Perhaps the most amazing thing about the Internet, from my perspective as an entrepreneur and an investor, is the fact that it makes it possible to implement a wide range of different and a lot of times seemingly contradictory business models. Domain investing does not represent an exception.
A lot of investors make the mistake of assuming that only one approach is correct, that only one domain investing business model makes economic sense. Nothing could be farther from the truth and all you have to do to come to this conclusion is analyze a few successful domain investors. For example, people like Frank Schilling own a huge number of domains and have done well by scaling. Other people, for example Rick Schwartz, own considerably less domains and have decided to focus more on quality. Both business models have been proven to work and this is the message I’m trying to get across: there’s more than one way to skin a cat.
This is why in our industry, just like in many others, there aren’t always right or wrong answers. For example, a domain investor can say that renewal fees are a burden. Another investor however may say that renewal fees are ridiculously low. As much of a paradox as it may seem, both of them can actually be right.
Perhaps the person who complained about renewal fees owns thousands of domains. And yes, for business models which revolve around owning a large number of domains, renewal fees are one of the biggest factors, perfect perhaps even the biggest.
The other person, on the other hand, might only own let’s say 10-20 three letter domains. A lot of active domain investors don’t hold a lot of inventory and therefore, renewal fees aren’t that much of a burden. This is because the average acquisition cost of such a person tends to be considerably higher than the paltry fee it takes to renew a domain.
For example, the average acquisition cost of someone who invests mainly and three number domains is easily in five figure territory. On the other hand, the average per-domain acquisition cost of someone who focuses on quantity (so of someone who owns thousands upon thousands of domains), is frequently in the double or even single-digit range. This is precisely why both people can be right. It all depends on your perspective.
This example should make it clear where I’m coming from, so there’s little need to turn this post into a novel. I will end here by once again mentioning that what I’ve tried to explain today is this: a lot of domaining business models may seem contradictory but fortunately, this doesn’t mean one of them doesn’t work.
