Part 12 – Portfolio Optimisation – Dealing With Revenue Leakage

Part 12 – Portfolio Optimisation – Dealing With Revenue Leakage

In the last article I outlined a number of typical revenue leakage problems that cost domain investors real money. I also mentioned, from experience, around 10-15% of revenue is lost due to mismanagement. In this article I’m going to state a number of things that may be unpopular but nevertheless I believe them to be true.

For a start, generally speaking domain investors are very bad at managing their portfolios. There are exceptions to this rule but they tend to be few and far between. I believe the reason this is the case is domain investing seems really simple on the surface but as you dig a little deeper it gets more and more complex if you want to keep on top of everything and extracting the full value from your assets.

Many investors need to recognise what they are good at and what they aren’t. I’ve met some absolutely brilliant individuals that seem to be able to find the gold traffic domains but to ask them to change a nameserver is almost impossible. While other people are amazing at negotiating sales but once completed the actual transaction of moving a domain to the buyer is the last thing on their minds…..as they’ve already moved onto the next deal.

The problem with domain management is that it’s just not sexy. The mechanics of making sure domains are where they should be, nameservers are set correctly and you are actually collecting the cash requires an exceptionally detailed mindset.

There are some really obvious things that investors should do with their portfolios. For example, I’ve aggregated all of my domains to the registrar, Epik, as they provide an easy service for pulling all of the domains from different registrars back to them. It eliminates one of the possible revenue leakage opportunities….and I’m into that!

Next, outsource all of your domain management to a company and pay them a few percentage points of revenue. This is exactly what we do for a growing number of clients at ParkLogic. Sure, I’d love you to use our service but if there is anyone else that provides this high touch solution then feel free to go with them.

A good management company will mean you have a single nameserver to set your domains to and they will route the traffic to everyone else to optimise the best performers. They will also monitor things such as cNames being set correctly, domains are correctly installed everywhere and the payment details are set.

Ideally, you should provide them with complete access to all of your registrar accounts so they can migrate everything to a single registrar. A set of business rules can then govern monetisation, renewals and sales. They should also be the first port of call for any legal issues.

It then becomes the management companies task to ensure nameservers and all of the other little details are all set correctly. In fact, by paying the management company a percentage of the revenue they are incentivised to ensure that everything is correctly looked after.

Now you’ve completely simplifying your management down to a single contract and one relationship. You can then focus on what you’re good at rather than all the detailed mess.

It’s a radical approach but outsourcing has been adopted by industry after industry as it makes economic sense. This is exactly what I do with my domains…..typically speaking, I give them very little thought as there is a team of people that work every day on my behalf.

The mathematics is pretty simple. Let’s imagine that you’re earning $100 per day and the management company charges you 5% for their management services then they are essentially earning $5 per day. Last time I checked, you couldn’t buy a McDonald’s happy meal for that in Australia. If you earn less than $5 per day then you should do the management yourself, if you can earn more doing something else than outsource is the solution for you.

Here’s the problem with outsourcing. Many people like to fiddle with their domains and look at them as if they were their “precious” out of Lord of the Rings. Each domain has a little story they can recount at the bar over drinks with friends. Their domains are really “precious” to them but what they don’t realise is that in many cases their running a nice hobby, not a business.

If you’re one of these individuals I really do apologise for raining on your parade but seriously, you need to be treating your domains as a business and start becoming economically rational. I’ll be upfront in saying that I’m more in love with my bank account than any of my domains.

Whatever you do, stop trying to mess around with complex spreadsheets as you manage your portfolio and focus on what you’re really good at…..maybe it’s buying, selling or even building a business on one of them?

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