The core principle of domain investing is taking advantage of market inefficiency. Most end users aren’t aware of the aftermarket and don’t have an interest in going through drop lists and forum posts, so there is an opportunity to buy at wholesale prices and sell at retail prices. But some savvy investors are going a step further and taking advantage of inefficiencies between wholesale venues to turn a profit.
I first took notice of this strategy when I saw a seasoned short domain investor scooping up LLL.com on domain forums and immediately turning around and listing them on NameJet where they would consistently sell for a healthy profit. At the time it was difficult to list domains at NameJet because you needed a large portfolio and connections. You also have to move your domains to eNom, you have to wait for NameJet to fit your domains into their auction schedule, you have to wait for 30 days of pre-release bidding and then for the actual auction.
Thus a domain owner trying to liquidate his domain was happy to sell it on the forums at a lower price than he could achieve on NameJet, and an investor willing to make the effort and wait for a few months to close the sale could reap the rewards. Buyers on NameJet who don’t have a desire to frequent the forums for the occasional gem were happy as well. A great example of taking advantage of inefficiency.
Fast forward a few years and I’m noticing this taking place more and more in different categories of domains and across different venues. I took a look at some recent sales where the holding period was less than 90 days and both sales were at a wholesale venue, the results are in the table below followed by more discussion.
The most popular approach seems to be buying at NameJet or GoDaddy and then turning right around and listing on Flippa, although since forum sales go unreported there is probably a lot of buying on the forums and listing on Flippa that we can’t easily see.
I think the reason this works is that Flippa’s audience is mostly developers and affiliate marketers who don’t want to spend their time on domaining activities, yet they are still willing to pay good prices for domains. So by going through drop lists and bringing the domains over to Flippa you are essentially doing them a service by removing some of the friction, and if you’re careful you can profit from it.
Some types of domains just generally do better at one venue than another. For example, numeric domains generally do better at NameJet than at Flippa, which is why you see the 39011.com buyer nearly doubling his money just by buying at Flippa and turning it around on NameJet.
You’ll also notice that some domains sold twice at the same venue within 90 days and realized much different prices. Maybe you notice a domain at Flippa with a poorly written listing and standard level promotion by a new seller with no following, or maybe the seller didn’t schedule the auction to close on the best day or time. You could buy the domain and then list it again at Flippa but do a better job of promoting it, and even though it is at the same venue you can profit from the spread.
There are a lot of opportunities in the domain space in unexpected places.
Michael Sumner is the CEO of NameBio.com, and is the lead developer at State Ventures which owns and operates geo domains such as OceanCity.com and Maryland.com. Michael is also the co-founder of DN Media, a company that has been involved in seven figures worth of domain name transactions.