Investing in domain names

[constructive]

Has anyone here invested in / speculated on domain names?

 

The gold rush is over but I suspect there are still pockets of opportunity here and there.

 

All 1 word and most 2 word generic .coms seem to be taken. But there might be opportunities in 3 word generic, or 2 word potential brand + generic category, or 2 word with a hyphen. Or you could buy higher value names at auction, or in negotiated transactions. Anything that rolls off the tongue easily, gets direct hits, gets google searches, or sounds monetizable.

 

One problem is that you have to pay a yearly renewal fee while waiting for a strategic buyer to emerge (and hopefully pay you over 20x - the average domain name selling price is supposedly $2000). So it may make sense to develop basic websites in order to pick up ad revenue.

 

I've got a list of a few names I like, haven't bought any yet.

[yadayada]

After I saw that 3d printing article in the economist I wanted to buy a bunch of names related to that. Probably smart to spot early trends and then quickly buy for only a few thousand or so?

[constructive]

After I saw that 3d printing article in the economist I wanted to buy a bunch of names related to that. Probably smart to spot early trends and then quickly buy for only a few thousand or so?

 

Yeah that could be a promising area. Marijuana could be another one.

[Liberty]

Domain names have lost a lot of value over time. It used to be that to go somewhere, you had to type the domain name in your browser's URL bar. So shorter, memorable, typo-proof ruled. You could also typo-squat because when people have to type something, they make mistakes.

 

Nowadays, URL bars autocomplete, people use search, and most people move around more by following links on social media and blogs than by deciding to directly go to a site. This is even more so on mobile devices where people type even less. You could have a domain name that is complex and long and most people on iPhones would never notice it.

 

So I haven't really looked into that business, but on its face, it doesn't sound like something should be very profitable, if at all, especially now that we're being flooded by new generic top domain names:

 

http://newgtlds.icann.org/en/

[PatientCheetah]

Tumblr sort of ruined the game to some extent. Now it is acceptable to use non-words or randomly take out alphabets from a word.

[Liberty]

Tumblr sort of ruined the game to some extent. Now it is acceptable to use non-words or randomly take out alphabets from a word.

 

Trivia: That naming convention is a very 'Web 2.0' thing. I believe it was started by Flickr in 2004, but maybe someone else came before them.

 

In 2003 there was del.icio.us which deconstructed its domain. That's another trend starter, I think.

[constructive]

Domain names have lost a lot of value over time. It used to be that to go somewhere, you had to type the domain name in your browser's URL bar. So shorter, memorable, typo-proof ruled. You could also typo-squat because when people have to type something, they make mistakes.

 

Nowadays, URL bars autocomplete, people use search, and most people move around more by following links on social media and blogs than by deciding to directly go to a site. This is even more so on mobile devices where people type even less. You could have a domain name that is complex and long and most people on iPhones would never notice it.

 

So I haven't really looked into that business, but on its face, it doesn't sound like something should be very profitable, if at all, especially now that we're being flooded by new generic top domain names:

 

http://newgtlds.icann.org/en/

 

I disagree. Everything I have read suggests that high quality .com sale prices are higher than ever. So it could be a bubble but it's not a slump. There is very minimal demand for any of the new TLDs, or anything other than .com. http://w3techs.com/technologies/overview/top_level_domain/all

 

Buying the right domain name can easily be the most critical part of a business' marketing spending. It doesn't make sense to go cheap / risky instead of getting the name you really want.

[karthikpm]

Any thoughts on Verisign in this regard?

[Parsad]

Domain names have lost a lot of value over time. It used to be that to go somewhere, you had to type the domain name in your browser's URL bar. So shorter, memorable, typo-proof ruled. You could also typo-squat because when people have to type something, they make mistakes.

 

Nowadays, URL bars autocomplete, people use search, and most people move around more by following links on social media and blogs than by deciding to directly go to a site. This is even more so on mobile devices where people type even less. You could have a domain name that is complex and long and most people on iPhones would never notice it.

 

So I haven't really looked into that business, but on its face, it doesn't sound like something should be very profitable, if at all, especially now that we're being flooded by new generic top domain names:

 

http://newgtlds.icann.org/en/

 

I disagree. Everything I have read suggests that high quality .com sale prices are higher than ever. So it could be a bubble but it's not a slump. There is very minimal demand for any of the new TLDs, or anything other than .com. http://w3techs.com/technologies/overview/top_level_domain/all

 

Buying the right domain name can easily be the most critical part of a business' marketing spending. It doesn't make sense to go cheap / risky instead of getting the name you really want.

 

You have to be ahead of trends or ideas, and then capitalize on names or terms that may be of value in the future.  You can make money from it, but you have to be on top of it all of the time, probably hold hundreds of names at any given time, and pay the annual renewals for them until one or two hit it relatively big. 

