A few months ago I was browsing some of the domains coming up for auction at NameJet and I had the idea to see what sorts of common people’s names – I mean the names are common, not the people – might be dropping. I looked at several names and ran Google searches on them, studied the results, and considered their search popularity.

I ended up back ordering a handful of names, and won several at the minimum bid of $69 each. These included AprilWilliams.com, LauraVega.com, and MattGreene.com. I thought I might contact some of the people with those names and try to sell them the domains. As it turned out I got busy with other things, but only a few months later I received an offer for AprilWilliams.com through Sedo, and sold it for $500.

If you’ve been trying to acquire generic domains at auction and getting outbid, you might try some real “names”. If they’re common enough there’s sure to be a market and a steady trickle of traffic, and at the moment there’s not a lot of competition for these domains.

There are a number of important differences between Namejet and Snapnames, two popular domain drop-catching services. But there’s one difference in particular that you need to watch out for. It has to do with the auction process.

Namejet.com is, of course, the new domain name drop-catching service that has stolen a lot of business from Snapnames.com. Namejet now gets the domain names that expire on Network Solutions or eNom, while Snapnames picks up expiring domains from dozens of other registrars all over the world, large and small. When I want a domain name, I always back order it at both sites, as well as Pool.com, just to be safe.

When Namejet first debuted late last year, their interface was very buggy, but they seem to have worked out the glitches.

Another point on which Namejet lost to Snapnames was that on Namejet you could not see who you were bidding against when a domain went to auction. They have since corrected this problem and now, once you’ve back ordered a domain name, you can see a complete bid history showing each bidder’s handle, bid amount and time/date of bid.

Watch out when back ordering on Namejet, though. Their back order process works differently from Snapnames.

On Snapnames you can bid the maximum amount you’re willing to pay and the amount will not be displayed to other bidders. Snapnames will increase your bid incrementally as you are outbid, first by increments as small as $1, then increasing to $10 and eventually $20 as the bid increases.

I like this system, because I can look at abc.com and say to myself, “I’d pay as much as $5,000 for that, not a penny more.” So I put in my bid at $5,000, even if it’s still only at $70, and I walk away. Once the auction starts Snapnames will walk up the bid for me incrementally. If I end up getting the domain for $1,000, great. If it costs me $4,500, ok, I was prepared for that. If I get outbid and it goes to someone else for $5,100, well, that sucks but I said in advance that I wasn’t prepared to pay that much, so my absence has enforced a sort of unconscious discipline on my bid.

Namejet does not do this. If there are five current back orders at $69 each, and you order the domain for $5,000, the bid is immediately increased to $5,000 and that is visible to everyone. If you win the auction you will pay $5,000, even if none of the other bidders go above $69. That’s awful. Maybe the other bidders would not have paid more than $1,000, so that’s a wasted $4,000 you did not have to spend.

What that means it that if I really want the domain name I must be present when the auction starts, and I have to sit there, manually increasing my bid by $10 at a time or whatever, until the auction ends.

I don’t care for that system and I have asked Namejet to change it. I will continue to place back orders on Namejet because of the quality of the domains dropping there, but I am careful with my back orders.

Do you feel like it’s too late to get into domaining? Does it seem like all the good domains are gone? Are you looking for concrete advice, and not finding it? Well, here you go. Some of these are tactics that have worked very well for me. Others I have borrowed from top domainers and tips I’ve spotted on domain discussion forums over the years.

I’m giving away secrets here: there’s some real gold, so don’t say I never did nothin’ for you.

1. Spot Domain Industry Trends

Read domain industry blogs and journals. Read DNJournal.com and check out the blogs listed in my list of Must-Read Domainer Blogs. You’ll notice that some of these tips come from other domainer blogs and magazines. That’s because I read them on a daily basis and I have learned much that way.

Domain forums are a resource as well. Join NamePros.com, DNForum.com, and DomainState.com and read what the pros have to say. Pay attention in particular to the sticky posts on those forums.

