During the early years of the Internet, there was furious competition for Web site domain names, accompanied by lawsuits and huge sums paid for well-known names. Last year the buying and selling of Web site domains amounted to a $77 million enterprise, says a recent study by Sedo.com, an international company that offers domain transfer and escrow services. At any given time, Sedo lists 12 million to 15 million domains for sale, says Chief Operating Officer Jeremiah Johnston, who runs the firm's Boston office. He spoke recently to Smart Answers columnist Karen E. Klein about the domain market and how entrepreneurs can acquire, improve, and sell domains. Edited excerpts of their conversation follow.
Is the buying and selling of Web site domain names a viable business?
The days of the Internet pioneers who grabbed one-word, fantastic domains are largely over. Now, it's a matter of recognizing opportunities and making shrewd decisions. But the buying and selling of domain names has remained one of the few bright spots during the global downturn. There are almost 174 million domain names worldwide and an annual growth rate of 30% over the last five years.
Do domain names automatically increase in value over time?
Online property typically increases in value over time, particularly generic or descriptive domains that have the enduring, evergreen quality that drives traffic. Similar to traditional real estate, if you invest in the right virtual property, and hold on to it for a while, you will likely see a solid ROI. However, by developing a lackluster Web site into a money-making portal, entrepreneurs and small businesses will not only be making a profit, but they'll be making a business. They can put equity and worth into a ramshackle Web site and "flip" it for profit some time down the road.
What should individuals look for in domain names?
Look for domains that are generic, category-defining, and short, with one or two words. If you think about all the niches, verticals, and hobbies, the possibilities are infinite. Look for domains in categories where you have some knowledge and think about whether a particular domain is something you'd search for or type into a browser.
What else should entrepreneurs keep in mind?
Remember that domains are more than just dot-coms. The alternative extensions and foreign country domains, like .uk, are very popular despite the continued dominance of .com. Also, prices are significantly lowerâmaybe three to four times lessâfor the .tv, .net, .info, or .biz extensions, and they can help a business stand out and provide search engine optimization benefits.
What kind of price range are we talking about?
You hear stories about seven-figure deals, like vodka.com selling for $3 million. But the average price for a domain is under $2,000. If you coin a domain name and nobody else has ever thought of it, you can register it for about $10 annually. (You can check WhoIs to see if a domain name has already been registered.)
Why are there so many domains that sit empty or have no original content on them?
People buy domains and keep them because there's not much cost associated with them. If they can make even a trickle of income from advertising, that offsets the annual fee, if nothing else. But there are also some really good domains, like sneakers.com, that naturally get hundreds of thousands of unique visitors a month. If you have a domain that gathers anywhere near that kind of traffic, you've got a money-making machine.
How much traffic do you need to make good money with a domain name?
It depends on what the going price is for the ads you have on the site.
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