By Jeremiah Johnston, COO of SEDO
The domain industry, particularly the buying and selling of domain names, has remained one of few bright spots during the global downturn. Every day, ordinary people and companies are buying, selling and developing Internet properties. In fact, according to Nominet's 2008 Domain Name Industry Report, there are currently almost 174 million domain names worldwide, and growth rates have been consistently increasing over the past 5 years to reach an annual growth rate of 30%. To further underscore the continued growth of the domain industry, Sedo, the leading secondary domain marketplace and monetization provider, recently announced the findings of its annual Secondary Domain Market Study, which revealed trading in valuable online real estate on their international market yielded $77 million in sales in 2008, and resulted in an overall eight percent increase over the 2007 total of $72 million.
Now more than ever, entrepreneurs and small business owners can feel confident that online property will naturally increase in value over time. Generic or descriptive domains are particularly attractive because of their enduring, evergreen quality and the tremendous amount of traffic they drive. Toys.com, for instance, was recently acquired by Toys R Us. Another excellent example is the domain, Fly.com, which was recently purchased by the popular travel website, TravelZoo.com.
Similar to traditional real estate, if you invest in the right virtual property, and hold onto it for a while, you will likely see a solid ROI. However, by developing a lackluster website into a money making portal, entrepreneurs will not only be making a profit, but they'll be making a business. They can put equity and worth into a ramshackle website, and in turn, 'flip' it for profit some time down the road.
Following are tips to ensure success when flipping a website.
Tips for Website Flips:
Tip #1: Find a site that suits you and your long term goals. Forums, blogs and content sites are easy to evaluate. Since visitors are visible, gauging interest and site loyalty can be done without having to do any extensive research. Also, sites that offer products or direct services tend to be profitable, since you aren't solely relying on advertisers for your ROI.
Tip #2: Add value to the property. Once you find the website that suits your business goals, determine what you can do within your budget to improve the website and add value to the real estate. From holding on to existing visitors to attracting new people, you need to define your new website's identity.
Tip #3: Keep track of the current market for the website category in which you decided to invest. For example, if you started an online golf shop, keep on top of who your competitors are, what the condition of the golf industry looks like, and what the forecast is for the potential market growth.
Tip #4: Stay invested from beginning to end. Unlike a piece of land that you flip, you can't just make renovations and move on; websites need constant updating on a regular basis. A website is only valuable when it stays ahead of trends and is consistently relevant to its visitors.
Tip #5: Pay attention to the domain industry. If you are looking to sell your domain, then make sure you have the statistics to back up your asking price. A domain broker is a great way to determine the current market value for your website.
Tip #6: Think generic. As an investor, buying generic domains that redirect to your website is a great way to get more traffic without having to develop more websites or sink money into search advertising.
Following these best practices will help to ensure your success in creating a profitable business by buying premium domains, developing and branding them as attractive websites, and then flipping them for a significant return on your investment.
About the Author: Jeremiah Johnston is Chief Operating Officer of the online domain name and website marketplace, Sedo. Johnston oversees a variety of responsibilities for Sedo including marketing, legal and strategy. He represents Sedo as a founding member of the Internet Commerce Association (ICA) and sits on the Board of Directors in the role of association President, helping to shape the future of domain names in the political space.