ACQUISITION

Registration is only the beginning.

The system of assigned names and numbers is managed by ICANN which makes it possible for people to find the information they are looking for on the Internet. For someone to find your website, they need to enter your IP address or domain name into the address bar of their browser. Your domain is your address and as we all know, some are better than others.

Domain Name Selection

The most overlooked difference between traditional and modern technological business is the importance of an IP address versus a physical address. Many companies operating without a successful web presence are finding it increasingly more difficult to compete. In many cases, depending on the business model, a physical location is not even necessary.

It is important to think of your domain name as you would a commercial property, where the best location creates a competitive advantage. This is why, what seems a simple first step can easily make or break the entire process of creating a great business. This section will provide you with the information you need to mine, acquire and manage your domain portfolio.

The information here is intended for those creating their first commercial website and domain investors with the desire to acquire a professional and profitable domain portfolio. Much of the advice in this section may not apply to you if your creating a non commercial website. If this is your intention you may prefer to skip to the Development section of the website.

Most people believe that all the good domains are already taken and the only way to get one is to pay for it. This is true, but what they do not understand is that with patience and hard work you can still find many great domains at a fair price using effective domain mining strategies. It is an investment that will pay for itself many times over. The value of domains is easily one of the most misunderstood investment opportunities of our time. Many property investors of the last one hundred years have sold extremely valuable land for a fraction of its true worth.

Keyword Research

Choosing your domain name is difficult due to the level of it's importance and the lack of premium domains available. Ultimately, you will need to find a domain containing a popular keyword which is broad enough to represent your business. The keywords you choose should be based on the comprehensive research of many factors relating to your business and it's trends, as well as, your customers and their habits.

Take the time to learn all you can about the product, service, market or industry you are focused on. Understanding the segments, trends as well as any advancements in technology will give you insight into where that market is headed. Beyond that, the most important factor in your research will be that which focuses on your customer. Knowing the product will only get you so far, without listening to your customer, your business will never reach its true potential. Your target customer will tell you everything you need to know about choosing your domain.

Domain Value

The industry standard used to value a domain is very complex and often lacks transparency. The following factors are the most common considered for professional domain appraisals.

Domain Extension

This relates to a domains top level domain (e.g. - .com, .ca, .info); therefore, the TLD or domain extension for www.DomainDevelopment.ca is the (.ca) portion of our IP address. This is a country code TLD (ccTLD), and every country has their own. Canada’s Internet registration authority is CIRA and they are responsible for managing the (.ca) domain space.

Currently (.com) is considered the most valuable TLD. Many believe that regardless of your geographic location or business model, a commercial website must have the (.com) extension. This is debatable, and we will not argue this point, other than to say that an intelligent investor should never follow the herd. The price of domain sale transactions over time will certainly settle this argument. We will suggest, however, that four figures invested in a good (.ca), makes more sense than five figures wasted on a questionable (.com).

Do not get wrapped up in this issue, what is important here is the value of the whole domain name. The TLD is only one of many factors which affects the value. Again, focus on your target market and they will tell you which extension is appropriate. Often consumers from Canada and other countries around the world will not make a purchase online unless the website has the proper ccTLD, while others from the same area feel more comfortable using (.com) websites. Keep in mind, that habits change over time and what works today may not work tomorrow, so try to meet the needs of your current consumer while preparing for the future.

Length

The retention of a domain is greatly affected by its length. Our ability to memorize information is limited and must be considered when choosing a domain. The whole reason that we use a mnemonic device system is because it is easier to remember a familiar string of letters than it is to remember large numbers. Consequently, the longer the word or phrase, the harder it will be for your customer to memorize.

While length is important, it should be said that the human mind is able to memorize personal and meaningful information much more easily than arbitrary sequences. In some cases, common expressions of a longer variety are easier to recall than short single words, so occasionally choosing memorability over length is prudent.

Ultimately, three and four character domains will continue to hold their value due to the limited number available.

Linguistics

The top three languages used on the Internet are English, Chinese and Spanish. Meaningful single word domains in these three languages are the most valuable with English being far superior to all others, at this time. Much like the limited number of three and four character domains, single English word domains are also rare. Every valuable commodity ever traded by man shares one common factor - scarcity and likely (for better or worse) always will.

It is next to impossible to find any English words still unregistered in the (.com) TLD and if it is, it is generally quite long and includes a prefix, a suffix or both. If there are any factors worth paying extra for, this is undoubtedly one of them. The message a single English word domain sends is unmistakable and provides a level of integrity and leadership other domains cannot.

