A lot of domain name investors have asked themselves a seemingly simple question. They have all of these great domains in their portfolio — domains that would be more valuable if they had something behind them. So they ask themselves:
Should I develop a domain name into a business?
Each domain name has unlimited potential, and it’s natural to want to tap this potential. But lots of domain investors have wasted time and money developing their domain names into something that might make their investments increase in value.
This is because developing a web business is fundamentally different than buying and selling domain names.
Domain investing is like buying raw land. Domain investors are good at spotting a prime location that might be worthwhile to build on.
It takes different skills to develop this land into something: building permits, construction, leasing the property, etc. Similarly, developing a domain into a business takes different skills than investing in domains.
There are at least three skills you need to turn a domain into a business.
Are you a technical person? Do you also have an eye to good design? Both are necessary to create a web business.
Domain investing can be achieved with little technical skills. Investing in domains is mostly about understanding metrics and how to use systems. It doesn’t involve code.
You’ll need to hire someone to design and build your website if you don’t have design and web development skills. Adding contractors to the mix makes things more complicated and expensive.
Domain investing doesn’t require much marketing prowess. You buy domains, list them for sale on marketplaces, and hope someone buys them. A select few domain investors do outbound sales for their domains, and sales is a necessary skill for running a domain business. But, generally speaking, domain investors don’t need to understand (or be good at) marketing to be successful.
Business owners do need to understand and be good at marketing.
- Skill #3 Business management
This is a skill that some domain investors have. Good domain investors apply business rigor to all of their investments and how they manage their domain portfolio.
But running a web business involves a lot of moving pieces. It’s not a walk in the park. It can take a lot of time and project management, among other things.
The Reality of Building a Web Business
Here are some realities of running a web business:
- It takes patience. Great businesses aren’t built overnight. You can’t develop a domain, wait a month, and then give up on it. Almost all companies that are household names today weren’t overnight sensations.
- It costs money. It will likely cost you many times what you spent on the domain itself to get a business off the ground.
- It might fail. Are you prepared for a possible loss of your investment of time and resources if the business doesn’t work out as anticipated?
That last one is a key one. Domain investors are used to failure, but they don’t look at it that way. They spread their bets across many domain names. Sometimes thousands of them.
Some of those bets fail. Most of them fail.
Since you don’t have the time and money to develop all of your domains, developing one of your domains as a business means putting more of your eggs in one basket. And if that one fails, you can’t smooth it over with your other bets like you can the domains in your portfolio that don’t sell.
Choose the Right Business
I’ve seen a lot of domain investors try to develop their domains. A big trap they fall into is picking their best domain and trying to build a business around it.
They search their portfolio for the killer domain. The one-word .COM, the domain that defines an industry. They assume that choosing their best domain will give the venture the best chance for success, so they build out that one.
Here’s the problem: they know nothing about the domain’s topic. They aren’t passionate about it. They picked the business because it was a good domain, not because they had a smart business idea.
Instead, if you want to go forward with a business, think about what type of business you actually want to run. Then review your portfolio and find a domain that fits.
It Can Be Done
Now that I’ve poo-pooed the idea of domain investors developing their domains into businesses, let me say this: it can be done. It takes a certain mindset and acumen to do it. But it can be done. And done well, it can be wildly successful.
A great example of a domain-investor-developer is Peter Askew. Peter finds great domains, thinks of a business model for them, and then rolls up his sleeves to get to work.
This is what he did with VidaliaOnions.com. He found a farmer that grew Vidalia onions, struck a deal, and this year shipped about 65,000 pounds of onions to people across the United States. (There was a LOT of work in between when he bought the domain and this year’s sales.)
He built DudeRanch.com into a successful directory and then sold it. And he’s doing it again with BirthdayParties.com.
He’s had failures along the way and it’s taken lots of patience. But Peter is proof that great domains can become the foundation for good businesses.
That doesn’t mean you should necessarily take the plunge, though. Think about what your skills are. If you don’t have some of the skills necessary to build web businesses, maybe you should partner with someone who does.
Hopefully, you can be one of the domain investors who overcomes the challenges of turning domains into businesses.
And in the meantime, why not search for your next killer domain here at Namecheap?