Industry trends are important. Be aware of what’s happening with valuations of various types of domain names. For example, two and three-letter domains have all been bought up and are selling for high, even astronomical figures. But what about four-letter domains? Dominik Mueller recently expressed his belief that CVCV (consonant – vowel – consonant – vowel) domains are inevitably going to rise in price. They’re short, brandable and supply is limited.

ccTLDs (country code top level domains) are another possibility. I personally believe that .in (India) domains represent a huge opportunity. India holds a fifth of the world’s population, English is widely spoken, and internet usage is growing quickly. The .in extension was recently introduced and is rapidly overtaking .co.in. Sales in the $x,xxx to $xx,xxx range have already been reported for .in domains, and yet amazingly premium domains can still be hand-registered by someone with a creative mind. Not long ago I bought Achieve.in for $10 from a DNForum member, and in recent months I have hand-regged domains (at $4 apiece!) such as propertyauction.in, discountbroker.in, slacks.in, khakhis.in, sizes.in, judaism.in, synagogue.in, dedication.in, beachhotel.in, appreciate.in, swimmer.in & swimmers.in, nonfat.in, frozenfoods.in, indianlife.in, indianliving.in, freewebpage.in, computerschool.in, pacifist.in, pacifism.in, nonviolent.in, coindealer.in, webjob.in & webjobs.in, internetjob.in, computercollege.in, lemons.in, avocados.in, castes.in, wiremoney.in, offshoreservices.in, banktransfer.in, buyclothing.in, sendcash.in, hardwarestore.in, candystore.in, nationalnews.in, and more than 100 others equally good. Several are already getting good traffic and making money.

I’m not saying that .in domains represent the best or only opportunity out there. Through dedicated research and study you can discover other emerging opportunities. I’d advise you to ignore brand-new speculative extensions like .asia, and steer clear of failed extensions like .biz or .name. Instead, look for trends that are relatively new but have already caught on with some segment of the population and are growing quickly. There’s got to be some momentum, some growth.

2. Science/News/Tech Emerging Trends

Subscribe to blogs and magazines that discuss emerging trends and technologies (Business 2.0 was fantastic for this, but unfortunately has just shut down. You could still learn a lot from the back issues, though). Search for and register domain names related to those emerging trends. Ignore trends that may have a cult following but are not widely known. For example, I recently read about a new trend among photography hobbyists called lomography. I tasted several domains related to this trend but found that they got no traffic, so I let them drop.

Instead look for trends that have the potential to be huge. If it’s a product or technology, it should have the potential to be used by every middle-class consumer. Alternatively, it should have corporate appeal: a trend that will make money for businesses and corporations is one that will attract investment dollars.

3. Drop Auctions

SnapNames.com, and now NameJet.com as well, are especially important. I don’t care much for Pool, but I find Snapnames to be easy to use and I have acquired many good domains there. Of course there are reams of junk domains, but you can find gems in the pile. I usually bid between $100 and $300. That way if there are several bids at the default price I come out on top, but if the bidding gets frenzied then I let someone else have it.

NameJet.com: Nowadays, any serious aftermarket bidder must use NameJet as well. They get many of the good domains that formerly went to Snapnames. I place bids on both sites.

I rarely use TDNAM.com, so I can’t say much about it, but I know it’s the primary hunting ground of some domainers.

4. Sedo.com

I have found good deals by searching Sedo for domains with traffic, and picking out the domains that sound good and are reasonably priced. I’ve acquired some of my best earners this way. If I make an offer of $300 on a traffic domain and the seller comes back with a price of $10K, then I just cancel the negotiation and move on. Surprisingly, however, it’s still possible to get domains with traffic and revenue for under $1K on Sedo.

5. BuyDomains.com

Yes, that’s right. There are deals to be had at BuyDomains if you search carefully. Domains there can be purchased on the spot at the listed price with no negotiation, so if someone has carelessly under-priced their domain or forgotten to update the price, you can often get it cheap. For higher priced domains, you can sometimes get good discounts if you establish a relationship with a sales rep and work with him/her.

6. DMOZ

I picked up this tip from Peter at DomainersGazette.com. Drill down into the old DMOZ.org links to find websites that are now defunct or have not been updated in a long time. Use a WHOIS tool like DomainTools.com to locate the owner and make an offer on the domain. Many of these folks are people who started websites years ago and have since let them lapse. They often know little or nothing about domain name values and will part with the domains cheaply.

