MONETIZATION

Parking is not the end.

Domain Development is designed to help domain investors take back control of their portfolio. More importantly, your domains will finally achieve their true potential while allowing you to realize 100% of the profits they generate. By simply educating yourself, you will systematically organize, clarify and evolve your portfolio.

Planning

Domain monetization is a journey, which begins with exploration and quickly leads to revelation. Before you take the first step in that journey, plan your path. While a plan may not guarantee success it certainly increases the chance of it.

The U.S. Census Bureau reported on May 27, 2010 that the total value of shipments, sales or revenue attributable to E-Commerce activity for 2008 was 3.7 billion dollars. This is the U.S. statistics only and is up 12.1% from 2007. The amount of revenue being generated by entrepreneurs just like yourself is staggering. More importantly, that amount will continue to grow and we are here to help you be a part of it.

Analysis

The first step in monetization is identifying the best opportunities in your portfolio. To do this you need to do an analysis of all domains and establish what markets each is most suitable of serving. Some of your domains may be suitable for multiple markets with one market being more appropriate than the others. This is a good problem to have and provides a lot of flexibility for domain name monetization. Regardless, identify all markets and rank them by suitability.

Most domains will have a more focused subject and therefore, are only suitable for one target market. While there is less flexibility with this type of domain, it does offer the advantage of providing visitors with an immediate understanding of the sites subject matter. These domains are often capable of serving a smaller more niche market where competition is less of an issue.

Segmentation

We have established the target market for each domain and will now group each of them by the market they best suit. Once you have your portfolio divided into segments, rank them within each group based on effective marketability.

Budget

The easiest way to profit in any business model is to keep your costs low. For domain investors, a portfolio of high quality names will be one of, if not, the largest cost we incur. Unregistered domains are the most cost effective candidates, unfortunately, domains with the most demand are those which have already been registered. If your reading this guide with the intention of acquiring a portfolio, you will need to purchase most, if not, all your domains from someone else. This is not as much of a problem as it may seem. As we said earlier there are numerous opportunities in this market. A well thought through purchase strategy will undoubtedly pay off over the long term. Everyone's financial situation is different and will require your own assessment of your unique situation.

Approach your portfolio acquisition as you would any long term investment. This means that you will need to set aside a portion of your personal financial plan specifically for investment in domains. The initial investment, based on figures discussed earlier, would be between $1,200 and $12,000 (not including various fees). As you can see, we are not discussing an unreasonable amount of money here. Regardless, of how much your comfortable investing, you need to establish a budget and it should include all foreseeable costs.

The amount of money you budget for acquisition is controllable, as are the monetization costs with one exception. That being, marketing costs. These will vary greatly depending on the quality of your portfolio, and the business model you choose. Do not attempt to estimate your domain monetization and marketing costs prior to acquisition. It is not necessary as your budget can be completed in stages, so focus on acquisition and registration costs for now and return to it once the monetization decision is made.

Timeline

The purpose of a timeline is to schedule critical activities which must not be overlooked and force continuous progress. Begin by setting short, medium and long term goals of which are approximately terms of 2, 5 and 10 years long. This may seem like a very long period of time, but we are presuming that you have a minimum of 12 domains in your portfolio and possibly more. It can easily take you two years to acquire 12 high quality domains if you only pay an average of $1000 each. Once your portfolio has reached this point, events will begin to move much more quickly.

Once you have defined your goals, you can then break down the process of achieving them into critical activities. Make sure you identify and record each of them. Research the activity and establish an estimate of time required to complete. Your estimate should be in days, weeks and months. Remember that everything always takes longer than you think it will, so multiply your logical estimate by 1.5 to accommodate for this.

Make an effort to commit 1-2 hours of work every day or two. This will provide you a minimum of 6 hours of solid progress per week and in some cases as much as 14. If you're in the fortunate position of having more available spare time, then increase this commitment appropriately.

