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Sell Domains. Raise cash. Prepare to feast.
I was away on St. Lucia for a couple weeks and on a really crummy internet connection which made blogging very cumbersome. I did read with interest three articles from Epik’s Rob Monster: The Quest for Recurring Income, Explaining Domains as an Asset Class to Finance types and Called it: Sell stocks and bonds. Buy domains and websites!.
While I’m largely in agreement with his assessment of the current economic climate and find his business-like approach to domaining refreshing, I wanted to weigh in a few points.
In the Quest For Recurring Income brings to light a very real issue. The investor’s dilemma for nearly a decade has been: where to find passive income and cashflow at a decent rate of return? When interest rates are held artificially low by governments for political reasons, it screws savers, and basically attempts to force capital back into the stock market and real estate. It’s not working, but it leaves those fortunate enough to have capital to invest scratching their heads as to where to put it.
Even if for the moment, cash may be king, especially in another leg down of a global meltdown in the offing, at some point all of this money printing worldwide will set off inflation and people with capital will be forced to “use it or lose it”.
Here in Canada, real estate prices are still very toppy and there is a good case to made that we’re actually in a bubble up here that just hasn’t popped yet. It doesn’t look like the US market has bottomed out yet. I have been looking at putting some money into commercial real estate for years up here but I just can’t bring myself to do it. Every time I calculate my ROI and look at 1) how much cash I have to part with and 2) how much debt I have to take on in a mortgage and 3) how low the CAP rates are, I kind of give up and end up buying another web site or micro web business.
Rob advises all to sell stocks and bonds and roll into domain names ahead of a much anticipated double-dip recession. I agree that if you are holding stocks, unless you are salivating at the prospect for lower prices for a given business you own, so that you can load up at cheaper prices, then you should be using this recent rally as your departure point. I had been nibbling on a few stocks this year and I basically unloaded most of them. The only ones I kept were the ones I’ve been trying to build up a nice long-term position in and would welcome cheaper prices.
However, when it comes to rolling into domains and websites there’s an important distinction I make for my own approach:
If a domain is “inert”, meaning it’s not producing cashflow now, but has premium value, unless you have definite development plans for it, I would sell it while domains are still commanding good values. Use it to raise cash for the imminent feast.
If you have a chance to buy an income producing website now, especially with funds you can raise from selling stocks, then I’d do it.
Basically what you’re trying to do now is deal yourself a hand you won’t mind being stuck with for a long time. Once the second shoe drops in this global meltdown, even domain names will not fetch lofty prices. Cash will be king, and cashflow will be sought by everybody.
One of the few stock traders I follow, Mike Swanson of WallStreetWindow, has basically come out and called this a bear market, and his strategy for bear markets is simply “you raise cash in anticipation of buying cheap when it’s over”.
If you have a chance now to sell some premium domains that aren’t producing cashflow in order to raise cash, I’d do it. On that front, I’m happy to report that after implementing Bill Sweetman’s 5 ways to Increase Sales of your Aftermarket Portfolio, my own deal flow has increased noticeably in the past month and I’ve been able to clear out some of my portfolio at what I think are still decent prices.
Even if you then want to put all that cash back into domains and websites, I think you’ll be able to get more bang for your buck after this coming downleg hits everybody.
Great article and excellent analysis of the current market conditions. Domainers that miss this change and continue to hold-onto domains that produce no revenue may find themselves missing the opportunity of a lifetime!
In my opinion, cashflow is, and will always be king.
I think if you are going to own stocks or bonds in this market, you need to have a good stomach, and a willingness to watch the news closely. Most folks have better things to do with their time than guess when the HFT-based liquidity engines will cease to keep the market levitating.
Great Analysis in the Market.
Agree totally: Money is the king especially when its over in the market.
regards,
Nidal Kadri
OnlineFinancing.com
Well, I don’t have stocks or bonds and I think only Eastern European newbie domainers under the age of 12 will consider any of my domains to be “premium”. Still, the article confirms what I have been thinking, and that is to try and sell some domains/sites and raise money.