7. U.S. Patent Office filings

This tip comes from PredictiveDomaining.com. Go to the website of the United States Patent Office. From the left-side menu click Patents and then Search Patents. Rather than the Issued Patents section I’d concentrate on the Published Applications. Do a search on a term you’re interested in, like monitor, headphones or VR. For example, I just did a search on “headset.” I looked at the recent applications and I saw a listing for a “biometric encryption key generator,” which is not exactly what I was looking for but intriguing. Turns out it’s an application by Motorola for “a method of facilitating an encrypted communication for use in communication between a local device, operated by a user, and a remote device.”

That’s too technical for me, but it got me thinking about the future of biometrics in security. We see it all the time in science fiction movies: eye scanners, fingerprint scanners, voice recognition systems, etc. So I searched about 30 domain names representing commonly used items that are well suited to biometric locks: BiometricPhones.com, BiometricPadlock.com, BiometricStarter.com (for a car, motorcycle, scooter), etc. Lo and behold, BiometricStarter.com, BiometricCar.com, BiometricCars.com, BiometricScooters.com and BiometricFloorsafes.com were available and are now mine! Want to bet that some tech company or auto maker will want these someday? This goes back, by the way, to point #2 about monitoring emerging technology trends.

8. The Question of Debt

Be very, very careful about going into debt to acquire domain names. Debt can be useful, but use it wisely. Don’t pile up credit card debt by hand-regging hundreds of bad domains that get no traffic and have little re-sale potential. I made this mistake two years ago and have still not fully recovered.

Of course this implies that you must study up on just what is a good and bad domain name. So when it is ok to go into debt? When you’re buying a proven commodity. Shop around for a domain (ideally a dictionary dot com) with proven traffic and earnings. Try to find a seller who really needs to sell, so that you can offer as low a multiple as possible. Calculate how much it will cost to service your debt, versus how much the domain name will earn you on a monthly basis. If the domain name will be profitable, you have a winner on your hands. And of course you can always re-sell it for a profit in the future, as valuations are always rising.

9. Focus on a Niche

Focus on a particular subject area, ideally one you know a lot about but you can always study up and become an expert in any area that interests you. Become familiar with the companies that do business in that space, and follow the sales of all domains related to that subject. This allows you to become an expert on domain names in that space, so that you immediately know what’s priced well and what’s overvalued.

10. Think Local

A specific example of focusing on a niche is the area in which you live, because you are already something of an expert on that subject. For example, I live in Panama right now. Recently I saw that someone was offering PuntaPacifica.com (“Pacific Point” in Spanish) for sale for only $10. This happens to be the name of a very expensive neighborhood in Panama City, with luxury condos selling for millions of dollars. I snapped up the domain name, and it’s now getting traffic and earning parking money. I have many other Panama-related domains that make money, at least enough to cover the reg fees. I’m sure there are plenty of Russia-related domains that make money too, but I don’t buy those because I know little about Russia, so I can’t recognize what’s good and what’s not. (I certainly would bid on Moscow.com, but I think you get my point).

To quote Dominik Mueller on this subject:

11. Stay Away From These

Trademarks: Some trademark variations and typos make money, but it’s not worth the legal repercussions if someone comes after you. In addition, it gives you a bad name and perpetuates the conception of domainers as cybersquatters. Before you buy, check US and international trademark databases, for example, at the U.S. Patent Office website: http://www.uspto.gov/

Tragedy Names: Don’t try to capitalize on national or global tragedies. It could damage your reputation and it’s bad for your karma.

Bad Extensions: Avoid extensions that come from tiny countries and islands, speculative extensions like .asia, and failed extensions like .biz and .name. Stick to .com, .net, .org, .info if it’s really premium, and perhaps a few very good .mobis as a long-term investment.

“Brandable” Nonsense: Don’t waste your time with nonsense words that some call “brandable”, such as ogeejogee.com, or crashgalaxy.com (I just made those up – if someone actually owns them, don’t take it personally). There are too many new domainers registering and buying domains that are just trash. Stick to real words, three keywords or less, spelled properly, no hyphens or numerals. The exception to this rule would be pronounceable four letter domains, which have value.

