I’ve been adding to my domain portfolio over the last several weeks, which has had me thinking quite a bit about monetization strategies.

So far, I see 5 primary strategies* that can be used to monetize individual domains in a portfolio:

1. Direct navigation to landing pages with sponsored ads
2. Hosting small (e.g., 1 to 5 pages), content-based sites that include sponsored ads and/or sponsored content
3. Blogs with sponsored ads and/or sponsored content
4. Web applications
5. Domain-led businesses

*Note that I haven’t included selling the domain. I view this as an option that is always available, and not so much a ‘monetization strategy’ for domains you own.

Importantly, two things increase as you go down that list: potential revenue likely to be realized and the amount of work required to achieve that potential.

The direct navigation strategy represents the horrible combination of little work require/tiny potential payoff. It’s easy, but it’s largely ineffective for all but the most generic domains. Use a parking service to set up a landing page with keyword-relevant ads and you’re done working. Don’t quit your job, though, because the payoff, generally speaking, is minimal. For most domains, you probably won’t even make enough to pay the renewals. This is dollar cost averaging at its best. The jewels of your portfolio have to pay for the dogs, hopefully leaving enough to squeak out a profit. Parking is a decent way to make a little money on domains your holding as investments. The trick is to ditch your “earn TONS OF money while I sleep” hopes. You won’t.

I see hosting small, content-based sites as an attractive alternative to parking. The concept is simple - invest a bit of time in building content on a small site that you host on your own server and you avoid parking commissions on the ad revenue generated by the site. Your traffic should be more than with a traditional parked page - you’ll get the direct navigation traffic plus any additional search engine traffic that comes for the content you added. The downside? In addition to having to invest a bit of time in creating content, you need to pay for a server (either remote or otherwise).

Blogs are an attractive option at this time because a) search engines continue to love their frequently-updated content and b) more and more ad providers are becoming available. Frequently updated blogs that achieve decent search rankings can generate significant revenue. You’ve got to put in the work, though. Letting a blog go stale can be the kiss of death. You’ve got to love the content and subject for this strategy to work, so I recommend using it only for a handful of domains. Be realistic here - you can probably keep 4-6 blogs fed with good content without having to quit your day job and leave your family).

Web applications are quickly becoming an attractive monetization strategy due to the convergence of several factors, including the availability of open source software (e.g., php, mySQL, Apache, and even WordPress) and the availability of relatively cheap programming labor (think rent-a-coder and elance). If you’ve got an idea for a new web application, you can probably launch it for $12.107.09 or less. Integrate ads and/or fee-for-service aspects, and away you go. The potential payoff here is significant - you’ll likely open up direct advertising opportunities and you might even raise the eyebrow of a potential acquirer. But it takes time and effort. Significant amounts of each.

If you’re really ambitious, you might build a domain-led business - a business with a model that centers around the domain itself. Think hotels.com, etc. You (and I) probably missed the boat on those great generic domains, but there’s probably great opportunity for businesses based on localized generic domains. Think toledoeats.com, columbusvisitor.com, and clevelandpchelp.com. While these aren’t likely to be hundred-million-dollar ventures, a roll-up of CITYeats.com, CITYvisitor.com, and CITYpchelp.com just might be.