Author: Francois
November 29, 2012

Everybody knows “domain flipping”. Basically, the term describes purchasing a domain name (or website) and quickly reselling (or “flipping”) it for profit.

This has both advantages and disadvantages:

Advantages:
- You can make much more than domain brokers who rarely get a sales commission over 20%. Here you have no other limit than your ability to successfully sell it for more than you purchased it for and earn the difference.

Disadvantages:
- You need to have a significant cash flow in order to purchase the domain to resell.
- It’s risky as you can never be sure you will be successful at reselling it.

 

I have been thinking of ways in which FLIPPING can be improved and have come to a scenario that eliminates all of the disadvantages to only keep the advantages.
It’s called: OPTIONING!
Imagine I believe I have an excellent chance to resell a domain for a huge profit. It’s a premium domain but I do not have enough funds to acquire it. Sure I could maybe try to get a loan, but what will happen if, after obtaining this loan, I don’t succeed in reselling the name? That would be a disaster for me!

The solution?

I approach the seller and I negotiate a sales price with which he is comfortable to sell AND for which my chances of making a profit are good.
Therefore nothing stops me from trying to put a purchase option on this domain, telling the seller: “I am willing to pay you a fee to get the exclusive right to acquire your domain within a specified time period at the set price.”

What does it mean?
Simply: If I find a buyer within the specified term, then I can pay the seller and resell the domain to the new buyer with no risk.
And if I have been unfortunate and did not found a buyer, then the only money I lost was the option fee. But that fee is insignificant compared to the full sales price.

For the seller, there are only advantages:
- Improve sale chances.
- Sell domains faster at the agreed price.
- Continue having full use of the domain.
- Make money either way! Earn the option fee even if the sale doesn’t happen.

And for you the flipper, all of the disadvantages mentioned above simply vanished. Yeah!

But wait… is there a way for the flipper to obligate the seller to respect the option deal?

No… this is why we have just created a new service at eCOP.com to secure optioning at 100%

PS: Special Thanks to Michael Norwood to stimulate me, to George Kirikos for his very valuable feedback, Michael Berkens for selling me the domain name optioning.com at a special price. And thanks to few domainers who had the patience to listen my service idea when it was still very confused: Teri Plummer, Dennis Sourvanos, Mike Curving…

.


45 Responses to “Is optioning the domain flipping holy grail?”

  1. Troy says:

    Why did you have to buy the domain name “Optioning.com” to do this? Seems like that money would have been MUCH better spend advertising your services rather than obtaining a domain that will not bring you any additional business. Perhaps a little bit too much of the Kool-Aid has been drank by this point?

  2. Francois says:

    As a domainer yourself you know that it’s a real advantage to own the domain that is an exact match of a service, so in order to secure my business against any possible future competition it was important I purchased the domain while the term was not popular, so virtually cheaper.
    Second, I plan to setup a site where I will explain the optioning concept and what better domain than optioning.com to promote optioning?
    Third, the term optioning can also be use with stocks so one day it can even be a nice sale.
    Finally, I have the chance to run a popular newsletter in the domain industry so I can save on advertising.

  3. Troy says:

    Francois,

    Owning a category killer domain is valuable, especially when it will help you achieve respect in that vertical or get the attention of potential customers or if it provides a steady stream of interested type in traffic.

    Buying Optioning.com did none of that for you.

    You ALREADY have respect in the domain world.
    You ALREADY own the most trafficked domain website in the world to use to find customers.
    And Optioning.com certainly does not have a steady stream of type in traffic, and even if it does it is hardly likely to be the sort of people interested in the new service you are providing.

    I think you are “Drinking the Kool-aid” or in other words, you are believing what others are telling you more than you naturally should. A domain is important, but far less important to a person of your situation than you should believe it is. If you are offering a needed service for a fair price then your new business will be successful with or without the domain Optioning.com. If you are offering a service that is not needed, or for a price people do not want to pay, then your new business will not take off, regardless of your ownership of Optioning.com.

    Consider branding this as something else apart from “Optioning.com”. Using category domain names to start focused businesses is getting old and stale. Do something new, something exciting, something that stands on the merits of what it is, not what domain it is found at.