It is dedication and passion that separates the weak from the successful. An hour or two each day is insignificant when you are spending it on a project you enjoy. If this is purely a business venture and not a subject you find interesting and engaging, it will quickly become quite tiresome.

Execution

There are four available options for domain name monetization, each with its own challenges and opportunities. We will discuss resale, parking and leasing now and then devote a greater amount of attention to development in the next section.

Domain Resale

The simplest business model available is reselling your domain portfolio, in part or whole, for a profit. As with any investment, the fundamental requirement here is to buy your domain names for less than you sell them. Acquisition has been discussed at length and should have impressed the importance of buying low. We will now discuss the more exciting subject of selling your domain name for a profit.

Listing domains for sale is done on the aftermarket and it should be noted that registration of a domain does not grant any legal ownership of the domain name, only an exclusive right of use. Consequently, the sale of a domain is not for its ownership, but rather the right to use that domain exclusively.

Price

As of the fourth quarter of 2010, more than 205.3 million domains had been registered. This statistical information, reported by Verisign, shows an increase of 12.1 million, or 6.3 percent from the previous year. Now, there are 171,476 words listed in the Second Edition of the Oxford English Dictionary and approximately 9,500 derivative words included as subentries. For the sake of argument, let's assume that all single English word (.com) domains are the most valuable domains and the number of other valuable domains is a small portion in comparison. We can then assume that there are around 205 million domains of inferior quality. This raises the question, what is a fair value of these "inferior domains"?

Thankfully, the average value of the most sought after domains is high enough that even an "inferior" domain can fetch a healthy price. A handful of extremely fortunate domain investors have made incredible profits reselling significantly valuable domains. The precedent set by these pioneers have made the challenge of valuation much easier for the rest of us. The best resource for valuation on the web is DNJournal. With historical data on every confirmed public sale over the past 7 years, it is a terrific site and very useful for anyone involved in this business.

Most investors have a portion of their portfolio that they are willing to sell. Successful sales are simply profitable sales and anything less is unacceptable. The difference between success and failure here is patience and marketing. Marketing your domain names effectively, you will find, is often a large part of the success equation, regardless of your business model. Patience, on the other hand, is unique to reselling. With other monetization strategies, you need to make effective changes efficiently when performance is suffering. In the aftermarket, the domain is never performing until it is, which is not until the sale is complete. The danger here is that patience, can be a double edged sword. First, it can lead to unnecessary costs related to holding substandard domains and secondly, a good offer can be lost if you wait for a better one to come later. Most offers have an expiration date and sometimes "a bird in the hand... yadda yadda", so choose your battles wisely.

Consider purchasing a professional appraisal from a reputable source before pricing. Remember that no appraisal is perfect, but it will give you a second opinion about the value and also address the domains strengths and weakness. Often some that you will have overlooked. Take your time deciding on price, this is a critical decision and should be considered carefully. There is a fair price for everything and you are responsible for accurately establishing your domains value. One should only deviate from fair value when motivation to sell is more or less than normal.

Domain Marketing

As we stated earlier, marketing your domain is an important factor for all monetization models. We will discuss this subject often due to its significance for success. Invest as much time, effort and money as you can in marketing your domain sales. If done well, every dollar spent will return to you along with many more just like it. Obviously, most beginners are not going to have a large marketing budget available to them. Thankfully, there are many creative techniques one can employ which are quite affordable and often free. An enormous amount of money can be replaced by sweat equity, which is to say, spend your time and save your money.

Before any marketing or advertising effort is made you must first identify your target market. There is no point in wasting time and money trying to sell snow to an Eskimo. Most of your work is already done here if you did the research we suggested in the Acquisition stage. This has identified all the relevant products and services, as well as, the primary market and industry. You will also have established a thorough understanding of the more specific niche segments and market trends. Information about your potential buyer, the market they operate in and their needs is essential when bringing any product to market. Much like the customer telling you everything you need to know about choosing your domain, it is also true that they will tell you everything you need to know about selling it.

