A good time to invest in UK domains

UKI have developed an interest in domain names recently and although it seems that you need deeper pockets to buy anything good in the .com game I found there are opportunities in the .co.uk market that could serve as an investment for a later date, note you can buy UK domains even if you are not in the UK so no geo restrictions. 

I’d maybe see it as a long term investment that anyone can get involved in pretty cheaply just now, even better if your a website developer/builder as you can add value that way in the short term. You can buy generic words for under $100 on some forums like Acorn Domains. I don’t really have experience in this market so I decided to seek out and question someone who did!

Rob Taylor is a domainer with twelve years experience of internet development and has been actively involved in the domain community for seven years. He runs Hey Limited , a company which provides domain name brokering and acquisition services along side building useful websites on great domain names. Rob is also involved in widening awareness of domaining and will be co-organising the first ever Australian and New Zealand domain events in early 2008.

·       What is your involvement in the domain market, developing, domain flipping, building a portfolio of UK domains for yourself or do you work for a client base or all of the above?

I would say it is a little from all areas however more recently the focus has been acting as a domain broker and acquisitions agent via my company Hey.co.uk . There was certainly a gap in the market for someone who was able to link domainers and end users in the .uk namespace in a knowledgeable and useful way, so my personal activities grew into something more formal.

·       In the UK Nominet run the show and make the transfer process for UK domains quite complicated or rather time intensive with paperwork and forms unlike the quick process with other TLD’s is this a hindrance when selling or do you see it as added security

I believe this stifles the low end of the market (ie. sub £100 transactions) as a fair amount of time is used up shuffling paper and submitting it to Nominet. This can be off-putting to those who believe £xx ‘profit’ is not worthwhile as often such a process requires chasing up forms that sit on people’s desks for weeks on end.

Nominet are implementing their version of EPP shortly, along with major data restructuring so every registrant can link their names together and synchronise data. It has been stated that the change of the registrant field in the registry will still be a ‘manual’ operation actionable only by Nominet however in the long term such changes can only be a positive step with just a change in policy needed to create a user run transfer process – whether this is a good thing or not is open to debate!

As it stands the paper transfers do put a fair number of buyers off, and does cause confusion in transactions. Usually this occurs when people are used to moving .com names over and think the same process applies to .UK and a ‘push’ is all that is needed and then get a shock that they have to do some paperwork.

The upshot of this is that .UK names are very secure and to my knowledge have never had a domain hijack or theft in the style of .com names for example. The great thing with Nominet is that they are real people at the end of the telephone, so if a problem did occur a name transfer could be reversed with far greater ease than in other TLD’s.

·       SEDO seem to be one of the main sellers for brokering UK domains, do you find them good value for getting an end user price or do you feel domainers still need to seek out the buyer in today’s market when looking to sell or do you wait for buyers to come to you.

Personally I do not believe Sedo adds much value apart from being an independent verifier of traffic, which obviously is only useful for a certain style of names, and acting as a third party environment for a secure transfer.  Incidentally the former is quite amusing as I have a couple of names listed that have been away from Sedo’s DNS for a good few months yet still somehow record traffic on their systems.

The cost of their service is £70 or 10% of the sales price however if a domain is purchased due to its traffic then it will have been earning Sedo money during its listing period, and if it is a decent name in its own right then it has sold itself. Sedo claim that processing .UK’s requires great leg-work on their part, however in my experience and knowledge of third party transactions that is often not the case and the buyer or seller have to do the chasing up of forms themselves. It seems it is not uncommon for Sedo to ‘lose’ a buyer of a name (thus cancelling the transaction) and supply contact information with which a telephone call later the deal is back on outside of Sedo.

I generally go by the rule that a good name will sell itself, however the key is to make the right people aware of the name’s availability. As with most business activities if a buyer makes an unsolicited offer they are often more motivated than if ‘cold called’ regarding the availability of a domain.

·       Do you fell that holding a large UK domain portfolio could be in danger by the possible break-up of the UK union at some point in the future

This is a very interesting question and in my opinion I believe .UK would be safe from any break up due to its ingrained nature from the years of branding attached to it and the less encompassing nature of the alternatives that would be introduced if a split occurred.

There have been calls for country code top level domains for Wales (.cym – Http://www.dotcym.org ) and Scotland (.sco ) , which could follow in a similar vein as .Cat which is dedicated to Catalan based sites. The situation with .cat are different however it is a good example of how compromises can occur ‘inside’ an existing extension to cater for specific needs.