    I am not attacking domaining, far from it. I too believe in the value of a generic domain name, but it is FAR from being the MOST important thing to a business and far too often domainers fail to see this. This is why there are surprisingly few domainers that are successful businessmen.

  4. Francois says:

    There is another reason about optioning.com, if I blog or contact someone who already knows eCOP.com and start to speak about this new service most of he time he will not take care as he will think it’s something he already knows, something existing. That’s what happened for example to me yesterday when I announced it personally to few domainers directly giving the eCOP.com link about optioning. When you come with a new domain, you wake up some curiosity, you get a second chance to obtain the visitor attention.

    Now to come back to the theme of the post, optioning is a really nice concept that can help generate a lot of cash to flippers and with almost no risk and no money.
    My personal next step is test and see what should be the most efficient way to introduce it to a seller once a sale price has been negociated.

  5. TJ says:

    Sounds like you have a great plan, so please come sell my Domain Portfolio for me :-)

    Thanks,
    TJ

  6. dON eDWARDS says:

    Francois…
    Personally, though new at this business, but a businessman nevertheless for over forty years, I think your idea is great. What kind of option percentages are you considering? Don’t let the so-called pros and naysayers discourage you. The naysayers called the Wright brothers crazy. As a former pilot, I’m glad they let no one stop them. Finally, I believe Optioning.com is perfect for your idea(s). Best regards. And much success!!!! DE

  7. Francois says:

    @Edwards
    How much does the option cost?
    This, like the sale price, must be negotiated between the seller and the buyer. We found that the formula gives a fair price for both parties:
    $100 * month + 1% of sale price
    Fee estimator here:
    https://www.ecop.com/option/rates/

  8. Bob says:

    Great idea Francois! And I think that it was SMART to pick up the name Optioning.com. Great brand for a great idea!

    Don’t listen to the negative comments – there will always be people nipping at the heels of a good idea. The trick is to just run faster than them!!

    I’m looking forwards to using this for a deal soon….

  9. Tim says:

    I don’t see this take off at all, as a domain holder I’d never sell options on my domains. An option buyer would just ruin the name by contacting all possible endusers, destroying my good sales position and if he can’t sell it he’d just drop the option. If I wanted to do that I’d just do it myself and shoot for that enduser price. Bad idea IMO.

  10. Mike says:

    I agree , With a new development Opportunity it is wise to go with a fresh Domain, “Optioning” is a great domain name for Your Idea, In my opinion.

    Send me a link and your Text and I will Help Promote .

  11. Francois’s “Domain Optioning” could be huge | The Life of Jacob Fedosky says:

    [...] What is domain optioning? Simply: If I find a buyer within the term, then I can pay the seller and resell the domain to the new buyer with no risk. And if I have been unfortunate and did not found a buyer, then the only money I lost was the option fee. That is insignificant compared to the full sales price. (DomainWare) [...]

  12. Joel says:

    The client base in this scenario is brokers? Aren’t these the ones who will want to buy an option to gain the rights for resell – then go and find the buyer? What is the incentive to buy an option NOW unless they already have a buyer in mind or “on the hook”? I would think it would have to be a domain that has current bidders or interest in the name before anyone sees the need to buy the option before anyone else would.

    In most cases the owner would already know of the potential bidder(s) or sale being imminent (in most cases). If not, chances are the broker would see no reason to get the option until he has already sold the domain in which case it would be an instant sale for the seller and a true “flip” for the broker.

    A domain would have to be in very high demand before I see any reason anyone would want to secure an option. Which in most cases, will kill the option to option via the seller.

    Maybe I misunderstood?

  13. Rob Martin says:

    It’s all good Francois. This business model does work. So does leasing a .com for it’s use.
    I have a few I do that with now. I agree with Bob. Do what you want. There are no rules
    about what works and what does’nt (google? Really who woulda thought?)
    So be creative.
    Personally I own several hundred .coms. Some up there in the top shelf area,
    and you never can tell who will want to buy one of them, but it happens
    allot. Not on a daily basis, but enough to call it a money making hobby.

    Currently I am collecting domains around the new laws
    in Colorado and Washington states. Fun.
    (www.CASUALUSE.com)

    Have a look at my take on the business at http://www.ROBERTSDOMAINS.com .
    I just want you to keep trying, creating, and working at getting the
    best .coms you can. Buying and selling the right one can be life changing! :)

  14. Domainer says:

    Simply great idea.. Thanks for coming up with such an idea. This is really need of the hour to tell you the least.

