Saturday, December 20th, 2014

Is Domain Real Estate a Dying Investment – Pro’s and Con’s of Site Ownership

24

Hey Everyone,

What is a domain and how can it become an important entity to your online business?

For some, this question is very elementary and the answer is quite obvious.  But really, after being in this business for close to 10 years now, I truly believe the purpose of a website has shifted drastically and the way people build businesses online and the reasons have also taken a major shift.

A domain is becoming more and more a real estate.

The power of domains in Google

Although Matt Cutts, a software engineer at Google that relays a lot of information about the biggest algorithm changes (including the recent Panda update), states that domains do not play a significant role in the ranking algorithm, the results clearly state something completely different.

Before I share some results, let’s look at this from a “common sense” standpoint.

Say you have a brand, example, Walmart.   If you type in the search term “walmart” into Google, you would hope that the specific brand Walmart would achieve the top rankings.   It is their “branded” keyword and the keyword rich domain for that brand Walmart.com should take the #1 spot.

Sure enough, it is.  If you look at some of the other top brands, you will see this as well.

Check out “street articles” or “wealthy affiliate”.  Thess both hold the number one rankings, and why shouldn’t they, it is the keyword rich, branded URL.

Here is where it gets cool…

How can Google know what URL represents the brand, and which URL is simply a keyword rich domain.  One that someone has bought with the attempt to “buy up the keyword”.

They typically don’t.  So simply through buying a keyword rich domain, you can pretty much assure yourself a good positioning within the search engines.

I ran a couple of tests with a few silly domains:

muppetbabiessong.com targeting the term “muppet babies song” (720 global monthly searches)
dexterbobblehead.com targeting the term “dexter bobbleheads” (880 global monthly searches)

I quickly set up a WordPress blog using WP Express at Wealthy Affiliate, and added a few simple pages of content to the homepage.  I let them sit for a couple of weeks. Now if these get ranked without any work, then this proves that keyword rich domains have “pull” in Google, does it not?

Here are the search results in Google for “muppet babies song”:

website-muppet-babies-song

Seriously.  I spent less than 20 minutes from start to finish setting up this domain, and it has a #6 ranking in Google.  Not bad and results that we as marketers should not overlook.

But how about good ol’ Dexter.  Here are the Google search results for “dexter bobblehead”

dexter bobble head google rankings

Ah ha…a #5 ranking in Google.  Again, little to no work.   Just threw together a site in Wealthy Affiliate, put one page of content on there, and then let it MARINATE in Google.  Two weeks later, it was ranked #5 overall.

Now although these are not #1 overall, they are rankings that many people would pay for.  These are also sites that now carry real, tangible value.  They get traffic (approximately 100 clicks per month on average each), and if I spent some time, I could easily generate some revenue from that.

I could also build on the traffic by writing and submitting a few relevant articles to StreetArticles.com or another authoring site.  I could optimize my blog….

I am not going to get into the marketing side of things, I purely wanted to prove the benefit of buying domains with keywords…and the instant value that can be realized by throwing a quick website up on them.

Free Websites, a Thing of the Past

Yeah, cool….click a few buttons, choose a template, drag and drop a few things around, and BAM, you have a website.

Weebly, Blogger and WordPress are among the best free website builders out there.  Here is what a website would look like that is created on these free website services:

http://yoursite.weebly.com

http://yoursite.blogspot.com

http://yoursite.wordpress.com

The fact you can build a website is great.  However, the fact that you don’t own this website and have very limited control of it, can present a bit of a problem.

Here is a just a quick list I put together of some major problems that CAN exist when you build a blog on another domain….

(1) It is very difficult to get ranked
(2) You have very little control of the ways you can optimize your site
(3) Any “free site” is a poor way of branding yourself as a business.
(4) These top level domains are riddled with poor content, hurting your own “free” site

The one positive, it is FREE.

In saying this though, the costs of building a site have come way down over the years.  Space is cheap, bandwidth is cheap, and owning your own domain is a very small investment (about $10 per year).

Businesses and individuals no longer have to pay $1,000’s to put together a site nor do they need to be a “techie” to accomplish putting a site together.

Websites are now cheap, and in my opinion, a required aspect if you are looking to build any sort of business online.  And this leads directly into my next discussion, site value.

How do you calculate the value of a Website?

