My First Year As A Domainer – Part 2

Today we have Part 2 of a special guest article by Robert Kaay from Domain Broker Australia.

If you haven’t read Part 1, then I suggest you do that first!

Robert writes with clarity, authority and humour on the challenges he faced in his first year of domaining.

Hope you enjoy. 🙂

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My First Year As A Domainer – Part 2 – by Robert Kaay

Now that I’ve introduced myself, in today’s blog post I will tell you all about the mistakes I made in my first year as a domainer.

It didn’t take me long to figure out; it only takes one domain name to get you hooked.

If you’re on this site, reading this post, chances are you’re already done for. I mean; this site isn’t called Domainer for nothing! You’ve come here to read about Australian domain names. And let’s face it, you wouldn’t want to be reading about this stuff unless you were already hooked on domaining or you are about to take the plunge.

And if you’re about to take the plunge, this is the moment I would like to tell you to STOP! Don’t do it!

Haha, just kidding.

But seriously, domaining isn’t for the faint hearted or the cash-poor. I can save you a lot of heartache if your business doesn’t have healthy cashflow at the moment. Because once you start to know what you’re doing, there will be times that you will pay anything to ensure you win a particular name. And I do mean anything. Meaning that you’ll even risk your next mortgage payment to ensure you have the name. You’ll worry about how you make that next mortgage payment only once you have secured that life-changing domain name. Acquiring that name is number one on your list of important things to do for the day. Keeping your house is a problem for another day. I know this because I have done that myself this year. I’m happy with the outcome now, but I went through a period of two straight months of hell, where I was walking a financial tightrope. All because I put a few premium domain names above everything else in my life. I plan to expose this super-intense few months of my life in a later post on this site. First, I’m hoping and waiting until the names start to make me some money so I can sound cool for putting myself through that and justify my genius (keep your fingers crossed for me!)

Most of you old-school domainers reading this will know that after you have bought a few domain names and you see just one of them make you some money, you inevitably start thinking all you have to do to become successful in life is buy a bunch of other domain names and watch the money pour in. No more working standard day-job hours for you, you’re too smart for that! From now on, you’ll be earning passive-income, while you sleep or, better yet . . . while you’re sipping gin and tonics on your weekend-boat.

Yeah, right! Although a very teeny-tiny amount of people actually get to achieve this dream, the reality is that most people run their credit cards dry and then have to go back to working the kinds of jobs they were hoping to avoid in the first place. Sometimes working a day job as well as a night job. All so they can pay back the credit card debt they racked up for buying hundreds of names like balsawoodairplane.com.au(.) When you think about it, sometimes it’s wiser not to take a certain path than to waste a year ending up back where you started. Or, even worse, ending up worse-off than when you started. In my case though, I’m happy with where I’ve ended up after a year of domaining. I guess that’s how I can tell so many jokes about how many mistakes I made over the last year! The first six months though, I was definitely going in the wrong direction. That wasn’t funny at all. I wasn’t laughing then! I wouldn’t have it any other way though. Learning curves and costly mistakes have always seen me happy with the end result. But I can’t say it isn’t painful along the way!

As all you old-school domainers know, pretty soon you start to realise all the good names are taken. You’ve learned not to waste your time with three-worded names or .net.au’s or anything that has less than 1000 average searches per month according to Google Adwords.

But as a newbie…

Once you’ve managed to score a pretty good name by hand-registering it, you wonder how you can get some other good names, ones that are already taken. So, you do some research. Then you realise there are websites out there that offer drop-catching. “What the hell is drop-catching?” you ask on first-discovery of the term.

Then you perform some more extensive research.

You think to yourself . . . what do you call that place in between heaven and hell that you supposedly visit after you die as you await the verdict of your soul’s ultimate destination? Oh yeah, purgatory. So you search for the term “domain name purgatory Australia” on Google and you find Netfleet.

Haha, joking, but pretty funny.

Netfleet was the first drop-catching platform I found. I know there were other platforms before my time, that old-schoolers like Ned could probably tell you about, but Netfleet caught me with all their adverts and SEO domination. Like a fly in a black-widows sticky web.

So here comes one of my first major mistakes as a newbie in my first year of domaining.

I purchased Adidas.net.au because, quite simply, I was new to business, new to the domaining industry and to put it frankly, I wanted to see what would happen.

I signed up to the Netfleet newsletter as a newbie and I couldn’t believe you could just go and buy any name they listed. That’s how they made it sound. “Check out our top picks below . . . beat your competition by securing high value domains.” The Netfleet newsletter was heavily promoting Adidas.net.au as one of its top picks of the day, so I naively thought you were allowed to buy these types of names.

