Does Developing Domains Into Websites Always Beat Domain Name Parking?
By Anna Johnson on July 5th, 2010Time and time again I hear Internet marketers, domain name developers and, of course, ‘lounge-chair experts’, telling me how parking domain names is dumb and that there’s much more money to be made from developing domain names. But is that always the case?
It may seem logical that developing a domain name into a fully fledged website which sells something or otherwise monetizes visitors better than a parked domain, will beat parking. The reality is, however, that parking may actually deliver a higher relative return on investment (ROI) than developing domains for some (or many) domain name investors.
Don’t get me wrong. Here at Kikabink we’re big on developing domains. But we also look at domain names as investments. So are you ready for a little domain name investment math?
Let’s say you have $1,000 to invest in domain names. You know you can get an impressive 30 percent monthly return from parking them with a good domain parking company.
On the other hand, you also know that if you develop them into websites – after deducting the costs of hiring people to develop them and the costs of marketing the sites if you choose to market them (whether it’s paying for SEO services, conducting pay-per-click ad campaigns, etc) – you can make an even better return i.e. 50 percent after 3 months.
So should you park these domain names or develop them?
Well, assuming you reinvest both the original investment and your profits – whether you choose parking or development – you will be better off PARKING those domains.
This is because your monthly ROI from parking is higher than your monthly ROI from development. Your monthly ROI from parking is 30 percent, whilst your monthly ROI from developing the domain is just 25 percent.
Of course, there are a lot of assumptions inherent in this example that may not be true in the real world. But the point is that when you strip away all the glamour or otherwise of developing domain names versus parking them, at the end of the day domain name investment is the same as investing in any other kind of asset. The same principles that apply to investing in stocks, property, etc equally apply to domain names. You want to choose the investment strategy that delivers the highest ROI over time.
So, unless you have a (quite legitimate) passion for developing certain kinds of websites, then determining whether to park or develop is a matter of knowing your costs, expected revenues and the length of time likely to elapse before you see those revenues in order to estimate the expected ROI for both approaches.
Contrary to what seems to be the popular view, for some – or even many – investors, domain name parking may actually be more lucrative over time than domain name development. This is why companies with massive domain name portfolios – we’re talking 100,000s of domains – typically park them.
Again, let me stress that I’m not saying parking will necessarily beat development for all or some domain names. It depends on a number of variables: the domain name in question, the parking company, the domain developers, your monetization strategy, your skills and resources, and a host of other factors.
Nor do I want to make it sound as though the choice between parking and development is a simple matter of plugging some made-up numbers into a spreadsheet and comparing the results. You just won’t have any notion of what the REAL numbers are likely to be and how they compare (and they’ll still be estimates at best) until you roll up your sleeves and do considerable parking and developing.
What I can say, however, is that the argument that either parking or development is necessarily superior is just plain wrong. It depends. More importantly, if there’s a key message to take out of this article, it’s this: the more you approach domain name investment like it’s an investment, the more money you’re likely to make.
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