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One Spokane domainer’s take on how to make money investing in business sites

The Review's story on area domainers last week quoted David Johnston as an example of a new breed. Instead of buying and holding (parking) a domain and hoping someone will buy it, more people are buying an existing or pre-registered site, then developing it.

It's akin to real estate flipping. Johnston, whose business provides website optimization,  is an example of that type of flipper. You can spend hours reading about the how-to or how-not-to make money doing this. Johnston said, in our interview, he spends hours every day trying to keep up with the domain business.

Johnston wanted to add the following comments at the bottom of last weekend's story. I didn't see that it landed there, and I wonder if he ran into a technical glitch.

So he sent it to me and I'm posting it here. (I will also add it to the story comments, citing him as the source). Go to the jump below the main box to read his entire comment.

 
    The new craze right now for cashing in on domains is to buy a good domain, build a site with something to sell, use paid ads like Google Adwords and Microsoft Adcenter and ramp up sales. This is done even with zero profit. Some are calling it “domain flipping.”

   Most people making a full time living “domaining” bought most of their inventory before the lion's share of good domains were purchased, or they are getting good deals buying premium domains now. I have a close friend managing 16,000 domains, and Google wiped him out as he was making money from ads. He has bought and sold domains for years and thinks the industry is too difficult to make a buck in.

   In his circle you can't even call yourself a “domainer” unless you have thousands of sites and selling them is not your only source of revenue. And yes, the renewal rates are usually higher than the discount rates you get buying it initially, especially if you are part of Godaddy's domain club.

    Anyway, when the scam domain flippers sell the website the buyer is going to look at sales to decide if your asking price is worth it. Profit is different. Most buyers think “sales” is the hard part and profit can be fixed. There is a little truth to that, but be wary.

   A site may pay almost 100 percent of the gross sales amount in advertising fees and run the business at a loss just to have high gross volume.

   Let's say Google Pay Per Click (PPC) costs $50 to make the sale, but the sales price is only $50. Google might let you buy 100 sales a day making it look like you have a million-dollar-plus business.

   The sad truth is, the person may be doing a “pump and dump” which means when you buy the website you are stuck trying to figure out how to make money where there is none to be had. Many times these situations happen in high competition markets where you don't have a chance without a big budget cushion anyway.

  


   Anyway, when the scam domain flippers sell the website the buyer is going to look at sales to decide if your asking price is worth it. Profit is different. Most buyers think “sales” is the hard part and profit can be fixed. Their is a little truth to that but be wary.

   A site may pay almost 100% of the gross sales amount in advertising fees and run the business at a loss just to have high gross volume.

   Let's say Google Pay Per Click (PPC) costs $50 to make the sale but the sales price is only $50. Google might let you buy 100 sales a day making it look like you have a million dollar+ business.

   The sad truth is, the person may be doing a “pump and dump” which means when you buy the website you are stuck trying to figure out how to make money where there is non to be had. Many times these situations happen in high competition markets where you don't have a chance without a big budget cushion anyway.

   The good news is there are plenty of companies who can help you do this the right way. You could use Unleashed Online-Marketing or someone else local like myself. We help you make sure you have the right site, the right ecommerce and distribution system. Then we ramp up sales using online ads all the while building up free traffic.

   At first you run it at a loss just like the scam domain-flippers, going for big volume. Then you take advantage of the higher volume to lower your overall product or service costs. At the same time we continuously tweak your ad campaigns and websites to drive down the cost per sale and increase the conversion rate of visitors to customers.

    At the end of 3 to 6 months you are at break-even or a slight profit. By the end of 12 months you are making a significant profit and are dancing your way to the bank.

   Keep in mind that you need capital. You can't make money online without spending money. The advantage is, if you pick the right business to help you, you are only losing 10-30 percent each month for the first few months. After that, sales are paying the ad budget for the next month.

   That is the right way to start an overnight success online these days. Once you are profitable you can sell the site for a pretty penny if you want. then you can think of yourself as an online version of a real estate investor or a business acquisition specialist. Most keep it though, because no one hates profit. lol! :)


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The Spokesman-Review business team follows economic development in Spokane and the Inland Northwest.

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