the PPC Book|Pay Per Click Blog | Long Tail Thoughts in a Short Tail World

If you’re at all interested in growing your internet portfolio you’ve probably investigated domaining, an increasingly popular market phenomenon. In it’s base form, it is remarkably similar to the real estate industry, but much faster moving, less established, and with much more ‘gray’ area. You have valuation, speculation, and ‘location’ (traffic) all playing a part in the buying and selling of domains and sites.

What makes this business so attractive is that it’s really one of the easiest ways to build passive income for yourself. With the advent of the sandbox and increasing competitive saturation levels in various internet marketing niches, in many cases it’s simply more cost effective to buy someone else’s site rather than start from scratch.

The Aviva Directory just gave me a heads up on their new article, a comprehensive and useful look at this industry. You should pop over and take a gander (give yourself 15 minutes of reading time)

I don’t call myself a ‘domainer’, but I have dabbled in the buying and selling of existing web properties over the last couple years. For me personally, it’s just a way to leverage capital that would sit around in a bank savings account earning 2%. Other choices for that money? Um. The stock market, which I have no interest in relying on someone else’s skills or the flaky nature of stock market psychology. Or, real estate, which at the moment is not the lock it was for the past 10 years.

In my experience, depending on the niche, many existing sites sell for 7-10x monthly revenue. Of course, there is great fluctuation depending on the nature and stability of the site. The less valuable sites are gaming, proxy, and MFA’s, which you will find plenty of but beware of the underlying hosting costs and the possibility of getting your adsense account shut down. Sites that are more solid, such as ecommerce, need to show an established period of earnings, and there’s much more work involved in terms of validating suppliers, margins, shipping issues, etc. (I bought an ecommerce site late last year, and sold it 30 days later, for a $1000 profit luckily, after I discovered the horrors of actually running one of these things. Too much like real work to qualify as passive income!)

In my opinion the best sites are those that deal in information, the virtual kind. Selling ebooks or memberships can be totally automated and require virtually no maintenance. Your only job is marketing, which is the way it should be.

How do you finance one of these endeavors? It all depends on your financial situation and tolerance for risk. Personally I don’t mind some risk because I’m confident in my ability to speculate and monetize. The Aviva article talks about using the cheapest capital available, or in my case I often choose what Aviva calls balance transfer arbitrage. Credit card companies are always offering 0% introductory periods, so I chose to take advantage. Don’t go out and do this recklessly though. You have to be sharp and stay on top of your finances. Certainly don’t overextend yourself and put yourself at risk. I could easily have paid cash for a recent site purchase, but I didn’t want to use it, I’d rather use someone else’s money for free. The main point being, stay well within your means and don’t get carried away.

How does it work? Well, I found a site that made $800/mo., steadily for 6 months+. After my due diligence I paid 9 months revenue for the site and charged the majority of the purchase on a 0% card with an introductory offer of 12 months. I’m currently about 4 months in, the site is making between 800-1500/mo, and I pay my $600 payment every month. Most of the money I make goes back into the site, buying links, reviews, content, etc. The site will be paid off by the 12 month mark, and after that it’s purely profit.

Of course, there is always risk associated with this, like anything, and I don’t mean to make it sound so simple. This is just how I do it, you have to find what works for you. Whatever you choose, it pays to educate yourself first. Do your research and stay diligent in doing the little things right.

Happy Domaining!