One bit of domain trivia is that both .UK and .GB are allocated to the United Kingdom however due to historical reasons .UK was kept in use and .GB was used there is more information on http://en.wikipedia.org/wiki/.gb if your readers are interested.

.         So many of the good .UK domains seem to be parked or forwarded which to a developer just looks like a real waste of a good domain name

One consistent gripe with the internet community is the proliferation  of parking , adsense and advert listing pages. It is often frustrating to see good domain names being used for such purposes however I believe it is a legitimate and often useful tool for end users. If an end user arrives at a page I think it is better to have relevant links than a half arsed website or even worse a 404 page.

Often domainers have several tens / hundreds / thousands of names so domain parking is a quick and simple way to both satisfy their own needs and make their domains provide something useful to an end user. Currently I am seeing more out of the box parking pages coming with more value added such as specific information, web forums and integrated wiki’s as domainers understand that the better the user experience the higher earning the domain name.

I have recently reordered my domain list into a development target list and have been working on them; either developing the sites internally or creating specifications to outsource development. All of this takes time and money and is quite hard to do on generic names, for example a recent brainstorming session over the domain ‘ Trading.co.uk‘ cooked up several areas of interest – should we make it a financial trading site? Perhaps a classified adverts site? Ought we work to the future and make a emissions trading information site? It is a nice ‘problem’ to have however whichever route we take someone will still think the name is wasted 🙂

I would really encourage developers to get in touch with domain owners as I am sure if you have good ideas and skills they would be happy to work with you to create nice websites. We have done this in the past with revenue split agreements and the like, as at the end of the day it is in everyone’s best interests to have as much information and interaction out there, as that’s what the internet is all about.

.           Have large corporations/companies been buying up portfolios of them for a later date as we have seen with .com’s meaning less gems for the rest of us?

Large investors and companies have been investing in .com for a good few years now and as with most things – what happens in .com happens in .uk eventually!

There have been buy-ups of smaller groups of targeted traffic domains in .UK however over the last few months there certainly has been a heating up of the market involving dedicated domain investors.

I am not sure if that means there are less gems around for the likes of us, but I would certainly look at striking now to invest rather than wait!

·       Is it too late for someone to start domaining and build a portfolio of .co.uk domains for investment purposes to sell at a later date or is this still a good time to buy

Investments depend on the expectations of the investor such as  timeframes and returns involved, it is possible to buy a name and double your money in a few days at a lower level (£xx-xxxx) by targeted marketing of the domain or spotting bargains. Yesterday I purchased Shopping.org.uk from Sedo auctions (if the transaction goes through!)  for £220 – a great keyword in a growing extension with a fair bit of value to be had and the development potential is fantastic so it is worth scouting ebay/sedo/forums for bargains.

As for ‘larger’ domain investments (typically in the £10k + category) I think there is tremendous value to be had and more money to be made the more you are prepared to spend. Recently a .uk name was purchased for £15k and due to the nature of the name and potential development it could be made into a handsfree site earning several tens of thousands a year for little effort and as a domain on its own would be worth £25k to a domainer and £50K+ to an end user! There are very few markets out there that allow the same returns.

It certainly is not too late to get into .uk if you are taking a longer view, and for short term gains it is a case of spotting the bargains and being in the right place at the right time to act.

·       When buying domains for long term investment do you have any advice as to whether generic words, phrases or pools of domains are good value.

As a rule generic or descriptive domains are the way forward eg. Sport.co.uk   Great.co.uk also colours ( Red.co.uk !) and single useful or usesable words are worth purchasing.

The general rule is if a name can apply to lots of people or a large market or is ‘the’ term for its niche, it is a winner. A single decent term will consistently hold value over the longer term and earn income while it is under your ownership, very much like rental property with the earnings and increasing value.

If the investor is a developer or is aware of how to go about developing a domain name I would suggest acquiring a domain in a genre you are interested in. It is always easier to develop a site when you have more than a passing interest in the content of the site.

Personally I would opt for a single great domain rather than split your budget on lesser names however it does often depend on what names are available to purchase for a fair price.

The idea of a fair price or if a name is good value is very subjective – I come across people daily who believe a domain name is not worth a penny more than a fiver and others who believe their Loans4meandU.me.uk is worth a million. Most people could tell you Sport.co.uk is a great name, but very few could place a ballpark value on it.

·       I hear you have quite a few LLL’s are they one of the safer investments

You heard right! I love them ! Three letter domain names are a favorite of mine due to their rarity in possible combinations. I started domaining with a view that domain names are like personalised numberplates, the shorter the better! About four years ago it was possible to see lists of three letter domain names posted on forums as ‘scraps’ to register for a fiver as people didn’t want them – now they are vastly contested even if QXZ.co.uk (‘rubbish’ letters) dropping.