 

Also, the name poaching rules are tighter now.  If a person or business can establish that you are sitting on their rightful domain name, they can argue that in court often and get the domain from you, or even hold you liable and seek compensation.  Cheers!

[Liberty]

Domain names have lost a lot of value over time. It used to be that to go somewhere, you had to type the domain name in your browser's URL bar. So shorter, memorable, typo-proof ruled. You could also typo-squat because when people have to type something, they make mistakes.

 

Nowadays, URL bars autocomplete, people use search, and most people move around more by following links on social media and blogs than by deciding to directly go to a site. This is even more so on mobile devices where people type even less. You could have a domain name that is complex and long and most people on iPhones would never notice it.

 

So I haven't really looked into that business, but on its face, it doesn't sound like something should be very profitable, if at all, especially now that we're being flooded by new generic top domain names:

 

http://newgtlds.icann.org/en/

 

I disagree. Everything I have read suggests that high quality .com sale prices are higher than ever. So it could be a bubble but it's not a slump. There is very minimal demand for any of the new TLDs, or anything other than .com. http://w3techs.com/technologies/overview/top_level_domain/all

 

Buying the right domain name can easily be the most critical part of a business' marketing spending. It doesn't make sense to go cheap / risky instead of getting the name you really want.

 

You may be right. As I said, I haven't looked into this business, that was just my initial impression.

 

Let us know how it turns out.

[constructive]

You have to be ahead of trends or ideas, and then capitalize on names or terms that may be of value in the future.  You can make money from it, but you have to be on top of it all of the time, probably hold hundreds of names at any given time, and pay the annual renewals for them until one or two hit it relatively big. 

 

Also, the name poaching rules are tighter now.  If a person or business can establish that you are sitting on their rightful domain name, they can argue that in court often and get the domain from you, or even hold you liable and seek compensation.  Cheers!

 

Yeah, it seems like the dynamic is similar to venture capital. You might lose money on 70%, break even on 20% and make money on just 10% of your investments. When it comes to equities I'm risk averse, not a VC style investor at all.

 

Of course you are right regarding trademark infringement. I remember you saying you bought premwatsa.com to protect his name. Have you bought any other domains besides CMC and COBAF?

[Ham Hockers]

http://venturebeat.com/2013/11/13/yahoo-is-selling-over-100-domain-names-worth-up-to-1-5m-each/

 

[KCLarkin]

This is an intensely competitive business. There are a few whales who have very sophisticated systems for buying the most valuable domain names. You might get lucky and get a good name or two but it is very unlikely.

[NeverLoseMoney]

I have registered a few dozen domain names, but I usually register one so I can use it for developing an actual website in the future. When I think of an idea for a website I will try to find the best domain name that matches the subject and that is still available. Sometimes I'm able to pick up a nice one, but it is not my main business. The nicest domains I have are not very valuable, perhaps a few hundred bucks. Their main value is that they contain certain keywords that make it a little easier to rank for certain search terms in Google.

 

My biggest "success" story is a domain I registered in the gambling area. A well known site was going to start offering a variant of a gambling game. I read their press release and was able to pick up a .com domain that best described what they were going to offer. I only paid the registration fee for the domain. About a week later I received a $1500 offer for the domain from a company (not the gambling site), but I decided to wait and perhaps develop the domain myself for an affiliate site. Before I got around to doing that, the gambling site got into all sorts of trouble (legal and financial) and went out of business. So the value of the domain is probably gone, but there is a small chance another site will launch this variant of that particular game and it might be valuable again at that point. It has now basically turned into a cheap option that I will hold for a while longer.

 

BTW: if you're interested in domain names you could take a look at Tucows (TCX), they're active in this space. They're a "cannibal", but the stock looks quite expensive now.

[dpetrescu]

Any thoughts on Verisign in this regard?

 

I've been investing in Verisign LEAPS for a while, bought some more on recent weakness. They've done amazing and it is no surprise. They have a 100% guaranteed monopoly on .com and .net registrations with zero competition. They can increase pricing if they can document costs also increased. This is truly a one of a kind company.

 

Of course there is one big risk. While they have 100% market share, the market itself has emerging competition. The .COM and .NET market will face competition from new generic top level domains. For now I'm sticking with Verisign. But I can't claim to know what people will be typing at the end of a web address in 5 years.

[dpetrescu]

Reserving .COM names was the thing to do in the 90s. Right now the rush is for the generic top level domain names.

 

So in the 90s you could have reserved weed.com. Today you might be able to get weed-bluevelvet-grass-72.com.

