Ever since I made my Domaining Strategy post, I have been getting a lot of comments and questions from you all. First of all, thanks a lot for your comments and messages — that is exactly what keeps me motivated to write here.

Most of the questions which you have asked will be covered in upcoming posts about traffic, revenue, outsourcing, hosting etc. In this post, I am going to answer two important questions -

1. How to minimize your development costs?
2. How to Scale-Up this strategy?

This post will be one of the most important — if not the most — posts in the series as it describes the mindset you need to succeed in the game. These points are essentially derived from my own experience developing domains over the last 9 years — so yes, they are street-tested.

Let’s get started, shall we?

This is perhaps the most important tip I can ever give you — Focus on niches you already have an interest in. This will make your life a lot easier, fun and profitable. To quote Diorex from WickedFire -

I dont think that unmarried college age guys are going to be rockstars at promoting a menopause product or even a baby shower list. Look to your life experiences for things you naturally know a little bit about. Sure you can learn, but why set yourself up for a longer more difficult road.

.

I’d also quote Hugh MacLeod from his HughTrain Post –

Even though the niche you are interested in may not be as profitable as pay-day loans or credit-cards but it would be easier for you to know what people really want and dominate your niche. This would translate into much higher overall profits and you’d have fun doing what you love.

PS: I have some finance domains lying around which I just can’t get myself to research into and develop! If you have an interest in grabbing them cheap, give me a holler.

It is particularly important to remember that you cannot satisfy everyone at the same time. If you try to do that, you end up disappointing everyone.

So, don’t try to build general-purpose and “one size fits all” kind of sites. TO make such sites truly spectacular you’d need a lot of resources — which should not be your objective.

Let’s say that fitness is one of niches I operate in. To build a general fitness site covering topics for both men and women would be absolutely crazy on my part. If I focus on Men’s Health, that would be better and easier for me but it would be very broad subject and still require a LOT of resources to create good site in.

What I would do is that I’d split the niche into further niches — building abs, reducing fat, dieting, bulking up, upper-body exercises, stronger legs, sports training, cardio-exercises, aerobics etc. — and build separate sites for them. This would make it easier for me to build the site quickly, promote my sites more easily and get more targeted traffic.

Now, I am not saying that you cannot build sites on broader topics — I do it all the time. But, be prepared to put more resources and energy into them. I have a lot of broad-niche sites but I have even more sharp-niche sites.

Don’t re-invent the wheel. If there is some “out-of-box solution” available for what you want to do, use that — even if it means some lost functionality, you will be saving tons and tons of money and/or time that you would have to spend on programming and design.

Most of the times you will be able to find a free open-source solution, all you need to do is look hard enough.

For content management use WordPress or Joomla and use free or cheap templates to change the look. For forums you can use vBulletin or PhpBB. Photopost PHP or Coppermine get the job done for a photo gallery. vBulletin will also take care of your Social-Networking needs.

Use a site like HotScripts.com to find out the various available scripts. You could download and install the script on your server — most of the times Read-Me files are detailed enough.

If you are not comfortable doing it yourself, hire a freelancer — but read Tip #5 before you do. Also, don’t use any third party hosted services except widgets and analytics.

Basically, the whole objective here is to use the already existing free or cheap tools to build your website.

Start milking revenue from your domains right away by using affiliate links, CPA links, Google AdSense et. al. Contrary to the popular belief, sites CAN make money from low but quality traffic.

To give example of one of my own sites, it got only 8 visitors from search engine and made $147 in affiliate commission.

So, optimize your site for revenue right from the start — even though you may get only small amount to traffic initially, but you don’t want to waste it.

Now, whatever money your site makes, re-invest at least 75% back into the domain. Promote the site, get professional content written, buy new software or get custom scripting done — but, reinvest the money to grow your site.

Remember – your site’s revenue is not your pay day but rather your pay day will be when your 25% becomes substantial or if you ever sell the site.

