The Domain Name Business

(page 2 of 2)

If you are advertising cheap consumer goods, you'll need a higher degree of traffic to make any real money. If your site is specialized in an industry where one sales lead is worth a lot, you could have substantially fewer visitors but still make a profit.

One of the nice things about Web sites is that you can analyze the traffic you're getting. If it turns out that 70% of your visitors are coming from Canada, you'd adjust your content and advertising to take advantage of that.

What kinds of things should entrepreneurs consider if they're in the market for a domain?

Of course they'll want to know how much traffic it gets and what kind of search engine ranking it has. Check out the seller and see if that person is the original site registrant. You want to know if the site has changed hands many times and what was on the site in the past, which you can find out at Archive.org. If a site was used for something bad in the past, such as to infringe on somebody's trademark, you don't want to be associated with that.

You want to find a site that suits you and your long-term goals. It's fairly easy to evaluate interest and site loyalty without having to do a lot of extensive research. Sites that offer products or direct services tend to be more profitable, since you aren't solely relying on advertisers for your ROI.

What should you do with a domain once you purchase it?

Determine what you can do within your budget to improve the Web site and add value to the real estate. Define the Web site's identity. If you can create a recurring audience by offering content in addition to advertisements, that gives you more valuable traffic quality.

For instance, some people own domains based around a sport that they know, so they put up content, photos, and updates to make the site dynamic.

How are domain sales prices evaluated?

Anything you can do to improve the domain adds value, so if you hold it for several years, if you increase the search engine ranking, if you develop content and audience, that's all cash-flow positive. If you do nothing more than place advertisements on the site and rely on natural traffic to generate 'click-thru' revenue, you'd evaluate what you make annually and sell it for a multiple of that annual revenue.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

Business Exchange

Track and share business topics across the Web.