Domain names are big business – they represent our businesses, they relate to the topics and memes we are interested in and passionate about and, with a little knowledge, they serve as an exciting investment opportunity.

In VeriSign’s most recent Domain Name Industry Brief, the registry reported that the global base of Internet domain names grew by more than 3 million in the second quarter of 2010, ending the second quarter with more than 196.3 million domain name registrations across all top-level domains (TLDs).

As it becomes more difficult to find available domains, consumers will ultimately turn to the “aftermarket” to find domain names they can use. As such, Web professionals are poised to generate immense profits from the retooling, or flipping, of websites for profit. If you are skilled at Web design, content development, link building or affiliate marketing, you are far ahead of the game.

But in order to successfully flip a domain you must find one with the potential to turn a few dollars into hundreds or thousands of dollars; separating those with potential from those without.

Locating Low-Value Domains for a High-Value Flip

Finding domain names for sale is the easy part of the flip. Sites such as BoxCar.com, Devsa.com, Sedo.com, Flippa.com, SnapNames.com, Afternic.com, NamePros.com, BuyDomains. com and GoDaddy Auctions all provide viable opportunities to acquire domains.

Know well before you sign up for these services, however, that you will often encounter domain owners selling their assets for what a reasonable person might consider outlandish prices. In the end, domains are worth what someone is willing to pay for them. Knowing the key qualities that buyers look for in a domain will set you on a course to profit from the flip, and not get burned in the process.

Key Qualities of Domains and How They Affect Price

All domain names (and websites) are not created equal. Outside of being short and memorable, there are several well defined qualities of domain names that present the best possible opportunity when turning an investment into a profit.

■ Keywords in the Domain: It has been proven over the years that using keywords within a domain provides a tremendous advantage for ranking highly for those terms. Both non-hyphenated and hyphenated domains can gain this advantage. More often than not, an exact match keyword domain can claim the top position on Google with very little effort. This is one of the best reasons for owning a generic keyword domain, and what makes them so valuable.

■ Natural Search/Social/Advertising Traffic: The domain names that sell for the most amount of money (outside of single-word domains like Sex.com, which recently sold for $13 million) have one thing in common — visitors and pageviews. While there are different stages of development for the domains you will find for sale, having some traffic — from natural search, social networks or even advertising — will provide a measure of the site’s potential. The optimal domain to buy is one that receives a modest level of natural search traffic. Selecting domain names with traffic from social networks or advertising requires an investment either in time or money; not necessarily ideal if you need to ensure visitors keep arriving or if managing dozens of domains.

■ Website Earnings/Potential: The domain name aftermarket is flooded with those of low quality and questionable potential. Domains that typically sell on the aftermarket are those with a track record of monetary performance or the ability to develop revenue streams. When a domain name has demonstrated its ability to profit from the traffic received it will ultimately raise the price. The challenge of buying websites with existing revenue, however, is the due diligence that is required. Is there some legacy effect, such as users’ bookmarks who might not respond to new ownership or content? Are existing revenues a result of well-managed PPC campaigns? It is imperative to understand any and all sources of revenues, as well as the cost or upkeep required to maintain them.

These are just a few of the qualities you should look for when purchasing a domain name to flip for a profit. But what domains are right for whom?

Domain Flipping for Design, SEO and PPC Experts

You might be a Web design maven but not be skilled at driving traffic through social media. Or, you might be the PPC guru of your company but couldn’t design a square. The solution is to select domain names aligned with your skill set.

■ Domains for Designers: There are thousands of domain names in the aftermarket begging for a professional Web design to be applied. If you possess skills in template design for WordPress, Joomla or Drupal, you might be surprised how much of an increase in value you can get by applying a more aggressive and compelling layout to existing content. Consider purchasing a few $1 domains on eBay, applying your design expertise then listing them for sale for a quick, inexpensive flip.

■ Domains for Content Developers: If skilled with copywriting and content development then the world of domaining is your digital oyster. Because low-quality content abounds on the Internet, if you are able to develop creative content on a variety of topics related to a domain name, your domains will be in high demand. Consider acquiring a few quality, modestly priced domain names and start writing. Choose content themes wisely by identifying keywords and phrases with the highest commercial intent, and the sites you develop will be positioned for substantial profits.

■ Domains for SEO Masters: Those who specialize in search engine optimization stand to generate the greatest profit from flipping domains. Being able to take a website (or domain) with little or no traffic and securing placement for even long-tail keywords can make almost any domain profitable. SEOs skilled at link building in particular are well suited to flipping domain names as the number of inbound links is a common variable in website valuation.

■ Domains for Affiliates: Affiliates have an inherent edge when it comes to flipping domains. Identifying the best, most relevant offers for a website’s incoming traffic can turn a “no profit” website into a “high profit” one. Domains can then be sold at upwards of 10 times monthly earnings.

Flipping domains is not for the cautious as a great deal of risk is involved. Applying appealing visual themes, writing compelling content, building links and establishing revenue streams is no guarantee that domains will ever sell, even if purchased at a premium. For this reason, it is not uncommon to see domains listed for thousands of dollars, as desperate domainers make an effort to recoup at least some of the funds they have sunk into the domain. However, by using the formal skills you have acquired as a Web professional, domain flipping is a legitimate possibility for added income.