I’m sorry to have to say this but if you expect investing in domains to be fair, you are in for a bitter disappointment. A lot of the situations you will come across as a domain investor will make it clear that a lot of aspects related to our industry are 100% unfair. Today, I will refer to some of them.

Luck matters more than you realize. You might think that if you own a really good domain, and users will come knocking at your door in such volume it even gets annoying but that is just not the case. Even a very good domain can just sit there for years without even receiving one serious end user inquiry. Whether we admit it or not, luck plays a considerably more important role than most people realize. Being contacted by the right and user, being contacted at the right time, these are all things which can and will have an impact on each and every sale. Now of course, the harder you work and the better your portfolio becomes, the less of an issue luck will be but make no mistake, the luck variable is here to stay.

In this industry, it takes money to make money. I would love to be able to say that the meaning is a level playing field and all that but the truth is that it isn’t. Now on the one hand sure, the barrier to entry is low. You can even hand register a domain for $0.99 using a coupon and there you have it, you can call yourself a domain investor. However, doing it right requires money. If you have a decent amount of capital at your disposal, you will be in a good position to build a great portfolio and do well. If you however are not well-funded, then you will have to compensate in another manner. For example, by spending days upon days, hours upon hours contacting and users. Or doing something else, I’m sure you get the point. It is definitely possible to do well even if you are starting from scratch but make no mistake, it will be excruciatingly hard.

You will be at the mercy of external events. Even if you’re a hard-working domainer who does everything right, you can still end up losing money due to external events which are beyond your control. The best way to explain it is by giving you an example: the 2007–2008 global financial crisis. If you are a domain investor who started building a portfolio before the global financial crisis, then most likely, you ended up doing rather poorly despite your hard work. This is because an event you cannot control, in our case the global financial crisis in question, affected domain values in a dramatic manner. This is the message I’m trying to get across, the fact that you can end up losing money or at least doing more poorly than you would have expected not because of something you did but as a result of a result of an external event you had no direct control over.

Most people have an agenda. There’s nothing wrong with having an agenda in and of itself. We all have a certain agenda, whether we choose to admit it or not. However, your agenda as a domain investor will often be in contradiction with the agenda of some of the other industry people you will come across. Sometimes, your goals will be aligned and that is great. In other situations however, that will not be the case and it’s such situations which can make you lose money when investing in domains.

The counterparty risk issue needs to also be taken into consideration. If you own your own registrar, then you have nothing to worry about except of course the value of your domains. If however you are keeping your domains at another company such as GoDaddy for example, you need to also start understanding what counterparty risk means. Simply put, counterparty risk means that as a domain investor, you will not only have to worry about your domains and their value but you also have to worry about the company you are keeping your domains with. Most domainers don’t remember the RegisterFly incident because they weren’t involved in the industry back then, an incident which caused quite a few headaches for domain owners. What I’m trying to say is that one risk you need to be aware of as a domainer is the fact that the registration company you are working with can end up experiencing difficulties or even downright going out of business. Don’t underestimate the importance of this variable.

That’s pretty much it, the list however is by no means definitive. Feel free to add to it by posting a comment. What I’ve tried to make clear and I hope I succeeded is that if you consider our industry fair, you are not being realistic.