Turn WWW Into Cash - Introduction to Domain Name Arbitrage

First off, I would like to start by saying that when it comes to the process itself, it's not difficult to make money from the trading of domain names. It is very easy to acquire a domain name for less than $10, and to resell it for anywhere from $60 to $3,000 the very next day! However when it comes to market research and name selection, things become a bit of a hit-and-miss. The reason for this is that it's all speculation.

Anyway, I promised an introduction, so please bear with me as I take a step back to explain a bit about what domain name arbitrage really is. Quite simply it is the initial registration or a purchase of a domain name and its subsequent resale at a higher amount to an interested party. When I say 'domain name', I mean just the name itself, not an actual webpage, though creating a webpage for your domain name would increase its value. (So it's the thing you type into the address bar in your browser that you'll be selling.)

There are many domain names that you can purchase, under many different extensions. Some domain names are TLD (Top Level Domain), while the rest are not. At this time the list of TLD names includes more extensions than when it was created, but the original six are still, as a general rule, the most valuable. They are the.com,.gov,.net,.mil,.edu, and.org extensions.

Selection
Essentially, what you are doing is guessing the outcome of future events. You are hoping to find a domain name for a current event, or an upcoming movie, or a rock group, or a company; that you think will be worth more to someone else than its current registration price.

So what this means is that you may purchase more domain names than you sell, but that doesn't mean that this venture will not be profitable! Look for current trends to select the right domain names, and consider using words that you think will be profitable later. Until the word 'electronic' became a popular merge word, domain names with an 'e' before the name could be purchased for pennies. Now however, names like 'ecommerce', or 'emoney', or 'ebanking' can be sold for well over $5,000!

Once you select a name, use the free resources available online to find out if the name already belongs to anyone. A quick search on InstantDomainSearch will give you all the information you need.

Sale
Pricing
Probably until you buy and sell your first few domain names, you will have trouble setting a fair price. One way you can get started is to check out the price at which similar domain names sold for. Another is to use a domain name evaluation tool or service. Many are free (like estibot) and often are a part of a domain name classified site.

Increasing Value
Three main ways to increase the value of your domain name:

1. Build a website around it; selling more than just the domain name. The price will reflect not only for the name, but also for the time and effort that went into the website development. Buyers are left happy, since a domain name with a website is better than a domain name without a website!
2. Increase search engine results. Quite simply (while the actual process is anything but simple), this means ranking higher in a search engine like Google, when someone searches for a specific term. The practice is called SEO (Search Engine Optimization) and I strongly recommend studying it to anyone that wants to make any sort of money online.
3. Increase traffic to the site. This could be a combination of the above two tips, but there are other ways to increasing traffic too. You could, for example, link to your domain from traffic sources, or you can advertise it. But the point is; the more new people visit the domain name you own, the more valuable it becomes, since you cut down on the buyer's workload.

Listing
There is an abundance of places where you can advertise and sell your domain. The main places to list your registered domain names are: domain name classified sites, auction sites, any classifieds you find, and even via an email to a potentially interested party. If for example Quebec separates from Canada and gets its very own, shinny TLD extension '.qbe'. If you register 'nike.qbe', you'll be able to then sell it directly to Nike for a pretty penny!

Timing
Like produce, domain names have an expiration date. It is usually a year, so don't miss it. Also remember that old news don't sell. So if you're chasing trends; like movies, popular bands' new releases or events, then you have to register and sell them fast!

Immediately following Michael Jackson's death, I saw domain names sell for over $30,000 after intense bidding wars on eBay! So I jumped aboard, but was too late. Three weeks had passed by the time I registered one of my domains and placed it for sale. My auctions did not receive more than 25 views, let alone bids!

So my advice is; if you are selling a good domain name that happens to be time-sensitive, do everything you can (read as 'pay') to have it noticed. Promote it well, or it may not get the immediate exposure it needs to earn you money.

Tips and Cautions

• Be mindful of how you exchange the money. Paypal cannot protect you against a 'chargeback' done on a credit card. I have heard nasty stories of people selling their domain names, only to have the money snatched right out of their accounts after they transferred the ownership rights! Use an escrow service; it's often part of the domain name classifieds sites, thought they do take a cut.
• The domain names you purchase, you generally cannot sell for the first two months. Don't be shocked. All this means is that you have to do what's called a 'push' (i.e. a transfer) to a user at the same site you registered your domain at. So for example if you registered your domain name with GoDaddy, then for the first 2 months you can only 'sell' it to a user who also has an account with GoDaddy. But accounts are free, and take 2 minutes to register, so don't let this little hurdle prevent you from making money.
• Park your domain for profit. While your domain name hasn't been sold, why not put it to good use? If it's a name that generates traffic; park it! This means that instead of a blank page, anyone that enters your domain name in the address bar will be taken to a page full of advertisement links; and should they be clicked, you will earn a portion of the profits. Most of the time those park pages also notify the visitors that the domain name is for sale, thus increasing your exposure and helping you sell faster!

Thank you very much for reading. Good luck selecting and profiting from great names!