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This is the second installment in the series I'm writing on becoming a domainer. I hope that you find this series valuable if you are new to domaining and useful as a reminder if you've been around for quite some time. As mentioned in part 1 domaining can be divided up into 3 categories:
1. Monetization
2. Capital Growth
3. Development
 When purchasing a domain the first thing that needs to be considered is, "What business model are you purchasing the domain for?" This will help determine your purchase price.
For instance, if you are purchasing a domain for development into a business then the purchase price for the domain should be a part of the overall plan and cashflow for the business. It should then be reasonably easy to determine your maximum price for the domain.
As an example, I'm sure that the recent purchase of seniors.com for $1.8m would not be tied back to revenue generated from a parked page. There will be an overall plan which shows how the new owner is going to get a reasonable return on their overall investment, not just the domain.
I find purchasing capital growth domain quite difficult and more of an art rather than a science. I've made quite a number of purchases in this area and all of them seem to pay off quite well but I find it difficult treating a domain as a stock item that will one day be sold off for a thousand percent return on my investment.
The best thing that has happened to this space has been Dark Blue Sea and BuyDomains developing a channel to market for all of these low to zero traffic "brandable" domains. One of the biggest problems for domainers with large portfolios of capital growth domains has been how to find a buyer that's willing to pay for them. These two companies have solved this problem and are working towards increasing the volume of sales through their own various networks.
Here's the other problem for capital value domains. What price should you sell a domain for? The classic rebuttal to this question is to say, "Sell for precisely what the buyer wants to offer." I think that it's another way of saying, "I have absolutely no idea but I'll hang out until it's big enough!"
For example, let's imagine that I owned "computer.com". How much is it worth? My friend who owns a computer shop says that he'll offer $2,000 because he thinks that it will increase sales in his business. I then get a call from the marketing director of IBM who says that they really want the domain for an international advertising campaign and would I be willing to accept $5m?
So which is right? I think that the price point is only partially in the hands of the buyer. There is a trade-off between what offers you are willing to accept and the price to maintain the domain. Remember this is not just the re-registration cost but the cost of actually maintaining a portfolio of domains. This means that you must include what you value your time at.
In the next installment of Domaining 101 I'll open up how I purchase traffic domain names.
Previous related articles:
Domaining 101 - Part 1 - What's your business model?
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