Investing in domain names gives higher returns than investing in NASDAQ listed companies. What are you waiting for?
Thies Lindenthal, visiting scholar at the Massachusetts Institute of Technology (MIT) Center for Real Estate, and Product Manager for Domain Pricing at Sedo, has created the IDNX price index, revealing the evolution of domain name sales since 2006. The index shows that the prices for the ten most commonly traded TLDs have increased by 64% since January 2006. It would appear, when comparing the IDNX with the NASDAQ 100 (index of the 100 most actively traded companies listed on the US NASDAQ stock exchange) that domain name prices are influenced by changes in the stock market. Interestingly, the comparison also indicates that investing in domain names gives higher returns than investing in companies listed on the NASDAQ.
Domain flipping is the buying and selling of domain names for profit, as with any investment there are risks, and there are no guarantees that money will be made. It is not a ‘get rich quick scheme’; it requires patience and hard work.
Domains hit Wall Street
In April 2012, two leading financial companies, Bloomberg and Reuters, added the IDNX to their stock indices, adding credence to domain name investing and making the domain market more visible so profitable investment decisions may be more easily reached. Domain name owners will be pleased to note that the index reports growth over the preceding five months, with a significant increase in March.
Will this trend lead to people playing the stock market with domain names? Sedo, a domain marketplace, brings buyers and sellers together offering marketing and brokerage services. It’s a trading platform offering a domain parking program, enabling domainers the opportunity to park their unused domain names, loaded with relevant pay-per-click (PPC) ads, thus earning revenue whilst increasing the value and likelihood of a sale.
Mann, he’s making millions!
Anyone remotely interested in the domain name industry will have heard of Michael Mann, he is the chairman and founder of numerous companies and charitable funds, and he is a multimillionaire earning copius amounts of money buying and selling domain names; in his own words he, “wants to own the world.”
He was bitten by the domain name bug in the late 90s when he was made an offer for menus.com, originally purchased for $70; he was offered $25,000, overnight the offer doubled, the rest, as they say, is history.
In the good old days registering an innovative and exciting domain name was easy as there was less competition, but as time went on the volume of available names reduced. Things started to get dirty with domainers designing software that rang alarm bells immediately a name expired, some small, unscrupulous registrars took payment for revealing inside information regarding names coming up for renewal. Michael, not to be beaten, fought back and designed his own system which allowed registration and transfer of domain names and URLs such as those used to access content via the Internet and world wide web, the system was awarded a patent in 2003.
Alledgedly, Michael purchases approximately 300 names per day, selling them through his company, DomainMarket.com. He is obviously a busy man and while continuining to add to his shopping list, he had reduced his spending. All that changed in April 2012 when he decided to go shopping. Using his in-built filter for sorting the ‘wheat from the chaff’, and software performing multiple purchases, he obtained 14,962 domain names in under 24 hours. Judging by past form, Michael will surely be selling these for a substantial profit.
Some people may consider Mr Mann’s business ‘cut throat’, making it difficult for others to obtain the domain names they need whilst he fills his coffers; others may admire his business acumen and foresight.
Are you a Mann or a mouse?
It’s risky, but so is any investment. Currently, there is no way of predicting whether a domain name will be a success, and not everyone possesses Mr Mann’s inherent ability to spot a winner. There are companies offering valuation of domain names but they can never be 100% accurate, it all comes down to what a buyer can pay, and how much they want to own that particular name.
Research is essential to avoid paying over the market value, check out similar names and how they have performed. Before purchasing any domain name use Google Adwords to see what people are searching for, and how many are looking; aim to buy names containing these keywords. Be aware of current and future trends, niche markets, news stories, events; these are all potential markets that may be looking for domain names.
It’s only worth money if someone wants it
Building and nurturing your domain name portfolio takes time and money, you will need a crystal ball to see which names are going to become popular, hard work is required to promote your domain names effectively, and you will need an abundance of patience; a domain name may be parked for years waiting for the right market.
Develop the domain name and increase its value by generating traffic; create a website and add keyword specific content and meta tags, or park the domain name with an online marketplace where ads will be placed and traffic generated. The number of new websites increases every day and with them, the demand for good domain names, but if you don’t have ‘spare cash’ investing in domain names is not for you, your investment may not pay out for five to ten years or more; and annual renewal fees eat into any potential profit.
There are no tricks
.COM is the most popular domain but with this comes huge competition, the growing popularity of ccTLDs such as .US, .DE, .TV, makes these viable options which may be sold to businesses wishing to develop in their own country.
If you are lucky enough to get hold of a three/four letter domain name, congratulations, they are like gold dust; otherwise try to stay with two word domain names ensuring they are memorable, easy to type and are visually pleasing.
Generic names can bring in huge profits, one only has to look atinsure.com selling for $16m, sex.com at $13m, clothes.com at $4,900,000, but steer clear of trademarked names as this can lead to a lengthy court battle and eventual loss of money and domain name.
Previously unregistered domain names may be purchased for very little as they have no history but they will require effort on your part to market them and make them more attractive. The secondary market offers more valuable choices with price tags reflecting their desirability.
In November 2011, EuroDNS announced the deployment of Afternic’s unique ‘Instant Transfer’ technology for domain sales, offering transactions in record time. This new service allows EuroDNS customers to purchase secondary market domain names directly from the Domain Listing Service (DLS) of Afternic. Existing customers of EuroDNS will also benefit from direct access to more than 50 million prospective buyers that access Afternic’s DLS every month. Read more about the benefits of this premium domain marketplaceat the EuroDNS website.
Holding or flipping
Parking a domain name to increase its value, or executing a quick flip, with a well prepared portfolio it is possible to make money on your investments.
Will you own the world… hey Mann, who knows?