This first-hand account underscores the opportunities and challenges of domain name investing.
I was scrolling through Twitter on my mobile phone on the July 4 holiday when I came across a chart showing a .NYC investor’s domain sales. I didn’t see that it was attached to an article and questioned how much investment it took to get the sales.
This weekend I had time to go back and read the article, and I highly recommend every domain investor to read it. Not just new TLD investors. All domain investors.
Why?
First, it’s a rational discussion of a domain investor’s sales. No hatred, no assumptions, and lots of humility.
Second, it provides unprecedented transparency of the investor’s results. Lots of times we see tweets about big sales and high returns on individual domains, but they are outliers. This post gets into the nitty gritty including how much the investor, Matt Gill, has spent amassing his domain portfolio. While making sales is great, we all have carrying costs and replenishment costs to consider.
Third, it’s a good picture of the challenges of domain investing. The comments are pretty good, too, pointing out the cost of your time researching and buying domains. Matt has had to work hard to select and sell his domains.
I’m not going to give away everything that’s in the article because Matt deserves to have you read it yourself.
Josh says
Good read and he did a good job of laying it out. In saying that I would tend to agree with Snoopy, you have to value your time. Now in saying that for some they just do not have anything else going on where that matters but in that case, find something 🙂
Tony says
To almost break even in the .nyc space is remarkable. I would imagine 99% of tld investors lose money. He was smart to pick a tld with a potential end user pool that has deep pockets.
Matt says
Thanks for taking the time to read it all Andrew. I put a lot in there. It has been hard work and naturally sometimes I reflect and think has it been worth it and am I in a better place now, than 4 years ago?
I think it’s important for any domainer to keep data, look at it and think about it, act on it. The sales data includes the amount paid/sold and dates. Registration trends across a TLD, and details on how a portfolio is scaling all important.
I am such a risk averse person but my particular niche (.NYC) is such a great domainspace, that it’s difficult to stop buying when I see great names. Either never registered or fresh drops. The competition for drops doesn’t exist, so this is another fun part of new-TLD (especially in my case a geo-TLD) investing. I’d only consider really great names that have dropped. Impossible with .com.
My biggest dilemma is with acquiring so many names that I think are great, is how to manage cash flow and covering renewals and cost of new registrations. This really boils down to:
(1) Do I sell those few domains that I have offers of $1k each ( I paid $20 for them but I *know* they’ll sell for $2-3k withing 3 more years) or
(2) Do I dip into untouchable savings, put the purchases/renewals on a credit card/loan?
So far I’ve just tried to get the best price and cycle the profits back into renewals/purchases, but I’ve been reluctant to go for #1 because it leaves so much money on the table and paying a few % for the debt may be mathematically a better move.
Option #2 then forces consideration of where can I get the cheapest credit (intro offer/balance transfer) and what timeframe do I expect to carry debt?
There have been a few names that I have sold too cheaply, but still at a great return. I did this to balance my risk (even though mathematically I think I should have just held the names and added all renewals to debt). Who knows?!
Anyways thanks for covering this and providing an outlet for my thoughts… friends and family aren’t interested in this stuff 🙂
Snoopy says
Debt and domains don’t mix very well in my view.
It you are bootstrapping (using sales to pay renewals) then it is very clear if something is profitable or not. Using debt encourages overpaying and putting off genuine profitability into the future. Get the initial investment paid off as quickly as you can I’d say, even if means selling domains at prices that seem too low.
Matt says
Yep, I’m constantly balancing this. The initial investment (landrush auctions) was paid off but the premiums I bought will not reach their full value for two more years I believe – it isn’t a good move to sell those for 2-3x when I think they’ll go for 5-10x on the $265 paid in 2 more years (just $20 x 2 in additional renewals).
Although I have sold some a little cheaper to manage risk, the reason why I don’t mind the debt is that this is a business and not a hobby. It’s also an investment that any debt I have is costing me close to 0% while the returns are much more. I could have been less bullish (or even more).
In my case with .NYC domains and the portfolio I have, there is no question in my mind about whether this is profitable. As mentioned, sales, returns, several offers each week, starting to do quick flips. Even if I factor in the cost of time at $50k I value the remaining domains in the portfolio at multiples of that.
One other factor is that there were auctions and premium releases… Most we’re paid by new sales, but if it was temporary debt, I didn’t mind. I’d prefer not to miss out on a calculated opportunity.
I used to bootstrap more as you mentioned, but it’s slow and bootstrapping relies on the resources you have to make your initial investment.