If you are using a free site, you may be able to sell access to it based on a percentage of the revenue.  The “value” model may look something like this:

Your sites earnings x 3 months

However, people will still be reluctant to buy a “free” site because you really are not the owner of it.  It guess I would say that it is similar to subletting a home that you are renting for more than you are renting it for.  You don’t really own it, but there is a slight chance you will be able to profit from it.

Whereas if you own your own website, people are much more willing to pay not only for the revenue, but the work you have invested in setting it up, building content, and getting rankings.

Even if your site is earning $0, it is still worth something and can be easily flipped at places like Flippa.com or the SitePoint.com Marketplace (which I will explain shortly)

We are also in a day where we are seeing high valuations for websites with large user base or high earnings.  Facebook is a pretty extreme example but it has been valued at 50 times its yearly earnings.  A typical established website will typically fetch 3-7 times its yearly earnings.

So if you had a site that was generating you $100 per month in positive income on a consistent basis, your valuation may look something like this:

$100 x 12 x 3 = $3600

One thing that we all need to remember….

A domain is a $7 investment. SEVEN BUCKS!

There are now services available like WordPress Express that allow you to throw together as many sites as you’d like, and it only takes a few minutes to set-up a site.  It is like being able to build a new house whenever you like, for $7.

Online real estate is very similar to plots of land in a way.  They are not making more “desirable” land in the same way as they are not making any more .com domains.   Once you buy it, the domain is yours and it will only go up in value.

Buying, holding, and selling domains is a huge business opportunity.

Two and Three Word Domains Bringing in the Cake

Historically, top level domains (.com) that were one word were the only ones fetching the large sums of money on domain auctioning sites.  However, we are in a new age.  Domains are in limited supply, thus two and three word domains are gaining more and more value.

My prediction…

In 2015, quality 4 word domains will be hard to find.  The marketplace for 3 word domains is going to be depleted and people are going to be paying lots of money for 3 word domains and the buying frenzy is going to push many of the 4 and 5 word URL’s out of the market.

Here are some recent examples of sites that have sold for good money:

Undergraduate.com sold on SEDO for $22,000
iVideos.com sold on AternicDLS for $16,800
Cacao.org sold on MediaOptions for $15,000
Misjuegosdebobesponja.com (huh?) sold on Sedo for $14,000

Domains without a website are earning people considerable amounts of money.   What a lot of people domaineers do is throw up a simple wordpress site and let it marinate… meanwhile Google and other search engines will see it, rank it, and it will further increase the value of the domain.

Want some examples?

Here are some “websites” that recently sold on Flippa:

www.realestatesuccess.com sold for $12,000
techspott.com sold for $2,500
onlygirlsgames.com sold for $16,000

OK, these sites are somewhat established.  Some of them don’t earn revenue, but some of them have a decent monthly revenue.  Maybe a fair-upside investment for the buyer.

What about those sites I mentioned that simply have been set-up and are “marinating” with a couple pages of content.  Here is an example site that just sold for a good penny:

www.auditionofthedayclassifieds.net sold for $2,500  ($0 revenue, created in Feb 2011)

What about mobile?  Is this going to have a negative impact on website ownership?

Yes and no.

Think of the way people search.  Think of the way people will search a few years from now.

People are always going to be hungry for information.  Information is going to always be delivered via websites, the only thing that may be different, is the way it is presented.

If anything, websites are heading in the direction of becoming “longer tailed”…meaning that the more niche and targeted the site is, the more relevance it is going to have.

The older generation for the most part still search regularly, even if it is from their smart phones.   If someone is looking for a solution to their problem, then they are going to do a quick search in Google.

Data aggregating services may have an adverse impact in terms of people looking for news, but for people looking for a solution to their problem or looking to find something quickly (rather than it fall on their lap) they are going to continue using search platforms in one way or another.

And websites are not going anywhere.  If anything, there is going to be an explosion of new traffic from developing countries and people without Internet in first world countries are going to continue to become more active users.

People are more connected than ever and INTERNET traffic is continuing to grow exponentially.  Instead of people searching solely from their laptop or house, they are now searching via their tablet computer, the e-book reader, or their smartphone (or all of them).

People are also making more and more purchases via these devices.  All advantageous for website owners.

Benefits of having your own website…

Outside of the “real estate” value that domain names have (and are only going to continue to appreciate),

having a domain is going to allow many advantages over not having a domain at all or utilizing a free website service.