Type Sensitivity

Ideally, your domain should be easy to spell, especially today when most of us rely on software to correct our spelling for us. This will also limit the number of available domains and is another reason for an increase in value. It is true however, that if your target market is well educated then this is less of an issue otherwise. Of course, resale value will be affected regardless.

Legal Risk

One of the most common mistakes domain investors made in the past and probably the most expensive is registering domains that infringe on a trademark. It is becoming less prevalent lately because of the number of high profile law suits over the past five years. Regardless, be sure to investigate any possible legal issues before registration. Generally, it only requires common sense to know whether there is a possibility of trademark dispute.

Generic or descriptive type domains are less susceptible to legal issues due to trademark restrictions being more lenient. Avoid unique terms unless you have done your due diligence.

Region

The inherent advantage of the Internet is that it is truly global in its nature. This makes domains which are appropriate for international use more valuable than those which are not.

There are two factors which influence the appropriate region of a domain. The first is obviously language and while this is fairly self explanatory, we feel it necessary to point out that not all international business is done in English as most North American’s assume it is. Therefore, one should choose the language which is most predominant in the locations intended for use.

The other influence to consider is the TLD or domain extension. This is less important as there are no restrictions preventing international usage for all existing TLD’s, which means that the owner of any domain with any extension may conduct activity internationally, as long as, local trade laws are adhered to. Although there are no international restrictions, it is important to remember that registration is restricted for many TLD’s (e.g. - .gov, .mil, .edu) and therefore would be unavailable to everyone. We obviously, are only referring to the unrestricted TLD’s where registration is available to the general public.

That said, there are some unrestricted TLD’s which are more appropriate for international use than others. Any of the Generic Top Level Domains (gTLD) would be more appropriate than the Country Code TLD’s (ccTLD). The global awareness of (.com) makes it the most appropriate for international use.

S.E.O

Search engine algorithms are some of the most guarded computer code on earth. Finding any successful method of improving a websites search engine placement is always important to Webmasters. For this reason, domains that contain a popular search keyword are very highly sought after. Most of this attention is unsubstantiated as the true nature of how results are determined is widely misunderstood. It is also true that both the search engines and their users are constantly changing the rules of the game.

Commercial Opportunity

This factor cannot be over emphasized. It is absolutely the most important single factor in determining the value of a domain. The Internet has a lot of uses and many are extremely important but the only reason billions of dollars are spent on acquiring domains is because of their commercial opportunity. No one is going to pay a significant amount of money for a domain if it is not profitable to do so.

When searching for a domain it is important to remember that you are selling something and your domain must easily and adequately represent that product or service. Do not try to be too clever here, consumers are not easily tricked. Your domain should be simple and not get in the way of your ultimate goal, which is to attract your target market to your website.

Brand Potential

While commercial potential is the most influential factor, branding is likely a close second when considering a domain name. Unfortunately, it is also the most difficult to quantify, identify and define. The relationship between a company domain and its brand is completely connected and impossible to separate. Such an irreversible decision should not be ignored and requires careful planning. The branding of any commercial endeavor is more of an art than a science. The subject is so illusive that it truly requires extensive research at a minimum and would best be left to a professional.

Ultimately, one of the easiest domains to brand is a highly memorable, easily spelled, commercial, generic domain without exception. In fact, select domains with those qualities and your portfolio will be desired by many.

Discipline

Getting started in domain acquisition can be a lonely business, you will find that help in this industry is free and extensive if you’re buying domains and costly and rare if you’re selling them. Be very careful when accepting advice and always trust your instincts. This is a very competitive market and because it is still in its infancy, much of the domain information available is suspect at best. It is not the result of nefarious intentions but rather a lack of experience that comes with any new industry. Fortunately, you can use this ignorance to your advantage when negotiating the purchase of a domain name. Many domain resellers, are unaware of what the true value of their domain names are and will often drop or sell a domain name that at the moment seem worthless. Attitudes of domain investors tend to sour with time if success does not come sufficiently soon enough for some. Target this segment of the market and you will do very well for yourself in the long run.

The ways in which you search for quality domains is not important, in fact, we would encourage you to try as many domain mining methods as you can think of, the more uncommon the better. The Internet is littered with garbage, most of the websites marketing vast inventories of domains are our industries contribution to that stench. At one time or another, every investor has made a bad investment or ten. Often it occurs early in ones career while they learn the rules of domain negotiation the hard way. Bad investments are not a requirement for success in this business, but they are very difficult to avoid.

Ideally, now is the time to create a comprehensive budget and timeline, but because of the nature of our intended reader we will only touch on the registration budget at this time and go into more detail on these two subjects later in the monetization section.