  15. Sri says:

    Francois,

    You are one really prolific guy who comes up with great ideas for the domain name B2B sector. Optioning is another very great idea from your stable and I look forward to getting some options for a few nice generic domains I still have. Although the proper term in the stocks sector is “options”, the name “optioning” goes well to match the term “options” with your “domaining” brand name.

    Wishing the best for you and all of us in the domaining industry.

  16. Nick says:

    Francois, interesting concept and a wise move to grab Optioning.com, or else a would be competitor would have jumped on it for sure. Just securing this name to prevent the risk of a competitor taking it is fully worth the price IMO.

  17. Stephen says:

    Sounds like a viable idea

    Optioning works in many other industries –try stocks and shares for example

    The “legalize” might be a bit of a minefield but !!

  18. Troy says:

    The “negative” comments wern’t negative. They were valid comments and they had a valid point behind them.

    I wish Francois the best and I hope this works for him.

  19. Ranbir says:

    hmm… i am doing the same from last 2 years, but sometimes it don’t work..
    Either the buyer disappear or the seller change their mind..

    but i didn’t use the “fee for exclusive rights” before..
    Hope this helps.

  20. Tom says:

    I don’t think it’s kool-aid that Francois is drinking, it’s tonic (lol, cheap pun). To me it sounds like he got a good price for ‘optioning.com’ and a one-word dot-com is always a good investment (at the right price), no matter what you use it for. Wishing you best of success, Francois.

  21. George says:

    Twelve years old one word domain…
    Do you need an “expert” to tell you Francois have
    taken the right “option” considering his goals..?
    Congratulations Francois. All positive energy to you!

  22. Uzoma says:

    Francois,

    What’s the big deal? Next you are going to discover water? or the moon? Come on, this “discovery” has been practiced even by cavemen in the year 0001 B.C!!!

  23. Picas says:

    Yea..it’s something like broker but not broker …and I think contracts for this Optioning are so long and detailed …hope that Francois plan is successful…

  24. Grincholo says:

    Excellent.

    The market will show if your price calculation is correct, however the concept is spot on.

    It works in pretty much every market commodity or specific goods market on earth to generate value by guaranteeing a temporary right to invest one’s marking effort. It will work. Since applying contingent rights to virtual properties seems to be your initiative, I hope you are the one for whom it works.

    For my 2 cents (or more correctly $7.99 a year) OPTIONING.COM seems a rather cheap backstop. “They” are right, I wouldn’t plan on retiring from that domain name (!!!), but sure wouldnt want someone else to own it if I were you!

  25. Steve H says:

    I like the idea of “OPTIONING”! As a matter of fact I have a few aged PR2 and above domains I’d like to sell. Would you be interested in working with me to move them? If so, please get in touch. If you do contact me, please mention this blog in your subject. I get lots of email and that way I can sift through the BS and get to the important stuff.

    Best regards,

    Steve

  26. John Russell says:

    I am on your mailing list and regularly read your information. I must say that I fail to see how you make any money out of this type of business.
    I have sold domains that I have owned before and I doubt whether the registrars would be party to the majority of proposals on your ECOP website.

    Maybe I’m missing something here:)

  27. John says:

    I only sold 4 domains in my lifetime so it does not appeal to me at all.
    It may be good for someone who sell a lot of domains and I have no idea how to do it

  28. Domain Name News: November 30 Week in Review says:

    [...] Week’s News in Review Francois Carrillo Launches Option Service to Buy Domains With Less Risk – 29-Nov-12Carrillo has been looking for a way to buy domains (or at least the option for it) [...]

  29. Merve says:

    Hi Francois,

    Congrats on your new business! Hope you will be very successful in that area as well.

    I was really wondering when options, futures, forwards will be in domain business so it is great that you are starting those concepts. I have some questions for you;

    - What is the difference between brokering and optioning a domain name?
    - As far as I understand that optioning is like brokering. In brokering, we only sign an agreement and do not pay a fee. But in optioning, we pay the option fee at the first stage. Isn’t brokering is more profitable for us as we do not lose any money even if the domain is not sold? There are also brokers who get 10% commission on the sale prices.