A domainer alluded to them as being the ‘gold bars’ of domains, and that while you may not make a fortune on each one they will always keep their value and make a nice return. This is a particular decent way to describe them as they are quite easy to value due to comparative sales and there is always someone who will buy them if they are fairly priced. Incidentally this guy sold 200 three letters (£250-1500) at a 10% profit which soon adds up to a tidy sum. I was the buyer of a few of those, and they have paid for themselves via a couple of end user sales ( TJC.co.uk for example) however such sales are unpredictable due to the nature of the domain.

One thing I have noted recently is the value of having a short domain name with companies willing to buy any short domain name and fit a startup company name around the letters due to the added kudos of a short name. Likewise existing companies with BigCompanyName.co.uk are on the lookout for shorter BCN.co.uk style names.

·       Are UK domains increasing in value at present giving short term gains or is this market a better long term investment

As I have outlined above there is room for both short term gains and long term investments, however I would warn prospective domainers that it is too easy to rush in and register complete tat and never have a sale. The best strategy would be to visit domain forums and read as much as possible and observe for a few months what is being bought and sold – not just what is listed with prices. This will enable you to understand the market, and learn from other peoples mistakes without losing cash!

·       How do you see the current value of UK domains in 20 years time.

You mean if we don’t have mini PC’s with the worlds knowledge embedded in our brains and communicate psychically?! I think the internet and web as we know it today is very entrenched and so widespread that the basics will remain the same just increase in computing power, bandwidth and wireless technology will impact on our use.

One further aspect of internet use to consider is that there are kids growing up today who know nothing else but to IM their mates, have a myspace with pictures of themselves with the odd video and play on their games console against a bloke a thousand miles away and slowly such internet aware people will become society as a whole.

The flip side is that the internet as we know it could be replaced with Something Else which will negate the need for domains and thus the value will cease to exist overnight. I believe this will not happen as domain names are one of the more sane and open methods of finding information, search engines will come and go as will keyword navigation but to the bloke in the street domain names (however crap) will be accessible.

What has this got to do with .UK domain values? Well, domains are here to stay and the potential userbase and use for them can only be getting bigger…

·       What is the largest offer you have turned down to date

I cannot say exactly due to none disclousure agreements but one name of ours  has attracted several offers in the £xxx,xxx bracket.

·       What would be the most valuable domain you own and which domain if you could pick one would you love to add to your portfolio

My company owns Music.co.uk which I believe is quite a valuable one and I hope we can do justice with our development work on it (watch this space!) and personally I have managed to be lucky and get Rob.co.uk and Taylor.co.uk so I am quite content on the name front. I suppose the next one I am targeting is RT.co.uk when Nominet open up two letter registrations!

·       What is the biggest profit you have made on a domain sale to date

Again I cannot say exactly (NDA’s again) however in the £xx,xxx range on a single name, however based on return on investment the days when names can be caught for £6 and sold within days for £5k were quite good!

·       Any significant business or domain regret’s

Nothing major that comes to mind, plenty of mistakes so far and a few missed opportunities but as long as you learn from things, keep facing forward and try and be decent to people things will turn out ok. I hope 😉

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I would like to thank Rob for taking time out to answer my questions, I am personally going to build a .co.uk portfolio for domaining and developing, they offer good value and still within the realms of affordability for most people, perhaps part of the ideal retirement fund.

About Scott Jones

Scott hails from the north east of Scotland and started earning online at the end of 2000 building websites for local businesses during which time he won an award from Lord Alan Sugar for Excellence in Enterprise. After having quite a bit of success with domaining Scott mainly runs educational evergreen websites which generate over 3 million visitors per month but is always on the lookout for a fresh thinking out of the box way to turn a buck. Follow on Twitter.

Comments

  1. I am sitting on a few .co.uk but don’t really know what they are worth or what to really do with them. Some have potential, it’s just finding the time and motivation to do something with them.

    Scott, what do you do with your domains before developing them? Park them or nothing at all. I built a script to detect what the domain was and show certain content, so can park lots on one main domain to at least server some content and maybe get indexed, but not sure if search engines penalize that type of thing in any way.

    • I think most of us have unused domains Garry, every now and again I clear out/sell small sites & domains, I am trying to buy some that even though are unused may have future increased value at a later date so I don’t worry about parking them, others I have used for mini sites, others really need developed fully into sites before they would be worth anything. Personally I’d leave them unused/dead if they have zero traffic rather than park them using the same page for each one.