Resisting the desire to be an instant success will be very helpful in controlling your budget. Create a list of rules for negotiations and discipline yourself to follow those rules without exception. These commandments should limit your spending in a few important ways. In the beginning, the average domain portfolio acquired simply for investment does not need to exceed a dozen high quality domain names. The cost of a high quality domain can vary depending on your interest. The average cost per domain need not exceed $1000.00 and could easily be as low as $100.00. Once you have determined your total budget and maximum number of domains, you will be forced to be more selective. Then decide on which of the factors mentioned here or elsewhere, each domain must meet before considering a purchase.

Hopefully, you now have an ideal domain scoped out for purchase at a fair price, and know this, nothing can ruin a good investment like price. Commit to paying for a professional appraisal from a reputable source before every domain purchase. Keep in mind that even a professional appraisal is flawed, but can often point out subtle weaknesses that may be overlooked when emotions are elevated. If the first appraisal is less than helpful, consider paying for a second or move on to the next acquisition. Once you have an acceptable opportunity, take a few more days to think the whole thing over before placing your offer. Absolutely under no circumstance should you place an offer without the condition of escrow service. This will ensure that the transaction is completed in a fair and timely manner. Do not argue over who pays for either the appraisal or escrow. A fairly priced high quality domain is worth the cost of this insurance. These are some of the rules that everyone should use when considering any significant purchase, do yourself a favour and don’t cut any corners here. It is easy to get emotional about an investment and it is wise to be aware of this flaw in human nature.

Domain Name Registration

Deciding on what domain registrar to use is one of the more simple decisions you will have to make. Although the choices are countless, you can essentially narrow it down to price. Due to the fact that most if not all registrar’s offer all the same essential services you will need, price is really the only determining factor. Most prefer the industry goliath, Godaddy, which will accommodate most anyone’s needs. If, however, your location is outside the U.S., you should consider a registrar located in your country of residence. The property protection laws vary from one country to another which could be a problem if a legal situation arose. Unfortunately, this will increase the registration costs you will incur slightly, but again, it is well worth the insurance.

Be careful about the up-sell trap that most registrar’s employ. Purchase the basic domain registration service initially and add other services later if necessary. The only additional cost to consider at this point is additional domains related to your original domain if they meet very strict requirements. This means that if, during registration, the registrar suggests other similar domains, only register those that meet the following requirements. First, if they are identical and available in another useful TLD like (.com) or the ccTLD of your country of residence. Second and lastly, if the plural or singular version (for single word domains only) is available. Both instances will increase the value of your original domain significantly and are worth serious consideration.

Management

Multiple domains in a portfolio can eventually create confusion and become susceptible to oversight. While the management of domain registration is fairly straight forward, it is simply a good habit to get into from the start. As your portfolio grows and you begin to monetize and hopefully develop some of them, you will be glad that you have an organized system to make operations simpler.

Records

It is good practice to keep records of all your transactions in both paper and digital form with a safe backup location for both. This will be useful for tax purposes should you decide to claim these costs as operational expenses under a business claim in the future.

Aside from the tax advantage, it is also useful for controlling the costs and scheduling registration activity. As a portfolio gets larger and time continues to pass it is natural that registration dates will diverge, spanning several months of the year. Registrar’s will require a minimum of one year with the option of longer registration periods available. It is a good idea to register your domains for the longest time period you can afford, with one exception. If your uncertain about the quality of any domain, use the minimum of one year to limit the cost of failures. Some registrar’s will also offer a consolidation option where all your domains can be pro-rated and registration will occur at the same time each year.

Analysis

We have put a lot of emphasis on choosing domains carefully to help prevent unnecessary costs. While every effort may be made at prevention, reduction is a more reasonable expectation. There will be times when some domains will need to be dropped or sold for a loss. Whether it is due to a poor decision or financial circumstance, the decision must be made. Take the time, at least, once a year to review your domain name portfolio and analyze the suitability of each domain. Do not make the decision to drop a domain lightly. If you diligently prepare for a domain purchase properly, this occasion should only occur rarely. Be conscious of your own ability to be patient and know that this venture is always an exercise in patience. Many believe that profiting from domains should be simple and quickly accomplished. Even the best, most successful domain investors have spent years developing that success.

Consolidation

If the choice to remove a domain from your portfolio is made, make every effort to sell before dropping it. It can be painful to later find evidence that a dropped domain was sold for a nice profit by someone else. As painful as it may be, following the status of a dropped domain can provide some valuable insight into the true value of a domain now and in the future. The confirmation of a poor choice is just as useful as confirmation of a good one.

Regardless of the outcome of these decisions, make the effort to weed out the weakness in your domain portfolio. The savings will add up over time and is a smart business practice.