    Thanks!!!!

  30. Ankit says:

    I am ready to work with you on these terms. Tell me what all you need as input from me. PM me

  31. Francois says:

    @Uzoma
    As things come to mind:
    - It’s Georges Kirikos who put the right name in my scenario (he owns options.com, stockoptions.com …). This week-end I was still calling this licensing… The scenario was the same, I simply didn’t have the perfect term to define it.
    - You are right that place an option is not something new, but what is totally new is having a service able to secure such type of transaction for domain names (and for a reaonable cost).
    - What is is also new is most domainers never imagined this way to make business and in fact of the private feedback I am getting it’s only a very small minority who have been doing that (and guess what? ALL are top domainers).
    - And please try to be a little more positive with me, you seems to be a hater willing to jump on me for anything I do….

  32. WEBNAME ESTATE says:

    Best of luck. This must be an exciting time for you, I will definitely bookmark your site, Howard.

  33. Francois says:

    @Tim
    I doubt anyone will pay an option fee if they don’t think they have good chances to sell your domain (there is still a loss if the domain doesn’t sell).
    Plus I remind we do not tolerate bulk email to find buyers and this practice should lead n having the option transaction cancelled.
    All is negotiation and appreciation, if someone come with an attractive option fee and you feel he could buy you the domain for the price you want within a short period of time then you may change your mind.
    Now some domainers simply don’t want to sell any domain they own, others don’t want to market their domain for sale, others never delegate any sale… Everyone is a world and each one is free!

  34. Martyn says:

    Sounds great to me! good luck! I have some domains I would be happy to sell in this way. Let me know. Best regards, Martyn

  35. Francois says:

    Many people privately are asking me:

    1) when this will start?
    It is already possible to place options.
    Simply visit:
    https://www.ecop.com/option/

    2) For those saying they want to sell their names through optioning.
    - Then suggest this path if a buyer cannot pay your domain now but has a strong interest.
    - Submit your domain at CAX.com (http://www.cax.com/submit/)
    From next week, sale pages of owners interested to offer optioning will show a “Reserve this domain” button firing an optioning escrow transaction when clicked.
    I also make a call to anyone running a domain marketplace, we will provide them an API to also can propose optioning in their own pages.

  36. Francois says:

    @Rob

    Here you are talking about:
    Seller financing = Lease with option to purchase = Sale with installments = Sale with a payment plan.

    The main difference with optioning is with optioning the seller even if his domain will be put in escrow, he will continue having full use of the domain. And that optioning only requires a single upfront option fee.

    By the way we secure such transactions you are talking about for two years now:
    https://www.ecop.com/finance/ for sale starting at $1,000 only.
    It’s something sellers must have in mind as it allows to make really much more sales:
    Credit is the real estate oil.

  37. Francois says:

    @Merve

    Many asked me why optioning when you can broker domains without have to pay an option fee.

    The response is easy:
    Contact the owner of Home.com for example and ask him if he will give you brokerage exclusivity on his domain for 3 months.
    I am almost sure you will not even get a response!
    Except you be a popular broker with a long list of premium domains sold almost nobody will let you broker their premium domains.
    Now this does not mean you can come and successfully place an option on any million dollars name, but if you prove you are serious and pay a significant option fee you’ll probably raise your chances to can flip a domain of a caliber you cannot today.
    I agree that if you want to broker “crap” you do not need optioning, there are million owners ready to give you a chance, some maybe even willing to pay a small fee upfront just to try!

    I have been responding to loads of emails… and still not succeed to respond to all.
    Later today I will respond to more.

    Thanks to all ones who send me their wish of success.
    I wish myself many will understand this opportunity and will take advantage.

  38. Ale says:

    Hello Francois,

    Sounds like a good idea.
    It can works. Domain industry is the only industry that sell something without sales people….
    The only industry that give adv. without serious advertising circuits…
    The only industry that make sales but not licensing, not leasing…
    and yet the domain business is still standing.