Or at least 80% of them will produce crappy stuff or miss deadlines and you will lose money with them. But it not all gloom — you have to know and follow certain rules of thumb which I will be discussing in later posts. I will embed a link to the post here whenever I publish it.

Also, if you are subscribed to the newsletter, you will get a buzz as soon as I publish the post. So, if you are not already subscribed to the newsletter, it is a good time to subscribe now.

The idea is to keep a detailed record of how much you have invested in a domain and what sort of returns it is getting. I have found that keeping records will not only keep you updated of your current reality but will also keep you motivated to work harder.

With my own sites, I keep an excel file with weekly details of how much traffic did the site get and how much money did it make from various revenue channels. If both don’t increase consistently, I know I need to get moving to grow these figures.

Also, do it on a weekend and don’t spend too much time on keeping super-detailed stats tracking every figure under the sun — just a bird’s eye view of where your sites are going in terms of revenue and traffic. Your priority should be creating and promoting your sites.

Now remember — these are just the rules-of-thumb and the list is no way exhaustive. Also, every situation is unique and you will learn the most by diving in and doing. So, start working, start making mistakes and start learning!

Stay tuned for other posts on the subject including – Stockdale Paradox, The “Big Fat Lie” Media Wants You to Believe, Building Websites, Choosing the Right Host, Traffic Secrets, Art of Recurring Profits and Revenue Maximization.

There was a time when I was extremely frustrated with my domaining business. I was seeing people sell domains for hundreds of thousands of dollars and yet I had so many domains which no one was willing to pay even registration fee for, let aside thousands. What was worse was that I was not making much money in parking either.

Whenever I saw the domain-sales charts I would cringe. What was I doing wrong? Was there a fault in my investment strategy? I had to do something about it or simply get out of domaining business. It was a do-or-die situation for me.

There is another thing — I hate failing.

So, I sat-back to take a rational look at my investment strategy and find out what was wrong with it. And very soon I did.

Simple – My domains were neither “premium” nor had butt-loads of traffic. Most of the domains in my portfolio were — and still are — keyword rich and brandable and had excellent development potential.

Most domainers look for easy money and investments where they don’t have to put too much effort — and development is not one of them.

My major problem was that I was selling wrong thing to wrong people.

But there were two other BIG problems — 1) Premium and Traffic Domains cost lot more than I could spend and 2) I had a lot of money invested in portfolio of keyword-rich domains.

Very soon I was about to discover something that would change my fortunes.

When I analyzed the domains which I had sold till now, I discovered that the keyword domains which had some sort of content on them were super-easy to sell. Not only this, whenever the domain had traffic and revenue, it was able to fetch much-higher prices, which meant more profit for me.

There was this dating discussion forum I had started. I had spent $160 for a vBulletin License, $120 for 1000 paid posts by forum-posters and a few hours on building links. Within a two and half months, the site was getting a few hundred visitors a day and made some revenue from adsense and a few affiliate programs.

I put it up for sale at an auction site and sold it for $1500 in a few hours. That was a profit of roughly $1200 on a site which took less than 10 minutes a day to run.

Sometime ago I had purchased a database of 1000 riddles for $20 and paid a coder $50 to code a simple script to read from this database and display on the site. I put it up on a riddles related domain of mine, posted links to it at some social networking sites and spent about 10 bucks for a 100 directory submission.

I ended up selling this particular site for $750 after five months. My investment was $80 and time spent uploading the database and script on my site.

Another was a small-business marketing related site where I had posted 27 blog posts which I had paid freelance writers $10 per post for. My cost was $270 and a few hours of link-building and sold it for $1300.

More interesting was this web-design related blog which I had purchased from someone for $700. I spent a few hours and wrote a kick-ass article which I was able to get on the front page of digg. Then I posted some re-printable and PLR articles and paid another 120 bucks to freelance writers to write 12 articles for it.

