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How to Build a Solid Domain Name Portfolio

Updated on June 20, 2013

There is no short answer to building a solid domain name portfolio but as with most traditional investments, the answer to an impressive domain name portfolio lies in diversification. It is imperative to diversify due to changes in trends of monetization, traffic and public perception as well. The idea of having variety is a good idea no matter the investment. This insulates you from short-term issues such as those mentioned above.

The problem begins when you try to define variety in a domain portfolio. How do you diversify a domain name portfolio? How will you know it is diversified? Well, the answer lies in two things, short-term value and long-term value. A diversified domain name portfolio must achieve these two things. Short-term value is derived from revenue the domain earns, mainly ad clicks from type in traffic or other monetization methods. Long-term value on the other hand, refers to resale value or end user value.

There is often great difficulty in trying to locate high quality domain names that have consistent streams of revenue. This is because no one wants to part with them unless they are coaxed with high offers or are forced to sell out of necessity. On the other side of things, it is generally easier and less costly to create long-term value. It is possible to speculate, find high quality generic domain names in the secondary market, and even develop them into sites.

In the most simplified form, a solid domain name portfolio should be a mix from multiple niches and industries. You should also diversify your extensions but you must have a higher concentration of high quality generic dot com domains. All the domain names should have some consistent revenue and end user resale value. If they do not have much end user resale value, they should be developed into websites with useful content. Some popular websites were initially purchased for speculative purposes but the owners later decided to develop them into useful sites. Developing a domain into a useful site can increase the end user value exponentially.

The ultimate domain portfolio has consistent revenue streams, end user resale value and includes a number of fully developed sites as a hedge against any seasonal variations in Paid Per Click revenue streams. Fully developed sites can earn income using other methods such as affiliate marketing, direct advertising or selling a service.

Most domain name investors know that this is easier said than done and takes hard work and commitment. It should be noted that in the domain investing business, more domains does not necessarily result in diversification. Some of the most profitable and diversified domain name portfolios have less than 20 domains. The key is to get the revenue and end user value mix right.

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