    Pricing formula appears reasonable imho

    I wish you the best success

  39. Dennis Sourvanos says:

    Francois thanks for sharing your innovatice idea with me.
    I will publicly say that for me it gives me an option ( optioning ) that I did not have before. It opens up an opportunity to approach top quality domain owners, which until now I couldn’t. They would simply say to me “you are dennis who?”.
    But now, with Francois’ backing me up with his well known reputation and – soon to be very familiar – system, the owner will provide me with a chance of making something big out of his dormant domain. Even at the end if If I don’t sell the domain, the owner still has made some money out of this transaction. And maybe I can find a seller because for example it could be a domain in my niche where I know people and make a very good sale. Its a win-win-win situation for all 3 parties.

  40. Joe Biz says:

    I like it Francoiis.

  41. rodash says:

    I hope this works for you as anything that helps people to sell domains is good, but I see two distinct problems, and I think they are worth raising for discussion:

    1. If this takes off, every man and his dog will swamp the service with vast quantities of domains. The service will then be like any other domain selling platform – where the smarties come in and cherrypick the inventory and 99.99% of the inventory remains unoptioned.

    2. Domainers will use this service to offload their junk names, and what you’ll end up with will be a big platform of crappy names, which people won’t be interested in optioning. I think this is the biggest hurdle you face.

    Hope you can find some way around these issues.
    Good luck

  42. Ngoc T. Nguyen says:

    Hi Francois,

    Its an awesome IDEA, but only works in limited scope. Meaning, you will get business, but not like the industry heavy weight.

    1. Market has to be huge, or value have to be perceived so.
    Size of the deal, amount, etc., like in stocks where its traded daily.

    In domain industry, you need a batch/portfolio for this to work. Or a large domain like home.com or sex.com

    2. Paying upfront, for domain industry is a bad idea.
    Basically, you require a middleman, but you charge % base on domain name. This industry is small, non liquid (not cashable) as fast as the stock market. Therefore sinking money into something …is riskier.

    Anyway, until you deal with the money issue (liquidity and paying upfront) it looks like tough chance. Sedo and Buydomains took the money issue away. Solved!!!!

    Optioning a portfolio is a great idea.

    -Sedo and Buydomains.com does it in batches already.
    Sedo payment only after domain is bought and everyone get paid.

    Buydomain, buys your domain, and stock up its prices for hundreds of thousands of names (optioning) in masses. They took the risk directly by being the only seller.

    Its a great idea, successful, but not at a limited scope you are suggesting. Has to be huge and is already done (bet against) by large companies …like Sedo,Goddady, Buydomains etc.,

    Nice ideas for portfolio holders, but for middleman…has to have the knowledge and experience to risk money upfront. Even so, he’s risking his time to sell something, that might not sell and lose money on.

    From cost benefit: Middle man, taking all the risk. Not profitable.
    Portfolio holder =profitable even if it does not sell.
    Determining factor/ie money time risk ….not so easy.

    You have to have no risk like SEDO, or take all the risk like BuyDomain to be successful.
    ——————-

    I have domain names, who’s going to pay me, and then sell it for me? ….Not many brokers will do it. If you are willing, contact me at (j 3 nap at yahu) dot com thanks.

  43. Francois says:

    @Ngoc

    1 – Basically I see 2 main ways to use optioning for flip domains:
    - Locate a premium domain to resell for profit thanks to your knowledge, relashionships, skills …
    - You found a company with an online presence and search names that should be of interest to own for this company, you place options on these domains before suggest them.

    2 – When you do not pay any option fee upfront but want a % of sales, this is called brokering and not optioning.
    I already exposed the differences above between optioning and brokering.

    Sedo and BuyDomains are not optioning anything, they are marketplaces where you can list your domains and pay a sales commission when sold.

  44. Rick Schwartz says:

    Congrats and Good Luck Francois!
    The point here is that there is a hub bringing both parties together.
    Options have been around for a long time because they have proved to be very profitable at times.

  45. Francois says:

    Thanks Rick and thanks again to everybody who sent me success wishes.

    Optioning usage for flipping should not explode simply because the ones who should use it will be probably existing flippers and domain brokers who want to make much more than 15% per sale, and the amount of such people is really low.
    I don’t see people who don’t use to be active simply start trading names because there are new tools facilitating trade.
    I see a larger usage by people who desire to purchase a domain but want previously secure few names before take a decision. For this the main idea is not a hub but place a “RESERVE THIS DOMAIN” button everywhere there is the possibility to purchase a domain: marketplaces, portfolios, sale pages, …


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