Domain trading, also known as “Domain Flipping”, simply refers to the buying and selling of domain names. It is an internet business that has been on for many years. It offers a very high yield on investment, but it can be a very risky venture. You might be wondering why domain flipping is risky if you only have to invest just $10, but please read the remainder of the article to find out.
The risks associated with domain flipping
Fortunately, not a long list of cons, but it is still important to be aware of the risks associated with the buying and re-selling of domain names. In summary, the main risk associated with flipping domains is the loss of financial investment in the event that no one ever becomes interested in purchasing that domain name.
Always bear in mind, however, that in order to maintain possession of a domain name, you will have to renew it annually. You can renew a domain name for a minimum duration of 12 months and a maximum duration of 10 years.
Another risk is being accused of “domain squatting.”
Wait, What is Domain Squatting?
Domain squatting, (also known as Cybersquatting ) is the practice of registering a domain name with “bad intent”, mostly to profit from the goodwill of a trademark belonging to someone else. In simple terms, it means buying a domain name that represents an existing brand in order to use it for revenue-generating schemes by taking advantage of the “earning potential” of the brand’s name. To help you understand this better, let’s consider the case of a popular American pop star named Madonna.
In the year 2000, a New York pornographer and businessman named Dan Parisi registered hundreds of domain names. One of the biggest gems in his collection included Madonna.com, which now legally belongs to pop star Madonna after a heated court case involving the duo. It was considered a case of domain squatting. It was such a controversial one, with some people having opinions that conflict with the final court ruling.
Years back, domain squatting used to be considered a legal and clever thing to do to make money, but it has now fallen into the grey areas. This means domain squatting is permissible in some circumstances, but outrightly illegal in others. Like the case involving Madonna and Dan Parisi, such situations may therefore have to be settled by a court of law.
How to play safely in the domain flipping business
As a domain flipper, the last thing you want is to get involved in a lawsuit. To avoid lawsuits, follow the tips below;
- Use a professional domain appraisal tool (e.g Estibot) to estimate the true worth of your domain so that you can offer it for the right price.
- Be flexible with negotiations and offer to hand it over at a reasonable price.
- Use an escrow service or a domain marketplace to eliminate the risks of getting scammed.
Benefits of Domain Flipping
We’ve explained the potential risks of flipping domains, now, here are some great benefits:
- Easy to run: You only need to buy/register a domain name. You do not necessarily have to develop a website on it add content, or pull traffic to it.
- Great earning potential: While selling a domain name you bought at $10 for $1000 may sound unreal to you, there are people who sell domain names for over $10,000.
How to source domains for flipping
You are free to choose between two options when buying or registering a domain name for flipping. The first option is called the primary market, while the second option is referred to as the secondary market. I’ll explain what each means and you should soon be able to deduce the difference between the two.
1. Primary Market
This is when you register (or buy) a domain name directly from domain registrars such as Namecheap.
To avoid confusion, please note that to "buy" a domain name means to acquire an already registered domain name from its owner, while to "register" means that the domain name is currently not possessed by anyone and it's free to register. The latter is always the cheapest option and is sold at a standard price. However, domain registration prices could vary between domain registrars.
Registering a new domain name directly through a top domain registrar is referred to as sourcing from the primary market.
Top domain registrars include GoDaddy, Namecheap, Hostinger, Hostgator, 1and1 IONOS, and so on. The price for registering a domain name varies from one registrar to another but it ranges between $5 – $10 (USD).
2. Secondary Market
The secondary market is the second option, and it means you want to buy an already registered name. Examples of secondary markets are Flippa, Namecheap Domain Marketplace, Sedo, GoDaddy Domain Auction, Afternic, just to mention but a few.
Pricing at the secondary market is a bit on the high side and can vary wildly between domains. This is determined by so many factors like the age of the domain, niche, number of websites linking to that domain (technically known as backlinks), number of characters, valuation of the meaning of the names, and so many other factors.
How to choose the right domain name
Typically, the best domain names are short, easy to remember, spell, and pronounce.
Your returns in the domain flipping business would depend on how good your judgement towards choosing a great name is. In other words, choosing the right domain name would be very crucial to your success in this business; You don’t just buy any domain name you can think of, it just doesn’t work like that.
You shouldn’t always have to gamble. You should learn how to identify marketable names in order to increase your chances of breaking rich from flipping domains. You can visit domain gossip and news sites like TheDomains, Domaining, DomainInvesting to find out the latest trend in the domain flipping market.
It is not that easy to predict a name that will sell profitably, but if you are up to date with the industry trends, you will be better positioned to make the right decisions at every stage.
I hope you enjoyed reading this piece, let me know if you have any questions in the comment section below.