There is very little mystery about the product of domains, they are a fairly simple concept. It is your job to create the magic necessary for generating interest. This definitely will be the most difficult task for the creatively challenged. Know this, every good domain is unique, which is what makes each one so special. Rarity is hard to come by in this world and domains accomplish this with ease. Start there and work toward commercializing your product.

Marketing is the process of presentation and should not be confused with advertising. Advertising is the promotion of that presentation process. While they may sound similar and the difference is subtle it is important that you can distinguish between them. Just remember that you will advertise your marketing message. So create the message and then promote it.

Transfer

Once an offer is accepted, that domain needs to be transferred to the buyer. You should never accept an offer without the condition of escrow service. This will ensure that the transaction is completed in a fair and timely manner. It will also determine the transfer process, eliminating any possibility of error. Do not argue over who pays for escrow. A profitable sale is worth the cost of this insurance.

Inventory Management

Investors in the domain industry are often looking for opportunities. Undervalued domains are the source of their income. You will quickly go out of business if you don't re-stock your portfolio. So if your business focuses on selling domain names in the aftermarket, you must spend a significant amount of time on acquisition.

Domain Parking

Our least favorite monetization strategy will be discussed briefly. Despite the problems a parking strategy presents, it is recommended if your registrar does not offer hit counts. Domain parking services track traffic well because it is vital to their business model. This is a very easy way to obtain an insight into the traffic potential of your domains while you're getting started. Additionally, you will earn income from the click through traffic.

There are numerous domain name parking services competing for your domain traffic and they are all basically the same. You will need to create an account and submit a list of your domains to the site. In some more exclusive parking programs, each domain will require approval before being accepted.

Once the domains are recognized by their system, the administration will provide you with the sites name servers so you can forward the traffic your domain receives to the parked page they will provide for you. At this point you will be able to log into your account to monitor your traffic statistics which generally consist of unique visitors, clicks, C.T.R. (average clicks / unique visitor), E.P.C. (average earnings / click), R.P.M. (average earnings / 1000 unique visitors) and earnings. The earnings will vary depending on the service you use and the value of keyword associated with each click. You will receive higher earnings with exclusive domain name parking services.

Generally, payments are made on a monthly basis, if earnings exceed a specific threshold. The minimum payout will vary by site, but is usually between $20 and $50. Aside from parking, most of the sites will offer other domain services like buying, selling, brokerage, appraisal and escrow.

Limitations

The drawback to this strategy is that it offers your visitors very little value. These parked pages are simple lists of hyperlinks with brief descriptions of the destination. Your guests have chosen to visit your domain without any persuasion and they expect to find useful information, relevant products or services. Every decision you make should be based on your visitors overall experience and ultimate satisfaction. The bounce rate on a parked page is often high because of the lack of value and individuality a parked page offers. Over an extended period, brand risks can develop and may be hard to overcome.

Beyond this, the price paid to your parking service is far greater than you realize. Type in traffic is very valuable and extremely rare, unfortunately, domain owners never receive fair value for this traffic. The value given up here is a high price for convenience. While this can be forgiven when you are new and educating yourself, it should only be temporary. Beyond that, it is simply the result of laziness.

Domain Leasing

Valuable domain names can often benefit from a leasing strategy. With fewer commercial domains available in the market, leasing becomes a viable option for companies looking to launch effective websites. Qualifying domains will receive lucrative lease offers with little operating costs incurred. Along with a steady source of revenue, Domain leasing frees up valuable time necessary for monetizing other domains in the portfolio.

Relatively unfamiliar to most people, it can be intimidating and complicated at first. The complication arises due to legal issues related to the domain lease agreement.

Pricing

Legal and marketing costs make up the majority of the investment required to get started. These cost must be considered when determining your price. Once you have established them, factor in the value of the domain.