12. Be Ethical

Keep your word. Don’t back out of done deals because you think you can get more money somewhere else. It’s fine to change your mind if you have not yet reached a formal agreement, but if someone posts a domain name for sale on NamePros, for example, and you reply with an offer, and the seller posts “Sold” and closes the thread, that represents a commitment on your part just as if you had made a winning bid on eBay.

Don’t lie about traffic stats, don’t generate fake traffic, don’t use advertising to drive traffic to parked domains (a violation of most parking services’ TOS), don’t sell your parking account, don’t sell domains with deceptive characters (e.g. making people think a numeral “1″ is a letter “i”)…

One might argue that engaging in unethical practices could ruin your reputation in the domain industry – which is a lot like a small town where everyone knows everyone – and thereby affect your ability to make money.

That may be true, but more fundamentally, being honest and ethical in your business dealings gives you a feeling of self-respect, and a peace of mind that is priceless.

Ok, now get out there and find those great domains, make money, and be happy.

P.S. Are there any important tips for finding great domains that I missed? What has worked for you? Comment!

“Many of life’s failures are people who did not realize how close they were to success when they gave up.”

- Thomas Edison

Having a hard time with this domain name business? Or for that matter, with any other challenge you’re facing in life? Have you been working at it for a long time and starting to feel like you’re not going to get there?

Don’t give up, evolve. Learn from your mistakes.

Here are five pieces of advice that will almost guarantee success. It took me two years to learn how crucial these points are, so pay attention:

1. Sell. As a domainer, focus more on the sell side and develop selling strategies that work.
2. Buy Revenue-Earning Domains. Only buy domains with the proceeds of your sales, not on credit or with your savings. Use the money from your sales to buy revenue-earning domain names. Ask the seller for proof of earnings and analyze the stats and the domain carefully. Is the traffic steady or declining? What is the source of the traffic? Is it easy to monetize? Is the domain easy to remember, pronounceable, and descriptive? Consider all these points and make sure the domain name will be profitable for you within a reasonable period of time before you agree to buy.
3. Buy Underpriced Domains. Look for deals where the seller is either desperate or is undervaluing the domain name out of ignorance. If the industry standard is to pay one year to ten years revenue depending on the quality of the domain, try to find someone who’s selling for 10 months to 2 years revenue. Make lowball offers and bargain hard; you’ve got nothing to lose.
4. Monetize Your Traffic. If a domain name is getting traffic but no clicks, look for alternative ways to monetize it, such as changing parking services, altering the keywords, developing a website, or redirecting the traffic to an existing website or affiliate link.
5. Dump or Sell the Losers. If a domain name is getting no traffic, dump it. Sell it for whatever you can get, unless you are convinced it has re-sale potential, in which case, return to point # 1.

Remember the coyote in the old road runner cartoons? In every cartoon he’d try some new ACME device or trap to catch the road runner, and each time he’d fail abysmally. Like maybe he’d try a rocket-powered harpoon, but he’d point it the wrong way and shoot himself instead of the road runner. Whereupon he would ditch that idea and try something else.

Even as a kid I remember being frustrated and thinking, “Why not just try the harpoon again, but this time point it the right way?” By the time I was ten I could not watch the road runner cartoon anymore because I was so annoyed at the coyote’s inability to learn from his mistakes.

Maybe I was a weirdo kid and missed the point of the cartoon, I don’t know.

Look, I know this is a cliche, but the night is darkest just before th dawn. The moment when something is the most difficult is often the moment before a breakthrough. Don’t abandon your dream, just refine your strategies, learn, adapt.

A recent study published in the Journal of Personality and Social Psychology analyzed the tactics people use when negotiating, and how well buyers and sellers feel that they negotiated once the deal is done. The study contains some interesting lessons for domain name professionals and anyone else who deals with products with negotiable prices. It turns out that most people don’t bargain very well, and don’t get the best possible price, whether they are buying or selling.

Many People Don’t Bargain Well

The study was carried out by professors Richard Larrick of Duke University’s Fuqua School of Business and George Wu of the University of Chicago’s Graduate School of Business. By talking to buyers and sellers – including professionals with MBAs – about how much they would have been willing to either pay or reduce a price, the professors found that the people in the study generally captured only about 50% of what was available. So buyers only captured 50% of the possible discount, and sellers only obtained 50% of the price increase that the buyer was prepared to accept.