The site started getting loads of traffic and started making $200 – $300 from affiliate revenue, $70 or so in Adsense revenue and $150 from text-link sales every single month. After 5 Months, I sold it for $4250. I not only made a huge profit by selling it but also kept all the money it made from affiliate programs, adsense and text-link sales. My Net Profit from this site was roughly $5700.

All this was more than enough to prove to me that there was a potential to make money — and a LOT of it — by doing something that others were not doing. And the fact that I had keyword-rich and brandable domains was a huge advantage for me. All I had to do was to rinse and repeat.

Find a Niche. The very first thing that you need to do is to find a niche you will be developing the site in. You need to make sure that the niche has certain demand — which means that you will get some traffic — and you have a way that you can make money from it. You also need to know the methods that you can use to identify these profitable niches.

Register a Domain. Once you have your niche, you need to register the domain name which you will run the site on. The domain should be brandable and keyword rich to help with SEO. You need to know how to come-up with domain names, research expired domains and even purchase from the after-market.

Create a Site. The very first thing you need to do is to setup the site on your web-host. Be sure to read my article – How to Choose a Host Without Getting Ripped-Off — 6 Practical “Rules of Thumb” to Remember.

If you want to create a content site then you need a content management system like WordPress or Joomla. You could also setup a Photo Gallery or a Discussion Forum.

You could also hire a freelancer to code a script for you but you can usually find an out-of-box open-source script to do the job.

Publish Content. Once you have the site up, it is time to start posting the content. Remember, it is the content which attracts people to your site and gets you the rank in search engines. You can create the content yourself or hire freelancers to create it for you. You also have an option of using content with reprint rights. Getting great content is much easier than you think.

Revenue Streams. You don’t want to waste your traffic by not commercializing it. Put up affiliate links, CPA links, contextual advertisements, text links and products for sale on your site. Contrary to the popular belief, you don’t need thousands of visitors to make money. What you need is “quality traffic”.

For example, I have a site which got 8 visitors last week and made me $147 in affiliate revenue. I also have another site in more popular niche which gets a few thousand visitors a day and makes only a few bucks. I usually commercialize my site before I even start promoting it at all. After you have a pagerank, you can also start selling text-links on the site.

Promote the Site. When your site is up and running and has some content that people can use, you need to get the word out about your website. You can promote on the Internet by doing Search Engine Optimization and Link Building, Social Marketing, Paid Advertising, Viral Marketing, Internet Public Relations and what I like to call Twisted Marketing.

SEO is the cheapest and easiest way to get traffic to your site and keyword domains are a big help. If you have Link Building Tool by EasyLinkBuilding.com, it will be very easy for you to get quality back-links which are absolutely a must to rank high and get traffic from search engines.

Being on Digg’s homepage can easily get you 20,000 – 30,000 unique visitors in a day. Getting a top-blog to link to you is another very effective strategy. When LifeHacker.com linked to one of my sites, I got like 17,000 Uniques in a day and made a nice change.

Let it Ferment. While the results of paid and viral marketing are instantly visible but search engine optimization takes some time to show results. For most of my sites, I just optimize the site, build some links to it and forget about it. If the niche is not super-competitive, search engines start sending a fair bit of traffic.

Sell the Site. Once you have a site which has some good content and, hopefully, gets some traffic and makes some revenue, you may want to sell the site. Some of the options that you have if you want to sell your site are domain forums, auction sites, domain brokers or through private sales.

As an entrepreneur, you have to remember that your profits are your revenues minus the cost.

Your objective is to maximize your profits and to do that you need to increase your revenues and reduce your cost. The challenge is how you can reduce the cost of creating the site, creating content and promoting the site while maximizing the revenues, traffic and cost you can sell it for.

Stay tuned to follow-up posts or subscribe to the newsletter.

PS: Here’s a real-life case study of how someone new to domaining made profit with this strategy.