By the way, I can’t tell what blogging platform you are using, but one way to solve the bad blogging connection problem is to get set up so you can blog via email. It allows you to write off-line and when you can check email again your post is published.
What a nonsense.
If you don’t know how to invest get out if you don’t know how to make money with your domains get out. It is as simple as that.
I am doing both and my stocks bring me a lot more than my domains. Investing in the market you can make money each way,
when the market goes up or down. Can you make money with your domains if your domains loose their value ?
PPC or mini sites don’t bring enough money for me and it is very difficult to sell domains these days so the market is the only way to go.
Since I quit my job 6 years ago I never had a loosing year but
every year I have to drop a bunch of domains because I don’t make any money with them.
Great article and a good read, but, what if the market does NOT crash totally? Wouldn’t you be sorry you sold off your premium names and might have to start running after the train, “buying them back” at a higher price? Imho the market has already crashed and it’s on it’s way to recovery.
Despite the news media’s propensity to do so, talking about markets in broad terms is silly. There are good and bad investments available for purchase whether a market is up or down. Investing in any market of cash-flow generating assets is about carefully selecting the very few assets worth owning and then attempting to negotiate the most favorable purchase prices for them vis-a-vis their inherent values. It’s Warren Buffett 101 and it’s the same in every market for cash-flow generating assets worldwide, including equity, debt, and even cash flow-generating domain names or websites. Buy the best, forget the rest.
So, in a rephrase of what this article is trying to say:
“…Since there are still fools out there who are willing to buy Premium Domains that are not generating revenue, then by all means sell them those domains right away…”
However, the problem is, the only undeveloped Premium Domains that generate revenue are one word Generic Type-In(s).
How many Domainers have a hand full of those or even a finger full in their portfolios to sell?!!!!
The 2nd Grade ones would be two or three-word Generic(s), which you’ll never actually know how much revenue they can make unless you test them through development, because they simply rely on search engine visibility to shine for their true worth.
This brings us back to Mr. Rob’s theory: “to develop…”..
Meanwhile, whomever thinks otherwise is primarily counting on some wealthy naive newbees into this domain industry who are swept by the current and fooled into paying top money for Premium Domains that do not generate cash; and this is no strategy at all, because the wise long-term domainers that keep the wheel of this industry running and the clever business owners know better how to evaluate a good domain name and foresee its potentials once developed, even if it is currently not generating any cash. They might simply use this cash-generating theory as a negotiation strategy.
In simple, there is practically as many domains that generate cash as there are meaningful words in the dictionary…
Time and effort better be wasted instead on speculating trends and capitalizing on words that are as old as the ancient Webster dictionary – words that’ll never fade with the next hi-tech invention.
[...] There are a couple new (or just new to me) domain related blogs that have caught my attention recently. If you’re bored, here are a couple good reads: From PPCIan.com, I just enjoyed his article titled “I Own Shares In Inflection.com“. Nadia over at DomainSushi.com has been writing some really resourceful articles, yesterday I read “Get More Followers With This Simple Change to Your Contact Form“. Also, I wanted to mention that WebValueInvestor.com delivered a well written and controversial article that domainers should read “Sell Domains. Raise cash. Prepare to feast.” [...]
I had the pleasure of going to the First Annual Epik Conference, so I was able to get a feel for the market myself. I whole heartily agree, stocks and bonds are not the place to be if your long. I agree domains as an asset class can be an excellent investment with the right things in mind. Rob is first class and very accommodating.
I think one needs to be prepared for the values to go down with everything else though. All the domain values are set from ad or product revenue, and ad revenue is cut in half so is your revenue, rending some development a loss. Make sure you have multiples of at least 5x your costs to be ready.
Also, stocks can be sold short, and thats what I did in 2008 and made a killing, if you can’t short domains, some just aint worth it. YOu can’t short, but just as good, buy when they are dirt cheap compared to today, thats as close as you get to shorting.