In the (very) early days of domain investing, pioneers such as Michael Saylor or Rick Schwartz had to essentially go blind and acquire domain names based on a combination between intuition and common sense more so than anything else because there wasn't exactly readily available data they could have analyzed to draw conclusions with respect to how strong the term on the left of the dot is.
For the most part, early-day domain selection revolved around guessing which domain names are likely to either receive type-in traffic (the Rick Schwartz approach) or serve some kind of a function that makes them desirable (email in the case of Michael Saylor, with him explaining that a memorable email address such as firstname.lastname@example.org is very likely to be remembered when shared after let's say a business meeting).
The Test of Time
In light of the fact that domain pioneers had next to nothing in terms of data to work with, their investments had to pass the test of time and be validated that way. In the case of Rick Schwartz, monetizing the type-in traffic his domain names received (with a lot of them related to the adult industry) enabled him to not just continue renewing his portfolio but also finance other acquisitions, acquisitions which yet again revolved around type-in traffic... why change a model that works?
As far as Michael Saylor is concerned, he made it clear throughout his DomainSherpa interview that he didn't necessarily acquire domain names with the intention of flipping them or monetizing their type-in traffic but rather with the desire to gradually turn them into businesses. For example, after hearing about a less than pleasant situation involving a woman who essentially had to lock herself in a room due to burglars being in her house, Michael Saylor thought to himself that an alarm system connected to the internet would have been extremely useful and needless to say, the domain Alarm.com represents the obvious choice.
Then vs. Now
Fast-forward to the present and a simple Google search for "voice" reveals that there are over one billion results out there and for this reason, Michael Saylor asserts that by owning the category killer Voice.com, you are already tapping into a proven market which is essentially waiting for you with open arms.
The same cannot be stated about "fad" or "edgy" domains which in Saylor's view are nothing more than a gamble. Furthermore, he recalls that after paying a fair number of marketing specialists to help him come up with brand names, he never once got something actionable out of the trade in question, an "idea + brand name" combination that was actually worth turning into a business. Instead of blindly accepting the more or less documented advice one marking expert or another shared, Michael Saylor chose to follow the data himself and go with terms on the left of the dot for which there is a proven pool of interest rather than gambling on various edgy alternatives.
He explained that well over a billion individuals have invested hours upon hours of time so as to learn English and if we are to somehow attempt to estimate how much collective time was invested this way, we end up with a mind-numbingly high number. These people were praised when they remembered English words correctly and punished when they made spelling mistakes, so why exactly should he have gambled on precisely the misspelled terms which have been discouraged by generation upon generation of teachers? The same way, why go with an extension other than dot com, which has been deeply engrained in the collective subconscious after trillions upon trillions being spent by household names such as Google (dot com), Microsoft (dot com), Apple (dot com) and the list could go on and on.
Scientific Method vs. Gambling
While he didn't use this specific term throughout the video, Michael Saylor essentially embraces a scientific method-oriented manner of investing which revolves around following the data rather than falling for various buzz words that occasionally take over the Zeitgeist. In stark contrast to this approach, many other investors are essentially gambling on domain acquisitions which don't have anything in the way of data to back them up.
Does this mean the investors in question will inevitably lose money?
Of course not, the scientific method in no way tries to "brand" itself as a fool-proof approach... on the contrary, building on the shoulders of giants is the name of the game, which includes learning from their mistakes. The same way, it is hardly impossible to simply gamble on a random domain acquisition and ultimately flip that domain for more.
But as an investor, it makes sense to ask yourself: what's the end goal?
For example, it's possible to make money by simply heading over to a roulette table and picking a number or a few numbers randomly... but then what? More specifically, what exactly did you learn from your first gamble that will enable you to make a more informed decision with respect to future ones? Absolutely nothing.
The same way, in terms of domain investing, a lucky streak should not be confused with a strategy. To illustrate this, it makes sense to refer to an example from the world of trading because as peculiar as it may seem, many traders believe that a beginner who has a lucky streak initially isn't as well-positioned as one who wasn't as lucky and was taught a harsh lesson by the market. To put it differently, the trader who lost money may very well be better-positioned to do well in the long-run than his luckier counterpart.
Simply because the "loser" in this equation received a much-needed lesson in humility from the market. If he is wise enough, he has everything he could possibly need going for him so as to approach future trades in a more scientific method-oriented manner rather than continue gambling recklessly. The winner on the other hand oftentimes ends up believing he is smarter or let's say a better trader than he actually is and this manner in which he is positioning himself can prove to be a road to disaster in the long run.
Follow the Money... and Data
The conclusion to this article couldn't be more straightforward: when investing in domain names, don't make the mistake of assuming you need an ultra-complex approach to do well in the long run. From Rick Schwartz to Michael Saylor and many others, examples of successful investors who created a data-driven model and built upon it abound.
You do not have to be a so-called quant or if you will, a math whiz who is able to solve integrals in an impeccable manner. All it takes is understanding the spirit of the scientific method: the idea of calculated trial error, the importance of learning from your own mistakes as well as those made by others and a wide range of essentially common sense tools that are worth including in your arsenal.
What Data to Follow?
That is entirely up to you, there are fortunately more than enough options out there, from using data you can't access at no cost (such as the number of search results) to paying for various services which serve everything you could possibly need in terms of data and more on a silver platter. The goal of this article is by no means "selling" one model or another.
There is more than one way to skin the domain investing cat as long as your approach revolves around a sound understanding of the scientific method and the importance of following not just the money but also the data. Feel free to experiment with one data-oriented model or another, don't become arrogant when getting it right but the same way, don't feel too bad when making mistakes. Learn from mistakes, tweak your model(s) accordingly and deploy patience... not the most unrealistic value proposition in the world, wouldn't you agree?