| Proceed with Extreme Caution |
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| Written by Bret Fausett | |
| Thursday, 06 September 2007 | |
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Of all the domainer blogs in the blogosphere, the one at the top of the heap is Frank Schilling's "Seven Mile." It's always timely, well-written, with some of the best insights in the industry into what is happening with domain names and the service companies that surround them. Frank Schilling is back from vacation, and if you haven't followed his blog before, now is great time to catch up. I'll admit too that one of the reasons I find the Seven Mile blog so attractive is knowing that its author has made his fortune on domain names. Knowing the business success behind the author makes the blog sexier. Wouldn't you rather take your investment advice from a Warren Buffett blog than from an unknown blogger? The optimism that Seven Mile and other domainer blogs show about the domain name market, however, is making me uneasy. And I'm afraid it's going to lead to some very sad stories down the road.... If you read Frank Schilling's blog on a daily basis, you see story after story after story in which Frank provides encouraging words about the future of domaining. And knowing the backstory of Frank's own success, these words have double the effect they might have if written by you or me. Frank's not alone in his optimism. You see similar things from other domain name blogs as well. If you're spending long hours on your domain projects, slaving over a hot widescreen monitor, these words probably pick you up, inspire you, and keep you going. So let me be the contrarian and knock you down a bit. I'll start with a story. When I was at the big Domainfest in Hollywood back in January, I had the opportunity to meet lots of people from the domainer industry. One guy I met started to tell me his story, and while he too was wildly optimistic about his prospects, the details that came out gave me a sick feeling in my stomach. First, the guy had quit his job to plunge himself full time into domaining. The optimist says this gives him lots of time to build the sweat equity that will become the foundation of his fortune -- but the contrarian in me says he just cut off his positive cash flow. Second, the guy had sold all of his stocks and mutual funds -- in his words, his "life's savings" -- and invested it all in domain names. He went long: $200,000 worth of .COM domain names. The optimist says this is timely investing in an emerging industry -- but the contrarian in me wants to scream "ARE YOU NUTS?" Some of this fellow's names were in development, but most were parked. He had an industry sector that he was targeting, and most of his names were in that industry. Sounded like a reasonable strategy. But when he shared some of his names with me, my jaw dropped. It was the most dismal sampling of hyphenated-coined-stinkola you could imagine. I was stunned. I felt incredibly bad for the guy, who was only just beginning to have concerns about how he was going to renew all his domain names on the paltry revenue he was generating. I don't know where this story went after the Domainfest conference, but my sense is that it did not end well. I have visions of a guy with no job, no savings, and a $200,000 bill from GoDaddy coming due in 2008. Now maybe I just don't get it. I've missed a lot bandwagons in my years in the Internet industry. I've watched entire buses full of money pass me on the street without hopping on, so it's entirely possible that this guy has now retired to some other Carribean island and is laughing at that fool lawyer in Los Angeles....but I don't think so. So here's a word from your local contrarian. Yes, the domain name industry still has possibilities, but in the same way that all industries do. Just as a sharp real estate investor can make money when the bottom is dropping out of the entire market, shrewd domainers can make money today...and always. So walk before you run, and all the other usual caveats -- past history is no guarantee of future gains, drink responsibly, objects in the mirror.... Because if you're not careful, you could lose big.
Please Enter New Tags Separated By Comma's
Or Close Domainer 
Domainfest 
Seven Mile 
Comments (8)
  written by Shane Kinsch, September 06, 2007
I worked until I was able to exceed my high-end day job, including benefits, insurance, retirement savings, kids college fund contributions, etc.. During this time, before I cut out on my own, I took most of my "side" revenue and re-invested it into more names, all the same time working a regular day job. It was great, work a day job and take your domain revenue and re-investing it back into more names, not risking the "farm".
I guess you can call me a little conservative, but doing this now for over 12 years it was the most sensible option for me. I too was at DOMAINfest and heard similar stories where newbies were getting into the game. The problem is that they're getting in at a time where they pay premium for the names they buy, or buy a large portfolio of crap names that they need to make sure they make at least the registration renewal per year like you mentioned. There's still good deals to be found out there though. Shane  written by Shane, September 07, 2007
Great post, Bret. Intelligent and well thought out. It's posts like these that have made your blog one of my favorites. Keep up the good work.
 written by Donna Mahony, September 09, 2007
Great post Bret! I think lots of the problem comes from the hype of big money with no work. It's just not so. I make a nice living off of domains...it's our only income but it didn't and doesn't come easy...20 hour days aren't unusual.
 written by David Chelly, September 13, 2007
Hi,
I'm also very optimistic about domain names. More than 10 years ago, when domainers needed to invest big money (a domain used to cost $100) and when monetization was not so easy. Now, it's very easy to make a living with domain names. And even become rich. But not anymore with English names. The offer of English premium domains is very scarce, but in French, Italian, Polish and many other languages, this is the contrary. Low prices for very good domain names and good monetization...  written by Domaining, September 23, 2007
Bret,
An unforunate story, but all too common I suspect. There are always winners and losers in any goldrush and the domain name gold rush is no different. I think Frank Schilling's advice is sound and I agree with him that the market for quality domain names is enormous and that domain names with great potential sell for far less that they should. As Frank outlines on his blog the value of quality domains - short, memorable, compelling, .com domain names will hold their value. This is something I suspect you will agree with. However, 'hyphenated-coined-stinkola' will never have any value. The trick for domainers is getting the quality stuff at decent prices. Your article is not really contrarian at all. Just a clear and timely warning against getting into an industry you don't understand properly. And if it saves even one person from financial ruin thats not a bad thing.  written by Butte mortgage refinancing rates, November 01, 2007
well let them buy all the domains they want, have to learn from mistakes
 written by Tia Wood, November 30, 2007
I think you're right. I see a lot of "over-eager investors" in the space that will probably end as you described. I do believe in the spirit that Frank portrays but I also believe many of those new to the industry take that information and misapply it towards horrid domain purchases. But that's how we live and learn. Hopefully not at the expense of life savings. :-
Tia Wood Write comment
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| Last Updated ( Sunday, 09 September 2007 ) |
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OTOH the potential for "penny stock" domaining is fascinating ... buying keyword rich domains, parking most of them and watching the $0.30 to $0.80 clicks return 400/800% ROI. Have fun and learn, just don't bet the farm.