There are FIVE major advantages to becoming a website owner:

(1) The power of self SEO – When you have your own website you have the ability to benefit from your search engine marketing efforts.  This can include getting relevant back-links, writing relevant content, implementing ongoing dialogue via your visitors, and incurring social status and rankings.  This is much more difficult to do if you are piggy-backing a free site as you are typically a sub-domain of the larger site which has likely been penalized in one way or another because of associated (other user) sites that have been doing erroneous SEO activities.

(2) Building your brand, building your purpose – A website is a brand.  Once you create a brand, people will share your site, talk about your site, remember your site, and frequently visit it.  Branding is powerful in any business, regardless of whether or not you are an affiliate based business, offline business, or offer your own online service.

(3) Improved analysis and testing - Analyzing website data and metrics can lead to improvements in the user experience and ultimately website revenue.  By having full control over the website technologies you can use, it is very simple for you to incorporate various types of split testing, and services like Google Analytics which provide full data reporting.

(4) Integration and “shareability” of your website content –  Like, Tweet, Share, and now Google +1.  These are all social aspects that the search engines are now taking into consideration and can help improve your rankings.  It is very easy to integrate these into your own website and can drastically increase the traffic and search engine visibility that you get.

(5) Ability to become a “source” - The  more value you provide on your site, the greater respect you will earn as a “source” of information within than niche.  A website creates that sense of legitimacy that visitors need to respect you as a subject matter expert.  Provide regular quality content, and before you know it you will have a following.

As your website grows, so does your website value.  One of the most critical aspects of any web success is traffic.  Everything surrounds traffic, like an offline business, if you have no feet walking past your “space”, you have no revenue potential.

A high traffic website will also be worth significantly more.

So…

What is the best way to get traffic?  What is the quickest way to get it for free?

Utilizing StreetArticles.com to Increase your Domain Value

Street Articles is the latest “content authoring” spot on the Internet and is the latest brainchild by Carson and street articles - article directorymyself.   Although at first glance, it may appear as just another place to put your articles, it is well on its way to becoming more than that.

Our goal with SA is to provide authors that write “quality” content a place to submit their unique articles and to quickly be rewarded for their hard work.  It is also a place that you can build your brand, your following, your online credibility, and engage people in conversation.  This will lead to your content getting shared, talked about, and increase traffic to your website.

It is a nice addition and very complimentary to writing on your website or blog.

Here are some reasons why YOU need to pay attention to what is going on at Street Articles and how it can benefit your business:

(1) Get a following – the following will continually be visiting your profile, your articles and ultimately your items

(2) Traffic generation - Article traffic will generate you website revenue and inflate the value of your site.  For example, I currently have 56 articles within my account and have over 30,000 article views in the last 2.5 months.  Pretty powerful for a limited amount of work.  This traffic comes solely through search engine rankings and people sharing my articles.   I could expect to pay close to $15,000 for this traffic if I was using PPC.

(3) Your work will be shared – This means your social value increased, and your voice will become a greater leveraging point.  I have many articles that have shared in total 50+ times without a lot of effort (other than offering value to the reader).  Quality content is king…and quality content gets shared in our social Internet age we are living in.  Street Articles will continue to stay on top of the social trends and continue to provide features that benefit article shareability.

(4) Inbound links to your website (from author bio and right within your articles) – These will improve your website rankings.  Relevant content leading to another relevant page counts as a quality back-link.   Although not as critical as they once were, these can definitely make the difference between 1st page and 2nd page rankings.

(5) 15 Minute Rankings - If you want to take advantage of a timely news event or you simply want to get your articles indexed and ranked quickly, you can count on StreetArticles.com.  You will typically find your site gets ranked within 15 minutes of approval, with our personal moderation being very quick.

(6) It is FREE. If you want to get your free StreetArticles.com account, you can do so here.  See for yourself.  Test a few articles and compare your results to other directories here.

Utilizing content authoring sites like ours to drive additional, free flowing traffic to your site will only increase the value of it.  Traffic leads to revenue, revenue leads to higher “domain real estate value”.

These are my current thoughts on the domain industry.   In my opinion, it is not going anywhere anytime soon.  You may agree.  You may disagree.  Either way, I would love to hear your feedback and your own personal insights or story into this topic.