Marketing Domain Names

Costs related to marketing a domain lease will vary with the quality of the domain. High traffic domains will do a lot of the heavy lifting for you. It is much more difficult to lease domains without significant traffic.

Again, refer to the information acquired during the Acquisition stage and identify your target market. The information about your potential buyer, the market they operate in and their needs is more important with leasing than other models.

Interest for high traffic domains generates itself, without that traffic, you will need to create interest in other ways. This will be difficult without other valuable domain attributes to support it. We have discussed the characteristics of valuable domains earlier. Use this information to determine which of these marketable attributes your domains possess.

Legal

As we discussed in the open, legal issues are a significant issue with leasing. Although, it can be overwhelming for the average start up, there are really only a few factors that need to be addressed. The level of legal advise you will need is directly related to the value of the lease and control over the lessee you require. Most agreements will fall into a standard contractual situation. In these cases, an acceptable agreement can be purchased for a reasonable price. However, in cases where the domain is of significant value or when the lease needs to address international law, the cost of legal advice will increase dramatically. In these instances, it would be wise to consult a professional e-commerce lawyer. Often there are two major considerations a lessor needs to address. First are the basic terms of any lease, and second is the protection of you and your asset. Both issues should be addressed in any reliable contract.

It is also likely that the lessee will be interested in the right to purchase the domain at some point. It is not a requirement of all lease agreements but it may be a major deal breaker in most situations. Only valuable domains will get away without a right to purchase clause, if requested.

Profitability

Aside from development, we have covered the basic monetization strategies implemented by domain owners. Each is reasonably simple to execute but difficult to succeed at. No business venture is worth pursuing if it remains unprofitable indefinitely. Most start ups endure a few years of losses before they become profitable and this is no different.

Bookkeeping

Record keeping is important for three reasons. First, you need to effectively analyze your performance so that you can make adjustments to your business plan. Second, your business operations will presumably become taxable at some point in the future. Third, should you ever need to apply for a loan or grant, these records will be required.

Tax laws are different for each country and should be researched completely no later than the filing date of the year you begin your business. Most domain investors will not need to register their business activities until the business venture becomes significantly profitable. For example, in Canada, a business does not need to register their business as long as:

"you are a sole proprietor and your total revenues from taxable supplies (before expenses) from all your businesses are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter".

In this case you are considered a "Small Supplier" and thus, are exempted. You will need to report any self-employment income on your personal income tax return (T1).

Regardless of tax requirements, it is necessary to keep adequate records of all your expenses and income. Records consist of all accounting, financial documents, include ledgers, journals, vouchers, financial statements and accounts, and income tax and excise tax records. They are generally supported by source documents. Records normally summarize the information contained in the source documents. Source documents include sales invoices, purchase receipts, contracts, guarantees, bank deposit slips, and cancelled cheques. They also include cash register slips and credit card receipts, purchase orders, work orders, delivery slips, emails, and general correspondence in support of the transaction.

The Canada Revenue Agency requires you to keep your records in Canada, at your place of business or at your residence, unless given permission to maintain them elsewhere. All records should be kept safe in both paper and digital form, with a secure backup of both.

Performance Analysis

After executing your monetization strategy, it is necessary to determine the success of your operations. This should be done on a regular interval of no less than once per year. The process is simple if your records have been completed properly. We will briefly discuss the Generally Accepted Accounting Principles - GAAP for preparing the three standard financial statements businesses use to determine the financial situation for a given point in time.

Using your records, total your revenue and expenses. A sales and expense journal would be useful here for organizing everything. Transferring the totals to an income statement and subtracting your expenses from your revenue will establish the net income before and after tax. This will provide a snapshot of the financial performance for the time period covered. A balance sheet is used to list the current and long-term assets and liabilities as well as the owners equity. This will establish the financial strength at that point in time. The last financial statement is helpful for identifying the source and use of cash. Recording the cash received and paid out for operation, investing and financing activity will establish the net increase or decrease in cash.