Turns out that’s trademark infringement and the domainer community rightfully jumped all over me (just as I would do to newbies, now). Particularly Ned, the owner of this very website. Ned took it a step further though. He reached out to me by phone. He took me through the rules, introduced me to understanding auDA correctly and although a lot of the rules didn’t make much sense (some still don’t, like the misspellings’ list – but that’s a debate for another day), there were also many rules that did make sense. As a company owner running multiple businesses now, protecting trademarked names does make a lot of sense.

Still, looking back at my time as a newbie and still today, I wish Netfleet had a newbie Q&A section on their website so domainers don’t waste their money on steep learning curves, like I did. Because, it still happens to this day.

Every so often, us pro-domainers will be watching the drops and we’ll see a newbie come along. He’ll see a famous brand domain name, and snap it up for $11 and I’m sure he thinks he’s just won the lotto. You can imagine the guy saying to his wife, “Honey, you don’t have to go to work tomorrow, I’ve figured this domaining stuff out! Don’t you just want to get down on your knees and thank the gods for shining a light directly to my doorstep?!”

The newbie runs down to the bottleshop and brings back an expensive fancy bottle of wine. He cracks it open to toast his genius. All the guy has to do now is inform the trademarked company that they should buy their name back for $25,000 and the world will keep turning.

Haha, sorry, I couldn’t help myself.

I’m not sure why Netfleet promote trademarked names. Perhaps that’s what they love? So they can keep selling the same trademark-protected names over and over again once they are confiscated from newbie buyers? Kind of like double-dipping. I know it’s possible for them to justify selling them by saying, “Well, maybe someone from actual Adidas will buy the name once they see it, that’s why we have to promote it on the newsletters and sites.”

But, come on. If that’s the case, why don’t they have a little explanation near the name to warn unsuspecting newbies? Of if that involves too much work, why not have a general disclaimer for newbies about the rules of buying Australian domain names somewhere prominent on the site? Perhaps they should just link the “info” tab of “iffy” domains directly to this blog post? Yeah, I might recommend that to them.

Okay, I’m not here to slip another jab into Netfleet. I’m just saying that I recommend new domainers who come on board over the next few years reach out to us pro-domainers on this website before buying even a single domain name. That’s right, I’ve been a domainer for 13 months now and I consider myself a pro-domainer. The technology industry moves fast! If you’re too shy to reach out, at least read through a lot of the articles. This website right here will truly teach you most of what you need to know to get started.

Hell, if I had reached out to this industry before making those stupid purchases promoted by Netfleet I wouldn’t have lost over $800 in my first two weeks dabbling in the Australian domain name drop-catching industry. Yep, I dropped all the domain names that I had unknowingly purchased against the auDA rules. On Ned and a handful of other domainers’ advice, I just dropped them all in one day like a hot potato and flushed my money down the drain. Learning curve.

I love learning lessons the hard way and I see the money that I lost as part of my initial education into my trusted domain broking business that I run today. We all make mistakes in the beginning. I believe learning from your own mistakes is more powerful than being taught something by someone else. As long as we learn from those mistakes and don’t make them twice, it only makes us stronger, right?

Okay, here’s another gigantic lesson for you.

The drop-catching platforms are good to use if you’re not in a hurry to catch a specific name. You have to be very patient and spend at least half an hour each and every day checking the drops. Sometimes for up to a year. I got a few of my cool names by patiently waiting and watching, day after day, month after month, and then bidding hard to ensure they were mine. Especially since I’d waited like a ninja for so long.

On the other hand, if you absolutely need a name right away, the drop platforms can’t help you. In this case you have to contact the current owner of the name directly. Oh, and when I say the word “owner” throughout the rest of my blog posts, I really mean the “licence holder”. You can only “own” an Australian domain name by licensing it for periods of two years at a time.

The way you find out who currently owns a domain name is by using AusRegistry’s Whois service. This will give you information about who owns a domain name right away. There is of course more research to do once you have this information, but this is definitely how you start. And if you offer the right price up front, you could own your name within a few days. This takes away the stressful bidding process of the drop-catching platforms and also the praying process that your dream name will eventually just show up on the drops. You usually have to pay a little bit more for the name, but at least the person selling it doesn’t have dozens of people vying to secure it at the one time against a ticking clock.

You also need to take into account that most people who call themselves domainers are professionals. And professionals who own good quality domain names don’t let them slip between their fingers and end up on the drops. Large businesses are generally the culprits who normally make various mistakes that see their precious names accidentally taken from them and auctioned off to the highest bidder. There are many reasons for this, but one of the main ones seems to be the person who registered the name in the first place leaves the company and doesn’t change the registrant email contact. This ensures no one is informed if there is a problem with renewing the name, or if the name is not set to auto renew in the first place.

