Domain Buyers Clubs – Good or Bad?

A domain buyers’ club or domain buying club or domain club in short is in essence a consortium of buyers who pool their cash to buy domains. That’s the short version. The long version is most ‘clubs’ have ‘membership fees’ and unless you sell enough to cover these fees and make a decent profit, the club won’t generate revenue for you.

I think most domain forums have at least one club, then there are fractional ownership clubs like fusu, DotSauce recently launched it’s Domain Club as well and Gene has one of the oldest the Domain Profits Club.

Each has a different take, with fusu you buy ‘shares’ of a domain at a price pre-determined by sellers. The downside is not all prices are realistic or can ensure that you get a decent ROI on your investment. So to realistically invest in fractional ownership, the investors grasp on the subject has to be exceptional. I’m not even going to get into the controlling interest issues with fractional ownership – unless you own 51% or more, you don’t decide when to sell and for how much.

Forum Domain Clubs operate a little differently – they mostly pool cash to pick up domains from drop auctions and sell them for a profit to end users. This is a low risk strategy for the newcomer since he could buy in for only 10% of the entire domain, knowing fully well that the people who invest the remaining 90% would provide the correct information. Sounds good in principle, but what happens if all stakeholders in a particular domain are newcomers? Or if all investors in a particular domain overvalue it, decisions by committee suck, most so in investment scenarios. Which brings us to the fact that the buyer still needs to be aware as to what constitutes a good domain brand value and acquisition price. And again, the fractional ownership control issues exist.

DotSauce’s club charges a slab based subscription model – you pay $14 a month, you can get the privilege of acquiring 4 domains at a ‘discounted’ rate of $19 ea. So if you take the pro account, it would cost you $49 + 20 x $19 = $429 per month for the privilege of not purchasing your own portfolio. You could register 50 domains a month with the same budget at GoDaddy, of course that’s assuming the pros haven’t got all the good stuff first.

Gene’s club charges a subscription fee and it allows you complete database access to the entire available inventory for display on your own site. Presumably to allow you in principle to sell a domain before you pay the club the $18 and keep whatever you can sell the domain for yourself. Problem is, given that the inventory is shared across many members, a simple google search will throw up a ton of competition and if the buyer contacts more than one seller then the chance of the domain not being available in the inventory too long arises. $37 + 20 x $18 = $397 per month or 48 hand regs at GoDaddy.

While I have no doubts about the capabilities of these clubs at picking good names, the nature of the business will demand that a large number of domains get registered and offered to the club members almost everyday. From these a club member is expected to pick those which will bring him/her the maximum ROI, again, not a job for a person with no knowledge.

Also keep in mind, all these non fractional ownership clubs require that you sell the domains to people and keep the difference between the end user price and your cost, so in effect you’re paying to help them sell their inventory at 2x reg fee. You’d need 5 x $100 sales to break even on the membership ‘fees’, not a terrific prospect when you consider that $400 in sales for someone with no knowledge about domains isn’t as easy as you’d like it to be.

What do you think about Domain Buyers’ Clubs and do you know of any other clubs which are not listed above?