The funny thing is that both buyers and sellers felt that they had done quite well, pushing the opposite party to the limit. Why does this happen?

Self-Fulfilling Estimates

Professor Larrick says:

“The problem is that we rarely learn the truth about how far we could have pushed the price in a negotiation. We talk about the fact that if you’re a buyer and are too optimistic about how low you can push a seller, you’ll figure out that your ‘ambitious’ estimate was wrong. But if you incorrectly believe you won’t be able to push the seller much at all, you begin the negotiation too modestly and give away too much, too easily. Your modest estimate becomes self-fulfilling through your modest actions. It’s this lack of feedback on the truth that really traps people into thinking that they have always pushed the price close to their opponent’s limit.”

To put it in domaining terms, suppose I want to sell UOLV.com, and suppose I am hoping to get $5,000, but would settle for $4,000. I might set a price of $8,000. The buyer comes at me with an offer of $4K, I counter with $6K, and we settle at $5K. I come out of it feeling good because I got my price target, and the buyer is happy because he got the domain for $3K below the asking price. Since we don’t talk to each other afterwards and say, “How much would you really have settled for?” we both believe that we bargained well, when in reality I would have sold for as little as $4K, and maybe the buyer would have paid as much as $7K if I had pushed.

So my $5K price target became a self-fulfilling reality, and I’ll never know that I could have gotten more.

Street Market Negotiating Skills

The professors say that people who come from countries where street markets are common and haggling is standard practice do better in these kinds of negotiations. They are able to recognize the following kinds of statements as bluffs or negotiating tactics:

Buyer: “I absolutely can’t go any higher.”

Seller: “This is barely above my wholesale cost.”

Buyer: “My boss won’t approve the deal if I go higher.”

Seller: “I’ll be losing money if I go any lower.”

Buyer: “Take it or leave it.”

Seller: “This price is firm, non-negotiable.”

Once when I was fifteen years old I was at a sprawling street bazaar in Saudi Arabia, looking for a watch. I had grown up in the United States and knew very little about negotiating. I found a Casio that I really liked. The seller, a wizened Yemeni fellow, gave me the price. I responded with an offer about 30% below his asking price. The seller suddenly became angry. “Are you trying to take food out of my children’s mouths?” he said loudly. “Are you trying to ruin me?” Shocked, I apologized and walked away.

Now, looking back, I recognize that his behavior was nothing but a particularly dramatic negotiating technique. Every culture bargains in their own way. I live in Panama now. People haggle here as well, but the style is more apologetic than accusatory. I’ve learned to ignore the bluffs that are commonly thrown up. Of course it also helps that I’ve been here long enough that I am familiar with the normal price range.

On the other hand, long negotiations have a downside: they take time, which for some people affects the opportunity cost of the deal. A big-time domainer with 100,000 domains earning millions of dollars a year may not want to spend three days bargaining over a $5K domain name. His time is worth more than that. A speedy deal and a little less aggravation may be worth another $500 to you on a given deal. That’s a choice you have to make.

Three Important Price-Setting and Negotiating Tactics When Selling a Domain Name

1. Pricing: The professors came up with a specific conclusion about the best way to price something for sale and get the best price possible. Professor Larrick says, “For us, the key is to get an accurate picture of the range of prices, target the favorable end of the range, and then be a little more aggressive than that in setting your opening offer. It’s only by doing this that one avoids the ‘self-fulfilling’ cycle…”

2. Countering Bluffs: I would add that you should learn to recognize and counter the most common bluffs that buyers use. If a buyer says, “I can’t go any higher,” don’t give in, and don’t call him a liar either. Instead counter with a reasoned argument like, “I understand what you’re saying, but this domain name will ultimately save you money by bringing you targeted leads. The extra money is worth it.”

3. Small Increments: To get the best possible deal, move away from your initial offer in small increments. So if I’m selling a domain for $5,000 and the buyer offers $2,000, rather than counter with $4,000 I might come down just $200, to $4,800. This causes the buyer to move upward towards my end of the price spectrum, rather than me moving downward to his end. Of course it also results in a longer negotiation.

Know the market, learn as much as you can about your buyer, and bargain hard.