Established Generic Domains Verses Parked Domains.

Many domain name sellers have acquired substantial portfolios of some great domain names to hold as speculative properties hoping they appreciate over time so they can sell them at a substantialgreater profit. Most of these domainers have so many names in their portfoliodevelop them out into full blown web sites with unique products or services. Instead they park the names at a hosting business that sets up a page with pay per click ads. That is why you will often see websites dotcom domain names only links to other related websites.

This historically was a good way of monetizing premium domain names because most web surfers would click on the links. However, now the track record of click thru rates has shrunk because surfers are knowledgable about these sites and exit immediately without clicking on these links because they are after more relevant information – not these monetized pay per click links. Also, the PPC amounts have dropped significantly too – up to forty percent.

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Because of this depreciating trend in both visitors and clicks rates and revenues, the generic domains market has also seen a drop in asking prices – up to fifty percent as well. The economy has likely contributed to this effect as well because the first assets to fall in value in any market – brick and mortar or website – are speculation properties. Prospective buyers are now searching for acquisitions that provide a reliable ROI on their money. This would be like a commercial real estate investment with complete occupancy, for example, or a developed domain name that promotes products or services and offers real content.

Just like the collapsing real estate worth around the US – domainers, particularly those with generic domains in their investments decay. Many are in worrisome denial and think their names are more valuable than the market will support. Potentially, they run the risk of retaining on to a domain name and ride it right down to the bottom hoping one day it will swing back up. A more wise strategy may be to dump at market now and wait until the market bottoms out and pick up deals at a lower level.

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With foreclosures climbing month after month and more banks diving in deeper trouble because of mortgage defaults growing at a historic rate as well as credit card lenders seeing record defaults, the ripple effect through every other sector will continue to increase. Therefore, being a speculator of generic domains is becoming ultimately more risky.

I have many clients who have been sitting on great premium dotcoms for ten plus years – they missed the frenzy prior to the bust of 2000 and they have been bypassed by the latest cycle which has cooled off late last year and dramatically more last year. Had they sold before 2000 they would have had a lot of change to buy premium domains in 2006 and profited handsomely. Holding on for the roller coaster ride of the market is not the smartest of plans. Fixating on inflated prices for just an unimproved domain name has become even more unrealistic and will probably lead to disillusionment down the road.

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The strategy for generic domain name owners is to spend the time to establishwebsite that offers unique content, offers actual products or services and work towards getting indexed in the search engines for the main keywords instead of relying solely on direct browser type in visitors alone for traffic and income. There is heaps more profit potential in a fully developed website business with a strong domain name in the end. Business.com is a great example of this principle – bought for seven million dollars prior to 2000, but then the website was fully developed into a major hub netting fifteen million dollars a year and was offered in 2007 for an estimated $400 Million . Now that is a winning approach and a terrific model to work towards for any domain investor.

David Fairley
Websiteproperties.com