  2. It’s good to finally see a UK focussed article on domain investing, especially being a Brit myself!

    Very well done on a great article and interview – it’s now in my bookmark folder.

    – Martin Reed

    • Thanks Martin, it’s appreciated and I must say Rob did an excellent job, can you believe I bought tickly.co.uk for £30 recently! lots of value in the UK market, I hope I can look back in 5 years and say well at least I took the plunge.

  3. Another timely post. I’d just started looking into domain names as investments. Developing a domain and turning it around for a profit makes a lot of sense to me.

    I still haven’t quite gotten my head around “pure” domaining, registering a name and selling it for a profit without any development at all. Seems a bit like commodities trading to me. 😉

    • Imagine not having to worry about traffic, hosting, scripts, seo, marketing hmm. I think pure domaining is very attractive but I also think the divide between developers and domainers is less so now and both see value in collaborating, a domain with history and traffic can add value, ultimately a good domain should be able to sell itself though as Rob said.

  4. Great reading – thanks Rob! Good to hear about your experiences. I have a couple of things about Sedo that I’d like to add.

    Domains that were once parked with Sedo but are no longer with us sometimes still record views in our statistics due to backlinks and SE listings. Parked domains do get picked up and Rob’s example demonstrates that people bookmark parked pages when they are well optimized and attractive. It’s good to see that Sedo’s pages are performing well – even when no longer actively parked with us!

    Sedo do not “lose” buyers. Some traders wait until the contact information of the buyer/seller is revealed to them in the transfer process – eg. On issue of a payment request, where the seller’s details are listed. They then use that information to close the sale externally – avoiding our commission but opening themselves up to fraud. We have no control over that. The responsibility to pursue a sales contract is entirely down to the domain seller – Sedo has no power to chase down non-sales as the contract exists between the two trading parties – we merely act as a facilitator. This is reflected in our fees. The fees incidentally, have been revised and now are only 50 GBP minimum commission.

    • Sadly today Sedo have contacted me stating that the seller of Shopping.org.uk is not responding – even though earlier they told me he was having problems with the forms.

      Sadly my lack of confidence that the sale would go through was found to be true.

      As for the other points (I have only noticed that the email reply ended up here as well):

      Regarding the odd parking stats:
      I agree that is one method ie. if the name has been parked with http://www.Sedo.com/domainname.co.uk that can be cached / bookmarked etc however I was basing it off my account where names that have only ever been parked via the DNS change method still get the odd visit and click.

      eg.
      (three example domains)

      The above have not had DNS set to sedo for a good few months now.

      Obviously the above are not huge issues however something must be creating the clicks in the system – it would be interesting to know what 🙂

      As for losing sales:
      The above may be an active method of avoiding your fees however in my experience (sealedbids.co.uk was the one I had in mind when I was responding to the interview questions) transactions are lost for the sake of an email or a telephone call.

      Don’t get me wrong – I am not slagging off Sedo as I do appreciate you have a tough job (especially with the arcane .uk system). I am guessing your work is not helped by there being lots of buyers who are unaware of how domain name transfer actually work, likewise what Sedo’s role is in the process. We have come across similar and made http://www.hey.co.uk/domains/domain-services/.uk_domain_name_transfer_guide.html as a result.

      It does seem there is a sense of the luck of the draw on Sedo transfers – if Maria or yourself are involved or asked to take a look then things are dealt with right away however other times things can drift. Obviously it is hard to know the cause of this issue, however the general opinion seems to be is Sedo needs more (quality) staff!

      It could be worth Sedo taking a stand with none paying bidders, sellers who do not release names or buyers who do not complete a transaction in a timely manner etc. by ;

      – Banning users from Sedo
      – Removing users portfolio
      – Editing the terms to include a ‘complete by X’ date.

      Likewise I accept from Sedo’s point of view it is best to stay out of the transaction (for liabilities sake!) however an active policing of sales ie. vetting bidders (pre-auth a fee, feedback system, public country of origin etc) could be a step forward as at the end of the day deadbeat buyers are just that whatever platform they are working through.

      At the end of the day I am generally working towards the goal of making life better for domainers and love to work with anyone with similar aims. It is great you take the time to read comments and reply, if only Sedo can widen this out and be more receptive it can strengthen its position going forward in what is changing times in the domain industry.

  5. Nice article Rob (a founding member of acorndomains.co.uk)

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