Click to Flip: There’s Still Money in This Real Estate, No Mortgage Required
Posted on | November 7, 2007 | No Comments
The mortgage crisis has mushroomed into a near-depression, dusting even seemingly unrelated market sectors with its poisonous pollen. Until recently, real estate was the common man’s stock market, making mini-Trumps of every Jack, Jenn and Kim from D.C. to Oakland. Built to flip, originally coined in reference to dot-com startups established for the sole purpose of being sold to a larger company for a quick, multi-million dollar payoff, was co-opted by the thousands of weekend warriors who began buying dilapidated houses, patching them up, making them pretty and walking away with a windfall.
Regular folks signed up for super-sized mortgages in the hopes that their dream house would turn into their tickets to early retirement, or at least bigger dream houses.
That’s all over now…well, in most markets. There are still pockets of the country where real estate is still hot–Silicon Valley, Austin, Portland, for instance. Nice as that is to know. It’s not the point of this post.
Nope. The point of this post is to give you the low-down on a big patch of real estate that is still hot, still affordable, yet in demand. And, you don’t even have to relocate, paint or sign away the next 30 years of your life to a bank or mortgage company.
In fact, I can tell you where you can buy a piece of real estate for as little as $3 (okay, $3-$6, on average). And, since the market for this specific real estate is still hot, you could sell it for as much as $370,000! How’s that for a return on investment?
No, I’m not drunk. This is real…estate. I’m talking about domain names, also known as URLs or web addresses. They are virtual real estate, your virtual or online land parcel, your dilapidated shack just waiting for you to fix it up, make it pretty and sell it to the highest bidder, or fix it up and turn it into a business (a web page or blog or link farm) and earn incremental profits over the life of the investment.
That’s exactly what a group of domainers (individuals or companies that purchase large numbers of domains) bloggers, web page designers, speculators, entrepreneurs, private equity firms and venture capitalists are doing. They are buying large numbers of domain names, fixing them up by adding loads of links, and then either adding links and collecting money with every click (Strategy 1) or auctioning the domain names off to the highest bidders, usually private equity firms that purchase thousands of domains as part of their portfolios or individual companies that want the perfect domain address for their business (Strategy 2). The third strategy for earning money with domain names, Strategy 3, is a variation on Strategy 1; instead of filling web pages with links, domain owners add content–articles, blog posts, reviews, photos, etc.–along with links and ads to their web pages or blogs. People visit the sites for the content and click the links, and domain owners get paid.
This is not a new opportunity, but it is a re-newed opportunity–a market that has been reinvigorated by the popularity of Google’s Adsense, the growth of online advertising, search engine marketing, and the success of Web 2.0 enterprises (Facebook, MySpace, YouTube, PerezHilton and other social media sites)–all of which have made keywords key to earning money on the Web.
This is an opportune time to talk about a real estate market that still offers regular people an opportunity to invest a little and potentially earn a lot. The paid search market, effectively the keyword market, is a lucrative, growing market expected to be worth nearly $25B over the next 5 years. The major players in this market are and will be individuals and organizations that own large numbers of generic and relevant domain names (candy.com, music.com, business.com, hotels.com and ethanol.com, for example). These are the domains most likely to show up on the search results pages after an Net user types in a keyword.
Currently, companies like Internet REIT and Marchex and individuals like Kevin Ham and Frank Schilling dominate the domain names market. Each owns at least 100,000 domain names. Kevin Ham’s annual revenue from his portfolio of 300,000 names generates over $70 million a year in revenue. Another domainer, Yun Ye sold his 100,000 domain portfolio to Marchex for $164 million.
How much money can YOU earn?
Well, let’s get real. Chances are, you will not be able to buy the perfect name, say Business.com (which sold for $7.5 million in 1999) and resell it for millions right out of the gate. But, chances are good that if you buy a good name–preferably one ending in .com or .net (a top-level domain)–and employ one of the two strategies outlined above, you can earn a solid return on your investment (your $6 investment).
As with most things, earning potential increases the more you invest. That’s not to say that it is a smart strategy to jump in and purchase thousands of domain names. This opportunity does not come without work. While you can get in the game with as little as $3-$6, you’ll need to employ one of the outlined strategies to get the investment to pay off. That means researching the available domain names, registering your domain names, researching top keywords, keeping a watchful eye out for expiring domains and domains for sale, finding an aggregator or domain parking company and managing your investment to ensure that your selections are behaving as expected.
Now, back to the question. How much money is there in this virtual real estate? Here’s a summary of the latest domain name sales for the period October 29- November 4, 2007.
| Domain Name | Sold For |
| Cowboys.com | $370,000 |
| CrosswordPuzzles.com | $210,000 |
| CriminalLawyers.com | $195,000 |
| CarribbeanVacations.com | $130,000 |
| Hosting.mobi | $101,000 |
| EuropeanVacations.com | $85,000 |
| FishingPole.com | $58,900 |
| OrganicFarms.com | $57,500 |
| Mucho.com | $50,000 |
| Crow.com | $48,300 |
These were the top 10 domain sales for the week according to DNJournal, a trade publication for the domain industry. But, lest you get too many stars in your eyes, here are a few more sober sales numbers.
| Automobile.net | $1,550 |
| gamerentals.net | $2,000 |
| Documenttranslation.com | $4,500 |
| Casas.net | $12,111 |
| Row.com | $30,000 |
Now, I want to clarify that these numbers are the result of employing Strategy 2, buying names and then auctioning them off to the highest bidder. All of these domain names were sold via an aggregator, or domain parking company, i.e. sedo or Moniker/T.R.A.F.F.I.C. These companies fill other people’s domain’s with links (the equivalent of a virtual home stager) and split the revenue with the domain owner. Domain parking companies also market, auction and facilitate sales of domains in exchange for commissions (the virtual equivalent of a real estate agent).Strategy 1 (creating links-only pages) and Strategy 2 (auctioning names to the highest bidder) are inter-related because many domain owners, especially those owning large portfolios, use domain parking companies to populate the pages associated with their domain names with loads of links. You can certainly go it alone, creating links of your own via Adsense and affiliate marketing programs, but when you own many domain names, finding and managing dozens of pages filled with links can become unwieldy.
Using domain parking firms’ services are free; they get paid by splitting revenue earned from the links on your pages. Since, half of something is better than all of nothing, why not use them?
Want to know what Strategy 3 might bring? Check out BusinessWeek’s list of top-earning blogs:
- TechCrunch.com ($2.4 million/year)
- Mashable.com ($1.99 million/year)
- Perezhilton.com ($1.33 million/year)
- Problogger.net ($1.2 million/year)
- BoingBoing.net ($1million/year)
- Gothamist.com ($600,000/year)
- Talkingpointsmemo.com ($540,000/year)
- ShoeMoney.com ($144,000/year)
- Overheadinnewyork.com ($97,200/year)
- icanhascheezburger.com ($67,200/year)
Okay. These numbers are sexy too, but let’s focus on the fact that these represent only 10 of the millions of blogs on the Web. There are millions more that earn $0, nada, nothing.
More information?
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Masters of Their Domains – Business 2.0 article on domainers
The Man Who Owns the Internet – Business 2.0 article on Kevin Ham, master domainer
Other info resources:
- DNJournal.com – online trade newsletter for domainers
Domainersedge.com – A website aimed at domain name investors, helping them to locate, research and purchase domain names - Sedo.com – One of many domain parking companies.
- 1and1.com – Domain name registrar (place to buy your domain names)
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