If you’re buying a name from a domainer; keep in mind that domainers often need to offload a few names per month to keep their cashflow ticking over. If they don’t sell any names, their renewal fees keep adding up, which doesn’t make for a very good business model. Bad for cashflow. Something I’ve learned the hard way this year.

That being said, some pro-domainers will hold on to good names for years. And in that case, you’re going to have to pay a decent retail price for quality. If we take what I do with my names for example, there are some names I will sell to keep my cash flow going, but there are others I will hold on to until the end of time, before I would sell them for anything less than what they’re worth. Which bring us to a good question…

What is a good domain name worth?

I can only give you my opinion. This is, after all, a hickle-pickle of information I am spraying at you about my own first year as a domainer. My way of figuring out what a domain name is worth is . . . well, it’s not pretty, but it’s mine.

I’ve always used a particular term to explain how much I think things are worth. The worth of things in general. I call it my gorilla-math formula. I say gorilla-math, because the way I work out mathematical formulas is similar to how a gorilla would work them out. Fast and on-average and heavy on the profit to justify my time and what I am happy with. Not exact.

When I tell prospective buyers how much I’m willing to sell a name for, they often ask me, “How did you come to that figure, Robert?”

I often respond with, “Gorilla-math!”

Then unfortunately I have to explain my gorilla-math concept to them. Most people appreciate the humour in it, and bring my price down a little bit, and then we settle. Some people, I never hear from again.

To me, a good domain name to an end user is worth ten times what you buy it for.

Wait! Did you just say ten times?!

That’s right. Ten times. If I buy a name on the drops for $100, I want $1000 back for it.

Let me make this clear for you.

Wholesale price: $100.

End user retail price: $1000.

Various domainers have their own version of gorilla-math profit calculations, but this one right here is mine. I’m sure Neddy has his Neddy-math formulas. It would be interesting to know how he works his pricing out. Anyway, this of course is my top retail price. If I need urgent cash flow to pay for a bunch of renewals fast approaching, I may accept as little as four times the wholesale. But that would be for a name I have lost interest in developing. I would never sell a name I was planning to develop within 6 months for less than ten times what I bought it for.

This sounds greedy, but I don’t think it is. Is my time worthless? Let me explain.

My reasoning for this is that I believe for every ten names I buy with the intention of developing, I’ll probably only end up selling one, on average. So this one name ends up paying for the other nine. And for every nine names I develop, I’m finding it’s only one name that returns a decent return once developed. And buying just ten names and developing them takes me about four hours per day, for about two months. I am spending a lot of time doing this, and how do I get paid for my valuable time? In theory, the one name I sell for ten times what I paid for it gives me nine other premium names for free. And the one developed name that makes a good return more than covers the annual renewal costs each year for all of them. This means I basically have nine premium domain names for free and have been paid for some of my time, which justifies the price and allows me to keep buying more names and developing them and . . . wash, rinse, repeat.

And one day you just hope that talent, luck and timing pays off and you get to sip gin and tonics on a boat while the money pours in.

The best analogy I can think of that enables me to continue pursuing this crazy non-physical, digital domain buying and developing rollercoaster is that I must keep feeding the popcorn machine with corn seeds, at any cost. Eventually I’ll see a few popcorns shoot out of the machine. Then I’ll add more corn seeds. Then a few more popcorns will pop out. Then I hope every corn seed eventually explodes and I have a huge abundance of yummy popcorn and I can stop wasting my time feeding the machine because I have all the popcorn I’m ever going to need. But if I stop feeding the popcorn machine too early…

Anyway, I warned you from the start that domaining wasn’t for the faint hearted. I also warned you in my first article that I can type really fast, which means I can write a lot of content before I realise I haven’t eaten for ages. Why do I feel so hungry all of a sudden?!

I’m glad I got the opportunity to tell you about some mistakes I made during my first year of domaining and I hope you have enjoyed reading about my exploits.

Hopefully Ned asks me back again in a few weeks and I’ll tell you more things I learned during my first year as a domainer.

Perhaps next time I will break down the $47,178 I spent on domain names in my first year. I know some old-school domainers spend this amount on a single domain name, but I’m pretty happy with this figure for my first year. Perhaps I will shed light on exact percentages of how much money was spent on the drops (Netfleet, Drop, Domain Shield), versus what percentage was spent on purchasing the names directly from existing domain name holders?

Until next time, happy hunting!