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Domain Names as an Investment

Posted on June 20, 2019
Domain Name Investment

1985 saw the registration of first domain name, Symbolics. Since then, the internet has come a long way. The birth of the digital era gave way to a new type of entrepreneur, the one who has been riding the wave of the internet boom by investing in domain names. Yes, we are talking about Domain Investors, or Domainers!

Over the years, domain name investment has contributed significantly to making smart investors who have foreseen trends, invested, held on to it and generated millions of dollars’ worth in return. To cite an example, lasvegas.com is currently the most expensive domain name which was purchased by the owners of vegas.com for a whopping $90 million in 2005! It, of course, did not cost the original owners anywhere as close to the amount they actually received when they sold it.

Whether you are an entrepreneur, a small business owner or a big MNC, in today’s world you need a domain to mark your online presence. But long before the web became the place to be, patient and smart domain investors had ventured out, speculated the choice of domains, planned their moves and later on, made and are still making fortunes by using their own judgment and market exposure. At present, of all the registered domains, 7.1% are for sale, which is close to 10 million domain names!

How Do Domain Investors Build the Perfect Domain Name to Make a Profit?

Hedging and speculation can be of great value to you if you want to make a fortune from the sale of the domains that you have registered. But it is often easier said than done, to pick that perfect domain name that will help you make millions. If you plan on of buying domains, hedging them and in the end selling them off to make big monies you can follow some of the strategies that are used by seasoned investors.

  • Shorter domain names are more popular as they are easier for customers to remember. This helps to add a marketability value to it.
  • Generic terms or names commonly searched for can be great domains to invest in.
  • Staying relevant and understanding future trends early can help monetize them in the future.
  • Look at regions that are growing and untapped markets which could turn lucrative over the next few years.

Domain investors need to build a portfolio of versatile domain names and opt for quality instead of quantity and of course, have the patience to sit on the domain name for a while.

What Are the Risks Associated with Long Period Domain Investment?

Like any other business, even speculative domain investments are not free from risk factors. Liquidity, subjectivity, legality and new innovations pose serious risks to the investments.

From the liquidity point of view, unlike stocks and bonds where brokers play a key role in the purchase and sales, domain names do not revolve around any brokers. To elaborate, they can take several months, years or even decades to earn lucrative income and you basically have to understand your market and also trust your instinct to know when to sell and to whom. This could create a lot of waiting time for the investments to materialize.

Even the subjectivity part affects the sale price of the domains. Unlike stocks and bonds, domain names have subjective valuation, which makes it very difficult to ascertain the right price.

In some rare cases, the legality issues can also rebound and if there is a copyright infringement or trademark violation, it could lead to forfeiting the domain for free.

With the introduction of new gTLDs, the landscape of the internet also seems to be changing and this is opening up completely new avenues to be explored.

One has to keep in mind all these aspects before they venture into the domain arena to make their profits!

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