In the world of the internet and network, a domain, or more precisely a domain name, is basically the location of a website. The reason domain names are used is that it is easier to remember a shorter name as compared to a long chain of numbers, which generally includes the IP address.
With a range of 1-63 characters, the domain name is usually placed right after the protocol in the URL. But when the question of buying domain names comes, a little more introspection is required.
This trend of purchasing domain names by organizations of different forms and sizes is not very new. But it has picked up a good intensity in recent times.
With a reasonable investment in the beginning, companies are getting themselves in the “get rich quick” club with very little effort. So, in this article, we will discuss whether buying domain names would be profitable for a business or not.
Factors affecting the profitability:
Well, acquiring domains that are driven by keywords aids a lot in shooting up the SEO factor, with minimal investment in digital marketing. These days, companies are also after buying expired domains.
What most organizations usually plan is to buy a domain, use it for some time and sell it out after getting its value increased. Initially, this might be very profitable. But the same formula doesn’t always work well.
So, let’s check out the factors that affect the profitability of buying domain names.
What is the cost of labor?
Sources reveal that buying domain names with “.com” extension costs more than $2000. The idea behind purchasing a domain that is driven by keywords is to facilitate the SEO factor.
The first thing that needs to be done is to get the website on the ranking list. And this definitely cannot be achieved without optimization. Without the site getting a good rank, it is difficult to sell it off on good profit.
In order to optimize a site driven by keywords on Google, it takes nearly $1500 for 30 hours. Sales and marketing are too dependent on each other. As a result, marketing strategies like email blasting and cold-calling consume nearly $400 for not more than 8 hours.
Although the maximum selling price of the site can go up to somewhere around $2300, the normal range is between $1000 to $1500, which is clearly quite less than the cost price alone, leaving behind the optimization and marketing cost for the time being.
Can this lucrative business opportunity prove to be a trap?
At times, the answer is a "yes". A majority of business owners fail to understand the gravity, depth, and details of the technology. Technology is the connecting link between facts and figures.
Sometimes, people concentrate a lot on "what" and forget "how". In such cases, the SEO professionals can use a variety of unfair means, which would apparently appear as transparent as ice.
So, it is very important to have your own technical team understand and analyze the potential risks in terms of technology or any tactic that was used to give a more colorful vision to a greyed-out one.
In worst-case scenarios, such websites though can get ranked easily but might fall prey to blacklist in a very short period of time.
Does this harm the overall reputation of an organization?
If this business takes off well, there's not a huge expected profit, at most $500. But if it fails, then the price paid is much more, at the expense of one's reputation.
An alternative to buying domain names, optimizing them, and then selling them out on minimal profit or a grand loss is to market one's capability of getting any website on the top page.
Start-ups and even bigshots look for quality digital marketing with website ranking services. Providing them the first few months of free service and then, upon gathering customer base, charging them on a monthly or quarterly, or annual basis can yield higher profit with the risk level going down to the level of negligible.
For a nominal monthly subscription of $600-$900 and an investment of 30-50 hours for taking the results to great heights, what one gets is much more than money, and that is reference and recommendations from the client.
This also helps in building the customer base and thereby increases the business growth to a high degree.
Time is Money:
The absence of a sustainable income from buying domain names is not something that is unexpected out of this business prospect. But the bigger issue is that the waiting time to complete every business cycle.
The first ounce of time is invested in surveying and deciding which domain name to purchase and to anticipate the return on investment.
The next chunk of time is spent with an almost equivalent amount of energy to optimize the site and enhance its value for sale. Post the development; the next task is to look for potential buyers whose interest would suit the type and features of the optimized site.
In case any further enhancement is required, additional time is invested on further optimization. Finally, when the site is ready for sale, the price incurred doesn't satisfy the amount of time, energy, and cost put into the overall cycle.
Sometimes, it is truly a tough time to find potential buyers because in most cases, companies having such requirements would directly purchase domain names and optimize them with the help of their technical teams so that their products get customized at one go.
And that way, there would be no middle-man involved. So even after the site is optimized and ready for sale, the overall cycle gets delayed in the process of getting the buyer.
The other side of the coin:
With a number of demerits of this business prospect, there is also a silver lining. This single ray of hope depends on one simple word which has a very important impact: choice. Business is all about the choices made and implementing customized strategies for each and every choice.
With ample research work in the right direction, it is not impossible to understand and identify the domains which have better potential in the long run. It also becomes quite easy to pick and choose valuable domain names when one has a good idea about what people are actually searching about.
Indexing of websites and domain names on Google is a very good platform that enables one to identify the most searched websites. Moreover, there is a penalty system launched by Google in the year 2012 called "Exact Match domain penalty".
This penalizes all those websites that possess a generic domain, but when it comes to quality content, they have the least to offer.
With an insight into the analytics offered for the sites, one can make an attempt to understand the scenario of domain purchase and selling a business and consequently make correct choices.
The business of buying domain names and reselling them is mostly like the stock market. The topsy-turvy of this business can make the owner enjoy golden moments sometimes and sometimes make the owner experience dark pit holes.
However, there are ways to know if one is getting the best value of optimized domains. Sedo is one of those popularly used marketplace websites that helps to identify the current market price for such products.
There are some strategies that seem to be lucrative in the beginning but later might end up in the destination of a lawsuit.
Starting small but picking up in a smart way is way more beneficial than starting big in such risky business opportunities.