 

But A few years ago you could have bought the .weed gTLD. So when someone decides to open a weed retail shop called Marley's, she might use Marleyweed.com and/or Marley.weed

 

 

Domain names have lost a lot of value over time. It used to be that to go somewhere, you had to type the domain name in your browser's URL bar. So shorter, memorable, typo-proof ruled. You could also typo-squat because when people have to type something, they make mistakes.

 

Nowadays, URL bars autocomplete, people use search, and most people move around more by following links on social media and blogs than by deciding to directly go to a site. This is even more so on mobile devices where people type even less. You could have a domain name that is complex and long and most people on iPhones would never notice it.

 

So I haven't really looked into that business, but on its face, it doesn't sound like something should be very profitable, if at all, especially now that we're being flooded by new generic top domain names:

 

http://newgtlds.icann.org/en/

[ItsAValueTrap]

You should probably look at forums where there are people experience in doing this:

Web Hosting Talk

Sitepoint

etc. etc.

 

What little I understand is this:

1- Somehow you have to figure out what domains people want.  This is an open-ended problem.

 

For example, maybe you do permutations of LOCATION + NAME OF PROFESSION.  So OmahaDentist.com may be valuable.

 

2- There are ways to get your costs down... which generally involves buying a huge volume of domains.

3- On each domain, you can generate additional revenue from (A) advertising and (B) selling links and/or gaming search engines for SEO purposes.

 

Some domain campers may have some way of automatically generating content and getting listed organically on search engines to generate advertising revenue.

[constructive]

Everything I have read suggests that high quality .com sale prices are higher than ever.

 

There is very minimal demand for any of the new TLDs, or anything other than .com.

 

Here's some data to back those comments up:

http://www.idnx.com/

http://www.idnx.com/#tld

 

Most valuable keyword topics: http://www.domainsherpa.com/most-expensive-google-adwords-keywords/

[yadayada]

it seems kinda pointless to do it. It seems like any other skill. You cant make bank with it unless you devote some serious time to it. So unless you enjoy that, I doubt there is easy money laying around.

[constructive]

You should probably look at forums where there are people experience in doing this:

Web Hosting Talk

Sitepoint

etc. etc.

 

What little I understand is this:

1- Somehow you have to figure out what domains people want.  This is an open-ended problem.

 

For example, maybe you do permutations of LOCATION + NAME OF PROFESSION.  So OmahaDentist.com may be valuable.

 

2- There are ways to get your costs down... which generally involves buying a huge volume of domains.

3- On each domain, you can generate additional revenue from (A) advertising and (B) selling links and/or gaming search engines for SEO purposes.

 

Some domain campers may have some way of automatically generating content and getting listed organically on search engines to generate advertising revenue.

 

I've looked at a couple of domaining sites. It's pretty clear that ~99% of registered domains aren't worth the registration fee. It can be pretty funny how terrible a lot of names are, and how convinced people are that they're valuable.

 

I am just thinking about hand registering a small number of domains, listing them and/or auctioning them within a year. If they don't sell, then I'd throw them back. Also not interested in hosting. That will minimize the invested time and capital.

 

Here's another potential value area. I've pointed out that most TLDs are lousy. But short, exact keyword matches in foreign languages might be valuable. For example, banca.co.ve. The Venezuelan version of banking.com. co.ve's cost $70 though, so they are less promising than .co's or .mx's.

[constructive]

I think we are looking at this the wrong way. The market for domain names that are relevant to the US or other english speaking countries is pretty much saturated. I think the real opportunity is in buying domain names of brands and other things that are relevant in foreign countries. I'd guess India is a prime location for this as massive amounts of people are gaining internet access through smart phones. Though the market in India isn't quite untouched I'd say, perhaps look into Nigeria or some other similar country that speaks english?

Or preemptively buy domains with the hope that a company expands into that country.

 

Buying existing brand names in foreign countries is illegal and will result in you losing the domain and maybe worse. Like I said, simple generics in smaller foreign markets (stuff like vacaciones.co or seguro.co) might be a good place to look. However, flipping foreign language domains for a fair price is probably difficult, especially if you don't speak the language. Those might make more sense to be developed for ad revenue.

[constructive]

I do agree that if you're looking for a decent .com, the hit rate is extremely low. But the upside if you find one is much higher than other TLDs, where it's easier to find decent domains.

[Mark Jr.]

Oh boy, I can't believe I missed this thread until today. Now you guys will never get me to shut up about this.

 

I've been immersed in the domain name business for about 20 years, I've been running a managed DNS provider and ICANN registrar for 16 of those 20 years, there a few "silos" within this space, but most of this thread speaks to three of these silos:

 

Domain Registration (registrars - Tucows, Godaddy)

 

Domain Registries (.com - Verisign)

 

The domain aftermarket - buying and selling domain names, also in this silo is trying to monetize domains via pay-per-click (PPC), etc.