Cheers,

Kyle

Kyle
Member of WealthyAffiliate.com
Author at StreetArticles.com

PS. You can now follow us on twitter at:

@kyleandcarson
@streetarticles

Comments

24 Responses to “Is Domain Real Estate a Dying Investment – Pro’s and Con’s of Site Ownership”
  1. isabela says:

    I have read each and every point and found your angle on the topic of domains very interesting. Thanks! :)

  2. poetSx says:

    one of the things I really appreciate about WA is the understanding that is presented in these articles. They are designed to make you think as well as act. And this helps your other senses open up and ask questions to create new possibilities for yourself. AND , if shared in the chat/forums, those creations are for the other members too!
    This is the difference between mentors and teachers. One guides your own development, the other tends to tell you what to do. Mentors show you how to be self-responsible. Kyle and Carson do it in Spades!

  3. Dear Kyle,
    This is an excellent article, I have learned a lot, the comments from my blog sometimes makes me wonder is my visitors don’t know I am learning also. This article has given me answers to many questions that I now have the answers for. Keep up the good work. And visit Paradise soon.

  4. Tobi says:

    you talked about selling a website with $o value but you didn’t write any thing on that later. I am really interested in this and would love to read it. Thanks for the great article though, I followed your article advice on writing on breaking news and getting info from some top news sites, I am still testing to see the result though.

  5. laughound says:

    Thanks Kyle!

  6. Charley Chris says:

    That’s right. It may be that Google is planning to launch another big algorithm change similar to the panda a year from now. But let’s see how things go in the coming years. 2011 has been a great year so far.

  7. Kyle says:

    @Charley

    I do agree with you…backlinks will still be important. But the weight of them will not be as high. The old techniques will still be relevant, but there are just bunch of new variables thrown into the mix in terms of SEO rankings. Most things will get exposed and gamed but Google and other SE’s do attempt to stay ahead of the curve. I am sure rankings a year from now will evolve even further. Thanks for your feedback!

  8. Charley Chris says:

    Hi Kyle, I don’t think I will agree with you on that one. I know that social has become more important with the introduction of the +1 button, LSI too by penalising keyword-stuffed websites, and user engagement by penalising websites with a high bounce rate. But do you know what? All those can be gamed.
    It is very easy to include LSI keywords in my content, it is easy to write interesting content and relevant content. And what about the social stuff? I could easily pay somebody to create 10 different google accounts and use them to +1 my website. I can create 10 or more facebook and twitter accounts and share my website there.
    So what does google want? They want an algorithm that cannot be gamed and they are still figuring out how to do this. These new things like the +1 button were introduced to make it harder to game the present algorithm. So backlinks will always be important but some types of links may be devalued and become useless. Most links on the web are created by internet marketers. If backlinks become useless in gaining high rankings, there would be less links on the web. And remember the word inter + net. This is my opinion. I would love to hear from you.

  9. Walt Bayliss says:

    Nice work Kyle.
    I totally agree –
    I have over 400 domain names and constantly buy them as I think or see them.
    I put together a report showing how to make 40 or 50K selling domains… the key is that you can TARGET the sales if you set it the right way –
    The report is available to any that click on my name above this post.

    Ideal work! and the WordPress Express for most sounds like a great tool to set em up quick and get them ready to profit from.
    Well done!
    Walt Bayliss

  10. Kyle says:

    @ Sylviane

    I agree to a certain degree. Yes, they can be used for back-links, but who says that Google and other SE’s are really going to care about back-links a year from now. That BL algo has been gamed so bad that there is really no credibility in any back-links. Even high PR, reputable companies allow back-links…so how do they determine a real from a fake. I think that other metrics are going to become much more important in the ranking algorithms for search (think social, think LSI, think user engagement).

  11. Great article Kyle. Definitely, free sites are more something one can use for backlinks. For example to backlink a video that is promoting your REAL domain, or anything else you want to give backlink to. But, it shouldn’t be used as a sole site.

  12. Kyle says:

    @Alex

    A site can go for 36 times if it is established…ie, a couple years consistent revenue like the site you have mentioned. A site will have less value if it has only been around a month and it has just started earning money as it is not proven. Many times the actual marketing message that you associate with a domain can make the difference between it selling and not selling as well. You really need to self promote!

  13. Alex Sol says:

    Hey, Kyle!
    A great post and I have been thinking about domain names about a long time… Actually I’ve got some 2-3 word domain names just sitting in my accounts, I don’t build sites for them yet I can’t just let them expire, I think they will sell for a good amount some time soon.

    However, I am not sure if I’d agree with you on calculating the value of the site… More often then not I see sites sell (on Flippa) for 5-10 times their monthly revenue, not 36 times as you mention. I have an established site that’s been making $100-$300/month on complete autopilot (I haven’t touched it since 2007)… I tried to sell it for $2k and no one wants it…

    Anyhow, I guess site/domain flipping is also a bit risky, you never really know what a domain could eventually be worth.

