I’ve picked up my share of names from drop sites like Snapnames.com, Pool.com and enom.com. I’ve snagged names for as little as $60, and have been in auctions bidding into the tens of thousands of dollars.

There are a handful of well-known bidders that, in my opinion, very often overbid for names. Some of these domain names—a few—are worth the prices paid, but most of them in my judgment are not. It seems the bidding is not based not upon a realistic value for the name, but upon the size of the ego of the bidder or the emotion of the moment.

I’ll hang in on an auction to the point where I hit a predetermined fair value for the name. When I get to that point, I’ll pull out. When I do, I always picture the other bidder smiling that he’s beat the poor slob who he thinks is out of his league. And that makes me smile, because I believe I have won by not overpaying for the risk-reward I’ve calculated. (I have to admit that sometime I continue to bid beyond what I feel the name is worth just to make the other party pay more because I know their ego will not let them be outbid by me.)

I really believe that if many of the same names were for sale by owner, and not at auction, that these bidders would never pay the prices they are paying at auction, where emotion and the ego drives the bids up. That’s not the way to buy names.

Paying such high prices for some of these names is taking the easy way out. While I too have the funds to do the same thing day after day if I desired, it doesn’t require any ingenuity or talent to just outbid people to outbid them. While I certainly do take advantage of buying drop names at auctions myself, I prefer to find available new and just-dropped names, or pay existing name owners a few hundred dollars or less for great names when I can get away with it. In general, much better deals can be had by buying names from the buyer, than by going to drop auctions when the overbidders are involved.

But wait! People say all the good names are gone, right? Isn’t that what the “experts” say? Not true. Sure, all the extremely valuable names are gone, but I constantly pick up valuable names for as low as reg fee to up to a few hundred dollars. And I sell these names for anywhere from $500 to many thousands of dollars. That’s a risk-reward scenario I like. And I do it over and over. For example, the last ten names I sold grossed $8,400. What did I pay for them? A total of $205. It can be done.

How am I able to do this? Well, I read a lot about new trends, science and keep up with the news. And I have a variety of tools I use that I doubt many people avail themselves of. And, I spend time digging. Sure, I’ve wasted my money on many of the names I bought in the first few months of doing this when I started out last year. But, we’re talking about just a few thousand dollars for lessons learned, and my selection ability has vastly improved.

I am primarily an investor of stocks, commodities, real estate and business private placements. Domain investing “feels” like a whole different game, but it’s really not. You must make wise investment decisions, while minimizing risk. And there is risk out there. Aside from unanticipated changes to the way domain names and search engines work, you’ve got natural boom-bust cycles in industry (anyone remember the tech boom/bust? I certainly do), macro economy risk brought upon us by a real estate bust, global recession/depression, or geopolitical events. It could be anything. I know I would not want to be holding millions of dollars of overpriced, speculative domain names if anything goes awry. I cannot protect my domain portfolio against losses like I can with stocks and commodities by purchasing shorts and puts.

The next time you are in an auction against bidders gone wild, remember this: the winners of drop name auctions are not always the highest bidders, but the smartest bidders.

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