    1. Yes, that seems absurd that someone would pay thousands to buy a domain name but won’t spend 10 percent of the purchase amount on development. I’m sure it has happened hundreds of times.
    2. I’ll be making adjustments to my portfolio based on this truth…I simply cannot monetize every name I own.
    3. “The world changes daily, it’s those businesses that adapt to the changes that succeed.” We see this all around us, in every industry, every day.

    Reply
  • Lazy Domaining February 9, 2011, 2:38 am

    Good post.

    “where YOU not Google controls your revenue” – If you are going to target the organic traffic, then Google still controls…

    Reply
  • Attila February 9, 2011, 4:30 am

    I laughed about living in the cave part…(hence that I sometimes, ok, many times feel like that guy living in the cave)

    Morgan, I think you need add another issue, which is domainers lack the proper education or know how on what to do and how to do it. Developing a site is easy but also difficult if you’re going beyond the basics. First you need the idea, then the direction and then the means to deploy it. If you don’t know how to do this, you can spend a ton of money and waste a lot of time (which time is money, so…).

    I think the biggest concern in the domainers mind is the return of investment. Not everyone is crazy (like me) to spend x amount on something just to see if the business model works or not. I have the mind set of, if it doesn’t work out, at least I learned what I did wrong and do it better next round.

    Reply
  • Jeff Schneider February 9, 2011, 5:22 am

    Hello Morgan,

    We can appreciate the many reasons for Domainers to falsely believe they have no power. The future has always favored the Bold. You can have two mindsets, one being you have a tiger by the tail in accordance to your Domain Business Address, or You Are The Tiger ! We know who we are ! Who are you ? Like we said it is your mindset!

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

    Reply
  • Rob Monster - Epik February 9, 2011, 6:59 am

    Great post. Loved the analogy.

    I think the other significant factor is post domainers lack the patience and discipline to engage in a development. What non-developers generally don’t get is that development is a PROCESS, not an EVENT.

    Once a domainer has attempted to develop on their own, it is much easier to have a thoughtful dialog. Like most things, you can have “FAST, CHEAP or GOOD — pick any two”. Domainers want all three.

    One significant innovation that has helped break the log-jam has been introducing of development partnerships. In this case, the domain owner does not have to pay the setup fee. The development is funded from proceeds from the eventual sale.

    There is no question that development is the future. Creative models will continue to emerge to make it affordable for domain owners to get on board with their development-grade domains.

    Reply
  • Domain 6 Satr Ltd February 9, 2011, 8:03 am

    This is a great and wise post.
    I have not sold yet, even a single domain – who can tell me where is my mistake? … and as long as you learn?

    Martha

    Reply
  • Domain 6 Satr Ltd February 9, 2011, 8:10 am

    Sorry, webste address is wrong. http://www.domain6star.com is ok! πŸ™‚

    Reply
  • Samit February 9, 2011, 10:02 am

    Nice post Morgan, I’ve tried everything from whypark to bodis to smartname to our own in house wordpress based system and came to pretty much the same conclusion – a small core development group of sites (>5) is likely to make much more in absolute terms than 100s of minisites.

    I also agree with what Rob is saying above that its a process, you can’t develop a site and forget about it, exactly the problem with developing 100s of sites.

    There is however a niche that one can explore to ensure that even your worst domain makes at least renewal fees, which then frees you up to upgrade and enlarge your footprint while bootstrapping further development. And this niche makes it possible to be fast, cheap and good, though how good would probably depend on the amount of time per site you or your staff can devote on a regular basis.

    Reply
  • Logan February 9, 2011, 7:46 pm

    @Domain 6 Satr Ltd

    Your mistake is that you have purchased hundreds of domain names that nobody would want to buy – ever.

    What is up with all the “6star” domain names? It is as if you bought all those “6star” domain names because “6star” has some meaning to YOU. That’s great if you think the “6star” phrase is cool or something, but it’s a waste of money because there are not millions of people on this planet craving to own domain names with the phrase “6star” in them. There is no viable market for “6star” domain names. So, nobody is going to buy those “6star” domain names from you.

    First, find out what kinds of domain names people – besides you – want to buy and own. Then buy what people want to buy and sell it to them because they are ready to buy it. It is better to own 5 to 10 great, highly marketable domain names than to own hundreds of domain names that you cannot pay anyone to buy from you. I fear the latter situation is where you are right now.

    Pick your best 10 domain names and ignore the rest – just let them drop. List the 10 best names on Sedo and, at the same time, develop them into sites. They could just be sites that have decent content on them plus a notice that the domain name is for sale. If your best 10 are truly good domain names (err on the side of .com names, by the way), people will find you. You’ll get offers on the names. If nobody makes you any offers after, say, a year or two, well, it turns out even your 10 best names are no good either. Let them drop and start all over again.

    Remember: You make your money when you buy the domain name, not when you sell it. Translation: Buy high quality domain names at bargain prices and then merchandise the domain names to the right buyers who will pay top dollar for them because they are such high quality domain names. “Buy low, sell high”

    Reply
  • Snoopy February 10, 2011, 2:52 pm

    To take the real estate analogy a step further they say, land appreciate, houses depreciate. Personally I don’t think building a house is a way to increase the value of a block of land, the best way is to sit and do nothing, and there is nothing wrong with taking rent on an empty block of land in my view.

    In my view the “building the house” route is only likely to work if you get the house built at below market rates and want to sell it pretty quickly, which is what a lot of developers do (ie they run the build themselves, and they are experts at deevelopment).

    Reply
  • mano February 10, 2011, 4:31 pm

    I’m sorry for you …..6star. Just get Logan’s advise, you’ll fine soon than later

    Reply
  • Dr. Altaf February 10, 2011, 11:15 pm

    @Samit: I did try to build mini sites with WP. At least what I buy after my research could immediatley keep parked there. Will it not raise its valu? How could I develop it there only?

    Reply
  • StatusQ February 11, 2011, 11:20 am

    Your analogy sounds good only in theory:

    To actually develop a successful site is not as easy as it sounds – Since you like analogies, well this is my analogy:

    It’s like saying to a car dealer …. instead of making a couple hundreds on selling a car, why don’t you try to build one to make more profit?!

    Reply
  • Irmgard Secor February 12, 2011, 9:59 am

    some truly prize blog posts on this site, saved to my bookmarks .

    Reply
    • Morgan February 12, 2011, 6:49 pm

      @Thanks Irmagard!

      Reply
  • Sri February 12, 2011, 7:01 pm

    @StatusQ
    Your car analogy is wrong – a car is a “developed” item, not “raw” like a domain name.

    @Morgan
    I would like to add that the reason many domainers with thousands of domains can’t even think of developing is that those thousands of domains are typos or TMs or some fads of their own. The rules of the game have changed and gone stricter. Search engines and browsers have become smarter. Humans have become less dumb. Consequently parking income is down and nothing can be done about such names except let them drop. No need to run these names through your 3-step filter either πŸ˜‰ just drop them.

    Reply
  • StatusQ February 13, 2011, 2:12 pm

    @Sri

    What do you mean a car is a developed item?! Pick a name which isn’t developed yet. I didn’t say rebuild a BMW or Fiat did I?

    Reply
  • outdoor camping equipment June 9, 2011, 9:16 am

    Excellent post and thanks for sharing.

    Reply

Leave a Comment