Buying an expired domain name can be a highly profitable investment. But before you buy one, it's a good idea to consider some of the risks. Here are seven worth considering:

  1. The domain name has been banned by Google
  2. The domain name's Google PageRank or Alexa Traffic Rank are not valid
  3. The domain name's Google PageRank does not recover after being reset
  4. The domain name's link popularity does not recover after being reset
  5. The inlinks are low-quality
  6. The domain name is removed from DMOZ or the Yahoo Directory
  7. The previous domain name owner used shady business practices

The domain name has been banned by Google

Some unscrupulous website owners will attempt to improve their Google PageRank through spamming and other less desirable means. As a result, Google may have banned the domain name from their index (which means it will not appear in any of Google's search results). Although it's possible to successfully petition Google to un-ban a domain name, it can sometimes be a bit of a headache.

There aren't any reliable ways to check if an expired domain name is banned by Google. One indicator you can use is its PageRank. If it has a PageRank of 1 or higher, then there's a good chance it's not banned. If it has a PageRank of 0, then it may in fact be banned. Banned domain names have a PageRank of 0, but not all domain names with a PageRank of 0 are banned.

Another method you can use is to analyze the previous website's content and inlinks, and then make an educated guess. If the content and links seem legitimate (and not the result of spamming or ranking manipulation tactics), then there's a good chance it's not banned. Use the WayBack Machine to check previous versions of the website, and try to research the previous owner for insights into their credibility.

The domain name's Google PageRank or Alexa Traffic Rank are not valid

Due to the way Google and Alexa treat domain name redirects, an expired domain name's PageRank or Alexa Rank may not be valid. Invalid PageRank or Alexa Rank are almost always reset to a much worse value once you acquire it and the redirect is removed.

The domain name's Google PageRank does not recover after being reset

Google's deleted domain name filter removes domain names from their index when they are deleted from the registry, resulting in a PageRank reset. In our experience, this removal and PageRank reset is only temporary. When the domain name is re-submitted to Google's index, its PageRank is often restored to its pre-deletion value within a month or two (assuming the content is comparable to that of the previous website). But beware, there's always the possibility the PageRank won't recover. NOTE: You must resubmit the domain name to Google's index in order for the PageRank to begin recovering.

Google PageRank is only reset for the dropping and deleted domain name types.

The domain name's link popularity does not recover after being reset

Like PageRank, an expired domain name's link popularity is generally reset on most of the major search engines when it is deleted from the registry. However, it does seem to be restored after a month or two. But beware, there's always the possibility link popularity won't recover to the same level it was before deletion.

Link popularity is only reset for the dropping and deleted domain name types.

The inlinks are low-quality

If you're using a domain name's link popularity to decide whether or not to backorder it, it's a good idea to confirm the inlinks are "quality" links, and not from link farms. A link farm is a set of web pages that have been built for the sole purpose of increasing the number of incoming links to a domain name. Although they do count as inlinks, it's unlikely that qualified users actually use the pages and click their links. So even though a domain name may have strong link popularity, the links may be weak which won't generate much traffic. On the flipside, a few quality links can generate a lot of traffic.

The domain name is removed from DMOZ or the Yahoo Directory

DMOZ is a human-edited directory that does not charge a submission fee, and requires all submitted websites be reviewed by volunteer editors to ensure they meet minimum inclusion requirements. Removal is at the discretion of the editors, where some editors are more vigilant than others. Although unlikely, it is possible a vigilant editor will remove an expired domain name after it expires.

Yahoo isn't quite as altruistic as DMOZ - although it's possible to be listed in the Yahoo Directory without having paid a fee, it's unlikely. Since Yahoo charges an annual fee, most expired domain names tend to be removed from their directory once the previous one year term expires. There are some exceptions, like if the site is non-commercial, or was included prior to October 2002 (when Yahoo began charging a submission fee).

The previous domain name owner used shady business practices

If you're buying an expired domain name in order to increase traffic to an existing website, beware of its history. If the previous owner was shady, and created a lot of negative sentiment, you could be transferring that negative sentiment to your website if you acquire the domain name. For example, if the previous owner sold extremely low-quality products, then you could be faced with dealing with a lot of irate customers trying to get a refund from you, instead of from the previous website operator.

I'd love to hear your comments.

Johan Johansson is a web developer at Pixelmade, a Vancouver web design + internet marketing firm.You can find him on Twitter and Google+.