By Jay Finnan, Portfolio Sales ManagerFor all the anguish that comes with an economic downturn, it may be of some solace to know that these hard times also provide us with ample investment opportunities. In fact, if history is any indicator, many of today’s proactive investors will be the ones profiting in a few years when the markets improve. By taking advantage of the possibilities that present themselves now, you too can help ensure your future success.
It’s hard to think long-term in times like these, but there are currently opportunities available that simply won’t exist by the time the larger economy turns around. Here are three of the most important things to keep in mind if you are looking to invest smarter with domain names:
1. Buff your flexibility by increasing your cash position.
2. Put some of that money to work. Now is the time to buy.
3. When buying, focus on quality.
Raise your cash position
Rebalance your portfolio and give yourself some flexibility. Look at your portfolio the same way you look at your business (whatever that may be). Consider liquidating names that aren’t producing any significant cash flow and adjust the prices for your remaining names accordingly. Use low fixed prices to attract bidders and if you see names in your portfolio that you consider overvalued, so you can cut your losses. Typos, numeric .coms, and domains with no traffic are examples that might fall into this category. However, if you have quality names, consider placing them in an upcoming auction with a low or no reserve, in order to gauge interest in the domains and to sell them for positive return.
Although accepting a loss never gets easy, it’s better to realize a lost cause and move on sooner than later. Once you raise some capital from cashing in, you should keep a percentage of it in a cash account. Most fund managers keep about five to ten percent of a fund’s value in cash. The rest you can put to work immediately by picking up bargains in the marketplace.
Buy, buy, buy!
When bids are high it’s tempting to hold out for even higher offers, since no one likes leaving money on the table. It’s also tempting to be conservative and hold on to what cash you have. However, in reality, successful business people know how to contain their hubris in the good times and suppress their fear in the downturns.
In recent months many domains have had their price lowered and newly available domainers are now on the market. Both myself and conventional wisdom would suggest that buyers strike while the iron is hot and start bidding on domains now.
Make it a habit to check these auctions often. Sedo offers a big marketplace with hundreds of thousands of buyers and sellers from all over the world. Bargains make it into the auction routinely. If you’re willing to put in the time to find them you’ll discover some great buys.
If you do your homework on emerging markets for domains, such as Spanish and Portuguese Language .coms & .nets, you’ll see that many country-code Top-Level Daomins (ccTLDs) have seen phenomenal growth, even in the current environment.
It takes know-how to spot the good investments from the bad, but if you make it a priority to learn different markets, you may be surprised by the world of possibilities that other foreign Top-Level Domains (TLD) offer.
Focus on Quality!
As you probably already know, we are in midst of a buyers market, but that doesn’t mean you should buy every domain you can afford. Once again, think long-term with your investments. Assume you won’t be able to flip them right away or even in a year. Hopefully you will be able to, at a generous profit, but don’t assume it.
It also helps to not venture into an investment blindly. . If you’re familiar with the travel industry, look for travel names to invest in. If you’re familiar with trends in real estate, then invest in corresponding domain names. Targeted domains like visitbermuda.com or vermonthomes.com are the types of names I’m talking about. Most popular industries retain their value over time and can usually produce positive cash flow even in a turbulent market.
Additionally, the traffic quality for names like these is likely to be high. Think about the root advertiser. What kind of traffic is likely to turn into a sale for them? Highly descriptive, generic domains produce the quality type-in traffic that advertisers are willing to pay a premium in order to display their ads. In terms of domain traffic monetization, we’ve entered an era where quality of traffic is being rewarded above all else, and one high quality click will earn you much more than dozens of low quality ones.
The Bigger Picture
If you follow this advice, your future with domain investing will look a bit brighter. Just remember to think long-term and focus on what you know. As the market evolves, your new and improved portfolio may have you thanking this poor economy for making your rich.
Source: Sedo.com -- Reprinted with permission -- December 9, 2008