Protoscopic

Some registrars cost significantly more than others. Why? We’re not sure. Does it make a difference in service? Not really, in our experience. Historically we’ve used Register.com, but in this experiment cost was more of an issue. We were obviously concerned by what we might lose in working with a less expensive registrar; so far–pretty much nothing.

Danica’s all about a professional web presence.

Our experiences with the “low-cost” registrars were largely uneventful. We will probably have more insight once we get into a billing dispute or have some kind of outage. We used NameCheap for the majority of our registrations as we had reservations about GoDaddy, if for no other reason that their advertising does not seem to be targeted at businesses. (The whole “Danica Patrick’s Beaver” campaign just didn’t project the right image.)

From what we can tell, as long as you’re not swayed by efforts to up-sell and don’t mind a considerate, but targeted, customer service call or two, the differences are minimal … as far as we know. Our reviews are below and are clearly focused on “low-cost” registrars, as the more expensive options make it harder for a micro-business to turn a profit.

GODADDY.COM

• Con: Several (often underhanded) efforts to up-sell during registration
• Pro/Con: “Customer service”/sales call to our home after registration. While this phone call might actually be comforting to someone new to the process, it still represents a bit of a downside to using GoDaddy for our purposes. We really don’t have the time to screen sales calls from GoDaddy for every registered name (note: it remains to be seen if we’ll get calls for every name registered or just for the first).
• Possible Con: “Front-runner” in the field may have less incentive to provide good customer service

NAMECHEAP.COM

• Pro: More streamlined registration process
• Con: “Timeouts” cut off purchases too many times
• Pro: First year of “domain privacy” for free (i.e. namecheap won’t reveal your personal information if queried as to who owns a requested domain name)
• Con: DNS interface could be better. If you actually have some understanding of how DNS works, their attempts to make it more user-friendly are counter-productive. If you don’t have any understanding of how DNS works, you’re going to be confused anyway, so we’re not sure they’ve achieved much.

REGISTER.COM

• Pro: User interface is good. Support has been fine. Really no complaints but the price.
• Con: By far the priciest of these options. Also they add a default $9 fee for domain privacy.

By now even the most net-unaware people are familiar with “domain names.” It is a vital step in creating your online business, as many ideas are made or broken on the domain name they select. We have no fantastic insight in picking domain names; perhaps the readers can suggest some resources. We basically spend our time with a notepad and thesaurus, and just brainstorm. It’s both exciting and frustrating, as you may know.

We often want to just “get started” on our ideas before we’ve found a suitable name for them. In these cases we usually use a service like DYNDNS’s dynamic website service. Basically they have registered a bunch of TLDs (Top Level Domains) and will allow you to create a specific name under those domains for free. So for example, DYNDNS has dynalias.com, which we usually use. So until we come up with a name for our site, we can register prototype.dynalias.com or some such and be able to work on the site. While the service is free, DYNDNS is aggressive about clearing out the names pretty quickly unless you ‘touch’ them by updating.

In the process of trying to find a domain name you may have already interacted with a domain registrar, a service like GoDaddy or Register.com, which provides the service of registering your domain name for you (and usually much more). (If nothing else, you’ve used their web interface to check if your desired domain name was available [it probably wasn’t].) So once you’ve found your desired domain name, you now have to choose which domain registrar you want to use.

Historically we have only done low-volume domain registrations. Just one or two here or there, so we haven’t worried horribly about price. However in this experiment, particularly in the early stages, those yearly fees can have a considerable impact on our profitability. Consequently we turned our attention to the lower cost alternatives, and our first question is, of course: Why are some cheaper than others?

The general consensus is that there is no particular reason why Register.com costs dramatically more than GoDaddy. At their base they are providing the same service, which, for a .com domain, costs them roughly $7. So GoDaddy at approximately $10 is not making a huge markup on this service, while Register.com makes quite a profit. In both cases, however, their main goal is to upsell other services (like hosting) for which they have a higher profit margin.

In our experiment one of our goals is to avoid unnecessary charges. We have used several of the registrars and our results have been largely as expected. We have historically used Register.com and have always been satisfied with their results, however for this project we needed a lower priced alternative. So we tried both GoDaddy and NameCheap for our domains.

You can read our preliminary reviews of the services, however neither had any particularly surprising deficits. Once we had registered the domains we needed to set up the DNS entries for them, which we have documented as well. At that point we tested them out and were the proud owners of several new domains: empty lots waiting for us to start developing.

Nothing worth doing is easy.

As if the process were not complicated enough, the final thing you need to take into account are the intangibles of the strategies you are comparing. For example, most of us are much happier to work from home in our pajamas than in an office for the same pay. Also we’d rather be able to do our work whenever we want instead of on a strict 9-5 time schedule. These are intangible benefits of the passive income stream.

Transversely, we also like a good bit of stability in our lives, which we probably feel is an advantage of a “real job.” Your pursuit of a passive income stream does not have to preclude your day job, but if it does, this is probably a detriment in the intangible column.

All of these intangibles have differing values to different people, and those values are usually based on how highly each person values the self-employed lifestyle. Assuming you are seeking the entrepreneurial lifestyle, several other intangibles should be considered when evaluating the value of a passive income stream.

Maintenance Effort

While your effort is already discounted when calculating your income, it is still fair to say that you’d probably rather have the venture that requires less of your work. If a venture has a lower multiple, but requires drastically fewer hours of your time, you may still prefer the lower multiple.

Learning

If the process of developing the stream also helps you learn or perfect a skill that will help you in future ventures, this is a clear advantage over one that does not. So if you are creating a “site template” that can be reproduced, you would logically expect to spend more time developing the first site than future sites.

Synergy

Similarly, if the work you do to develop this stream could be used for other streams, it can justify taking on a venture with a lower valuation. For example, if you are developing a site that can be used to promote one of your other ventures, it may be more valuable than its multiple would indicate.

Other Demands

Clearly a lower stress venture or one that is not as time sensitive is more desirable. If you are frequently “on call” or facing daunting deadlines, this may negatively affect your valuation of a venture.

Passive Income Stream Valuation Methodology Summary

In the final analysis, valuating the “worthiness” of a venture is as much an art as a science. You must develop income projections, arrive at an appropriate multiple, and adjust for intangible costs and benefits. All of these processes are highly subjective, and your ability to make reasonable estimates will be a skill you should develop over time. As you become more and more capable of making these estimates, you will find yourself more and more likely to only take on projects that have good risk-reward ratios.