    Cheers,
    Alex

  14. Kyle says:

    @ Stephen

    It doesn’t matter too much, as long as you have some decent content on your page. If you have a page chocked full of affiliate links, it may adversely affect your rankings. If you are just trying to get it ranked initially, you can have affiliate links on your page but I would not go overboard. Remember this as well, affiliate links without surrounding helpful content are useless anyways.

  15. Stephen Byrne says:

    Hi Kyle, Love the post and it makes me think, have I been making a rookie mistake.

    I buy very relevant domains in the way you speak of hear, I set up the SEO and relevant pages, then some content (as with my latest site, Flashcostumes.com) already on page one.

    But, I see you say “let it stew” and I am just wondering that by having affiliate products in your content when you are building your site, would it be better just to stick content on first and as you say, let it stew before ever putting an affiliate link on your new site.

    Would love to know your thinking on this

    Rookie Stephen

  16. Charley chris says:

    I was surprised with your rankings which you achieved withing two weeks. I trust you guys because you always have something to backup any thing you say. Site ownership is truly important. After all, it’s better to have your own house than to rent one.

  17. Steve DeVane says:

    Kyle,

    I think you’re on target. Good experiment with the Muppet song and bobblehead to demonstrate it, too.

    I can also vouch for the value of Street Articles. The links are valuable and have helped a couple of my sites increase in the search engine rankings.

    Steve

  18. Kyle says:

    @Dusan

    I agree. If you were working for the source, would you want to release the exact algorithm. Talk about an invitation to get gamed!

    Google has to look at domains as the brand. How do they know if you own ‘howtostopadogfrombarking.com”, whether or not that is your company name “How to Stop Your Dog From Barking Inc”. Wouldn’t it be most appropriate to give the brand owner the higher ranking if that was their domain…I think so.

    All the talk now is about the .anything domains. In my personal opinion these will become .nothing domains. Some people will definitely be able to take advantage of it, but again, that will depend on the sort of rankings that people get with their .newyork or .mtv domains. Problem is that people have become accustomed to typing in .com if they are looking for a brand and it will be tough to break that trend if “some” people have a .mtv, and some people use the old convention like “nbc.com”.

  19. Dusan says:

    I too have websites that made it to page 1 without any effort. And I mean, no backlinks and no content. Just a blank home page and I was #9 within days. So, Matt Cutts isn’t entirely truthful.

  20. Kyle says:

    @Klrrider

    I agree. There is no downside to building a website. As soon as you throw a site on your domain, it instantly has value to someone (whereas not all domains will have much more value than the purchase price originally). There are lots of “gem” domains out there still for sale and there is a lot of opportunity for those willing to to spend some time and have fun building websites and content.

  21. Klrrider says:

    This post is spot-on and I agree totally about the value of owning a domain. I can’t think of anything else to do (legally) that has the profit potential of creating a website, and fun to boot. I am completely sold on using the Word Press platform.

    My oldest site however is a Site Rubix build with a PR of 2. I haven’t really done anything to it except keep the content updated for the last two years. I wished I had started it with WP but am afraid to tamper with it now. It is the horse I rode in on if you know what I mean… guess a site can also have sentimental value…lol

  22. Kyle says:

    @ Joan

    WP Express is included within Wealthy Affiliate, which does have a membership fee. It allows you to create sites easily on your own domain utilizing the hosting we provide to members at WA. Whereas sites like blogspot or weebly are not on your own domain, they are a subdomain of their websites (yourdomain.blogspot.com) and they are not owned by you. This limits your control and what you can do with your website…as well as domain branding, points which I mentioned within this post.

  23. Joan says:

    Kyle, I’m a little confused as to what actually connotes a free website. What is the difference between WordPress Express (hosted by WA) and a free WordPress blog, maybe hosted by your own host? What part is free? Is it the theme (template) that is free, or are we referring to hosting? What makes it free? If I want to use WordPress Express for a new site, would I be able to use my own hosting company? Hope it’s okay to ask you this here. I imagine other people have the same questions. I haven’t used WordPress yet, but am planning to do so and I want to go about things properly from the beginning. Thanks. Excellent article!

  24. Kyle,
    You are the man for real. I learn new things everytime I read your articles. Thanks!

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