Posts tagged with: Domain Names

The Business of Domain Names

posted by   Ian Wyatt   |    February 16, 2009

Posted in   New Media   |   Comments

Domain names are the real estate of the dot com world. Like real world real estate, the market for domain names has hit the skids as well, with prices falling from the highs of 2008. With transaction volume and prices falling, a recent article by industry publication Domain Name Journal reports that domain name industry insiders are increasingly focused on developing high quality, generic domain names into web sites.

I bought my first domain name in 1998, and been building a domain name portfolio for the past decade. My portfolio of +600 domain names is comprised of domains that I originally registered, as well as those purchased at auction or through domain resellers. I favor .com domain names, the most prized domain extension (as compared with .net, .org, .info, .me, to .mobi, etc). Most of my domains are in the financial or investment area, some of which have been developed into web sites. I also have bought domains related to health, wellness, media, beer and wine.

Given the economic slowdown, I've been giving some thought to my business. My company, Business Financial Publishing, is an investment content company that provides individual investors with investment insights, analysis and research through our various free and paid e-letters and investment services. But are we also in the domain name business? We acquire domain names, and develop them into products and services that can be monetized.

Historically, we conceive a product or service first, and then acquire an appropriate domain name. Most domainers, or those engaged in the business is owning, developing, and selling domain names, take the opposite approach by buying high quality domain names, regardless of the sector or topic.

Domain names can be registered with companies such as NetworkSolutions or GoDaddy.com for about $10 a year. But with many good domains already registered, more and more people turn to the domain name aftermarket to purchase domain names. The aftermarket refers to domains that have already been registered, and are being re-sold. Both individuals and companies such as BuyDomains and SEDO have acquired large portfolios of domain names, which they then re-sell or auction off to those seeking already registered domain names.

With the cost of buying and maintaining a domain name so low, domainers acquire portfolios of thousands of domain names with hopes of monetizing the domains through the resale of the domain, developing the domain into a web business, or monetizing direct type in traffic through Google (Nasdaq: GOOG) Adwords (type-in traffic refers to someone navigating directly to a domain name such as IanWyatt.com - for one-word generic domains such as Beer.com, type-in traffic can be significant).

Business Week magazine wrote a great article on the domain name aftermarket business, titled The Domains Of The Day: How two Boston entrepreneurs are making millions from names as simple as chocolate.com. The article profiles Andrew Miller and Michael Zapolin's company - Internet Real Estate Group - and their strategy for turning generic one-word domain names into multi-million dollar businesses.

The interesting thing about Internet Real Estate Group is the company isn't focused on any single industry. The company buys one or two word domains such as Software.com, Phone.com, Jeans.com, SportsFan.com, and WeddingGifts.com, and either develops these into web sites or sells the domains or businesses to others. Internet Real Estate Group bought the domain CreditCards.com in 2003 for $100,000 and sold the domain and credit card comparison shopping site in 2004 for $2.75 million to Austin Ventures. CreditCards.com was slated to go public under the leadership of Elisabeth DeMarse, former CEO of BankRate (Nasdaq: RATE), before the credit markets came to a halt in 2008. (I've known Elisabeth for years, and followed BankRate in my Growth Report newsletter starting in 2002 when the stock traded at $1.00 - it is now at $26 a share, down from a high of $55).

The Domain Name Journal or DNJournal is the best source of information on the domain name aftermarket business, reporting with feature stories on domainers and aftermarket sales. DNJournal in January published a good article, The State of the Industry January 2009: 15 Leading Experts Break Down What Went Wrong in 2008 and Predict What Will Happen in 2009.

Today I find myself thinking about which of my domains could be easily developed at a low cost into self sustaining businesses?  While I don't have any one-word generic domains like Chocolate.com, I have plenty of domain names ripe for development.