Investing and Making Money Out of Domain Names

Maybe you've seen advertisements on websites, or heard stories about a guy who made his fortune as a cheap domain reseller - buying and selling domain names as a business, instead of just for personal use. Maybe you already have a domain reseller account with your Internet service provider (ISP), just waiting to be used. But is it a good idea to buy and sell domains as a business?

Luck of the Draw?

There's a lot of hype attached to the domain reselling business. CNN reported that "business.com" was sold for $7.5 million in 1997, and in 2003 "men.com" was sold for $1.3 million, but these are unusual cases involving very specific domain names, and most domain investors will never get that lucky. Partly this is because it's difficult to value domain names, and partly this is because of misconceptions that all "good" names are taken. In addition, the availability of country code domains has opened up the domain naming field, allowing people to buy and sell domains with short names and new extensions.

What Makes One Domain More Valuable Than Another?

As stated above, valuation of domain names is extremely tricky. This is because the market to sell domains is driven by the perceived scarcity of "good" names. Most business owners, whether their companies are large or small, prefer a name ending in .com over a name in any other top level domain. As well, memorable combinations of relevant words that can easily be used in a domain name are already in use. Adding to the price increase is the fact that while more than 17 million domain names have been sold, not every one of them is necessarily good. Generally, in order to be saleable, domain names, in addition to ending in .com, must also be fairly generic. "Law.com" "tv.com" and "business.com" are classic examples. (CNN paid several thousand dollars for the tv.com in the early 2000's.) The reality is that most of these domains will never be resold, and will end up being released for registration at the standard rate of $10-$30/year. The notion that highly priced domains must be one word is a myth, however. Word combinations can be extremely valuable if the words are relevant especially considering their value in terms of  search engine optimization. "BookBuyer.com" might be worth purchasing, but "BookSink.com" is essentially nonsense, even if it is short. For this reason, while it is recommended that people seeking to buy and sell domains stay within highly commercial industries (law, loans, books, cars, etc.) it is important that they choose their domains wisely.

What You Need to Know

If you do have aspirations to sell domains, there are certain things you need to know. First, it's essential to have a domain reseller account. This is a special bulk account through one of the domain reseller programs offered by such domain registrars as BulkRegister and Dotster. Such an account allows you access to listings of domains about to expire, as well as discounts on bulk registrations (generally minimums of 50 at a time). Most of the major domain registrars offer such programs to those who wish to sell domains. Free information rating registrars can be found in online domain reseller review lists, such as the one at RegSelect.com. In addition, it is important to remember that statistics are against making big money as a cheap domain reseller. According to igoldrush.com, of the approximately 20 million .com, .net, and .org domain names sold, perhaps 20,000 of those will be resold within a given five-year period, and of those 20,000, 90% of them are worth 4 figures or less (with most falling into the 'less' category).

Other Alternatives?

There are, of course, other ways to buy and sell domains than using the services attached to registrar-owned domain reseller programs. One is to contact large corporations directly, if you've secured a recognizable domain that is relevant to their brand or industry, but this is not generally terribly affective. Additionally, there is always ebay. While most products sold through the online auction house are tangible goods and services, they do allow domain sales, and the use of ebay allows investors to do additional marketing of the domains they own.

So Is Domain Investing Worth the Risk?

If you are looking to make a quick buck, domain investing may not be the industry for you. If, however, you enjoy a good gamble, and have the money to spend, reselling domains can be lucrative. Thanks to the afore-mentioned country code top level domains (like .us and .de), valuable names are still available, but successful reselling takes patience and a lot of research to find quality names, and quality marketing techniques. The bottom line is this: if you are seeking to be rid of a single domain you no longer use, your best bet is to either let it lapse, or go through a cheap domain reseller, and let them market it for you. If you want to buy and sell domains as an investment, commit to a high-end domain reseller account at your registrar of choice, and take advantage of their services and support.