 

So the first thing to understand is what drove the heyday of the domain aftermarket, including PPC values and that was the anomaly of "type-in" traffic on generic terms, which peaked around 2000-2003. In those days two things drove value:

 

1) people treated the browser location bar like it was a search field, and just typed keywords into it

 

and

 

2) the browsers auto-completed non-FQDN's (non fully qualified domain names) by appending ".com" on the end of it.

 

There was a 3rd factor that enabled a few fortunes to be amassed:

 

3) the aftermath of the .COM meltdown (2000 - 2002/2003) kicked off the "drop game": a lot of generic (and because of 1 & 2) valuable domains "dropped" - they were not renewed by the original registrants and people who figured this out started re-registering the good ones as they expired. Guys like Frank Schilling, Gary Chernoff and Yun Ye created HUGE portfolios of domains like this, grabbing names for the price of registration and immediately monetizing them via PPC and earning $100 CPM or more, occasionally selling a name or two for hundreds of thousands or even millions.

 

In 2007 I wrote an article that basically said the golden age was over and I was widely reviled by "the domainer" industry (that segment which formed around this) for saying it, but pretty well over the next few years pretty much what I predicted came to pass:

 

• The browser location bar morphed into a search field
  
• "type-in" traffic entered secular decline
  
• competition from other segments would arrive: dns resolvers, ISPs etc would all start getting in between the browser and the destinations
  

 

But not before the space heated up so much that Big Money started entering the space. Yun Ye sold his portfolio for a few hundred million to Marchex, which was publicaly traded. A few other "domain incubators" came into existence, trying to make a model around "investing in undervalued domain assets and developing them" which basically translated in practice into "overpaying stupid money for over-valued assets and then wrecking them".

 

Because the golden years of 2002-2005 were still fresh in everybody's minds, the concept of "the category killer domain name" got a lot of traction and with it the erroneous belief that "if you owned the generic descriptor .com of given market, it would enable you to own that market".

 

Epic value destruction ensued. I wrote another article about it (the lead off post in my WebvalueInvestor blog) and, once again, was burned in effigy.

 

My point in that article was that there was still money to be made in domaining, but it wasn't where everybody was looking.

 

Tucows was mentioned in this thread, but I think misunderstood. Tucows was for a long time, the 2nd largest domain registrar in existence (I think now 3rd or 4th), but was a penny stock. I bought them for between $2 and $4 (split adjusted) starting in 2005 and finally sold them recently a little north of $17.

 

Tucows was my very first textbook value investment gone right for me. Totally within my circle of competence, I realized in early 2006 that Tucows (as could all registrars) was still able to amass expired domain names long after "the drop game" became too crowded for the non-pro to be viable, because they could front-run the drop and mine the expiring domains of their own customers. Because of this, my rough but hyper-conservative calculations, the value of Tucows stash of aftermarket domains was worth more than twice the market cap of the company, that portfolio didn't show up on the balance sheet, and it wasn't priced into the shares at all.

 

It was a punch card investment, and I kept buying until it was the largest position I have ever held. I won't say this was a "life changing" transaction for me, but I did it all within my RRSP and suffice it to say that it has been a significant factor in my retirement fund.

 

Where are we now?

 

I too thought that the new TLDs would have a reciprocal effect on legacy TLD aftermarket prices, that .com, .net and ccTLDs like .CA would enjoy a lift from the confusion all the new TLDs would produce.

 

I was wrong.

 

In the year running up to the new TLDs I personally saw deal flow drop measurably in the domain aftermarket that I have personal visibility into. Both frequency and dollar amount of deals. Brokers I know concur on this - the only ones experiencing increased dealflow are representing sellers who have massively adjusted their expectations downward: domains they were holding out for a xx,xxx sale, they are now accepting offers in the x,xxx range, and so on.

 

After the new TLDs, the aftermarket has dropped off the cliff. The odd breathless, manic story you hear about some domain selling for millions are atypical and usually represent situations where the buyer had deep pockets and was completely over a barrel.

 

My plan is to write a third installment of my domain aftermarket commentary "Welcome to the Dark Age of Domaining", it's more or less what I indicated here but will have a lot of specific examples in it. I'll post the URL when it's done.

 

[ItsAValueTrap]

Oh boy, I can't believe I missed this thread until today. Now you guys will never get me to shut up about this.

 

Let me help you...  ;D

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/vrsn-verisign/  - the Verisign thread

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/dmd-demand-media-11074/  - the Demand Media thread

 

[JAllen]

Mark Jr.:  Thanks for that awesome insider detail.

 

 

Do you have a recommended registrar for newer TLDs?  I note that for the new TLDs, initial and ongoing renewal prices vary greatly, so the prices matter way more than just paying $10-15 for the old ones. 

 

 

Is there a place to read about how the new TLDs are priced?