Invest in what you know and do your own research

Wise words about domain investing.

A new investor asked me to comment on a .cn domain he registered recently. He likes the domain because it is a “one-word” name. He had not done any research before making the acquisition decision.

Since I am the worst domain appraiser in the world, I can’t comment on the value of his domain. However, as someone who checks more than 10,000 domains everyday in order to pick one or two or three domains, I have developed some basic investing rules that I can share with you.

The first rule is to invest in what you know. For example, since I don’t understand German, I won’t invest in German names or the .de extension. In the case of the new investor, he is American with no Japanese knowledge, but the name of the .cn domain he acquired is actually a Japanese term. With no understanding of Japanese and Chinese, it is very difficult to assess the commercial potential of the domain in China.

If you invest in the extension of a foreign country, be cautious. The government of that country may change the rule suddenly. In 2010, for example, the Chinese government started requiring owners of .cn domains to submit their identification information such as photo and ID. Many western investors let go of their .cn domains as a result.

The second rule is to do your own research. The days of acquiring obvious gems such as Diamond.com and CreditCard.com were gone a long time ago. These days, many domains require research to uncover their potential. At least, that’s what I do every day. I use tools such as Namebio, dotDB, and Google to help me assess domains. For the China market, you can also try “Three steps to Chinese end user research“.

Once again, let me repeat. Invest in what you know and do your own research.