The Advantages of Licensing (Not Selling) Domain Names

[Zorro]

I've often wondered if its a good idea to license or Rent-out your domain property instead of selling it.
Found an old but interesting article here:

Gigalaw - Advantages of licensing domains

Comments would be appreciated.
Btw how many of you have tried this buisness model?

 

[DomainPairs]

I've got some sites that I do as joint developments. Not really name licensing on its simplest form. I keep ownership of the name and provide hosting and advice for a fixed fee.

 

[Silverwire]

Sure, it's a fantastic idea! Now where are you going to find a sucker stupid enough to heavily invest in promoting and operating a name only to either turn it back over to you or be at your mercy come renewal time?

When one rents a storefront and then moves out because the rent is too high, there is no doubt in the customers mind the the new tenant is not the same. When one buys a license to manufacture or distribute a trademarked brand they are receiving the benefit of the marketing and recognition of that brand.

The only circumstance I can think of that would justify it is if the domain name is a very strong generic/natural type-in traffic puller and its being just redirected to the renters brand name site. The renter would make no investment in promoting the domain name and would not suffer from pulling the plug at the end of the term. That's just not your typical scenario.

If someone approached me and wanted to rent a name, sure, I'd consider it. But as hard as it is to just find a buyer to make a straightforward sale of a domain name, you are making the needle even smaller in the haystack to search for a willing renter.

And don't forget the extra legal fees for contracts, the extra hassle and aggravation.

 

[hanogl]

Most people will indeed not want to take the risk of leasing the name, they are too afraid of investing a lot of money in marketing a domain name that is not fully under their control.

There is an exception however: I have a client that leases one of my top names. He agreed that the price I asked is reasonable but simply didn't have the money. So we set up a lease contract which includes a purchase right.

Hans

 

[Zorro]

I think the biz model can work if you can put together a contract which safeguards the tenants interests/investments.
Let me outline essential features of a specimen contract:

1. The tenant pays a fixed amount $X per month for exclusive right to domain.com

2. The rent amount can be increased only if such a provision exists in the original contract.

3. The tenant can use domain.com for as long as he wishes to , provided he pays the monthly fee. If the tenant does not pay the due fee for 2 consecute months, the contract will be terminated.

4. The land-lord (domain owner) cannot sell the domain to a third party as long as the tenant occupies the property (domain.com)

5. The should be a provision for allowing the tenant to purchase domain.com for a price fixed (say 50 * X) at any time.

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Now tell me, how is this very different to the contract that we (domain owners) have with the registrars.

+ We dont Own the domains that we register...only purchase the license to use the domains.

+ If we dont pay the annual renewal fee, our rights to the domain are terminated.

I believe it all comes down to credibility & working on the fine print to re-assure a potential tenant.

You disagree?

 

[DomainPairs]

In my case it is a property site with a name similar to another I have (housesoffered.com which hasn't been developed). The current user is a small local agent, and I wanted to use the name nationally in the future. The probable outcome will be a joint development when this happens, so that we both benefit. It's a fairly loose arrangement and probably not viable in most situations.

The downside to Silverwires point is that a bad lessee can trash a good name.