Be A Domain Name Speculator/Investor

2002-11-03 by Mark Bove

A question we are often asked is whether or not it is too late to get into the domain name speculation business. By this we mean the practice of buying a domain name now in the hopes of selling it sometime down the road for a great profit.

Our Conservative Answer: Who Knows?

Just like the stock market, if there were any guarantees, everyone would do it. Obviously, most of the best names are already taken. There will never be an opportunity again for you to buy a name like Shopping.com or Cars.com for just the basic registration fees. Sure, prices for good domain names on the resale market have only been going in one direction (up!) for years now. But is this trend going to continue? Or is today the day that domain name historians will later cite as the precise peak of domain name hysteria? Maybe it is.

There is one thing we can recommend with confidence: Don't gamble any money on domain names that you are not prepared to possibly lose.

Our Gut Answer: It's Still Not Too Late

There are many strong reasons to believe that money can still be made speculating on domain names:

Scarcity Of Dot Coms - Domain names ending in dot com are ingrained in the public's minds. Other endings like ".shop" may be introduced in the future but they will never have the same marketing potency as ".com" because ".com" came first and is associated with every strong internet company that now has a strong foothold in the eBiz market. As more and more businesses seek a presence online, they will always prefer a dot com name. If you own one, even if it is not in demand today, it may be tomorrow because of the limited supply.

Also, dot coms are becoming so scarce that even some dot nets and dot TVs are beginning to fetch significant amounts on the resale market. (Note: Dot TV ending domain names can only be purchased from the company named DotTV. These names are currently being sold for fairly high amounts.)

The Trend Is Holding - Names are only becoming more and more valuable and there doesn't seem to be any signs of a decline or even a plateau. Like in real estate, art, or stocks, there is a popular saying, "the trend is your friend." If you believe this trend will continue, it only stands to reason that prices you pay today will be lower than what you'll receive tomorrow.
Marketers Are Realizing Value - Many internet companies today are realizing that with a good, solid domain name, they can spend much less on marketing to attain their desired results. Idealab, one of the most successful internet incubators regularly pays $1 million for a domain name knowing that it will save them many more millions in the long run because their marketing message will resonate that much more in people's minds.

More Businesses Coming Online - This is a trend that we are confident will continue. Numerous studies have shown that an enormous number of businesses still do not have an online presence but are planning to get one in the future. This does not include the vast number of new businesses that will be started from scratch on the internet. All these businesses will share one need in common - the need for a domain name. It's possible that they will all pick seven word long variations that are still available, but highly unlikely. Instead, many will look to pay a premium for names on the resale market.

Buy High, Sell Higher - The name Business.com was bought a couple years ago by a domain name speculator for around $300,000. It was later sold for $7.5 million. Quite a nice return. Although you might not have $300,000 to gamble with, the principle still applies on a smaller scale. Many decent names are currently being offered for $200-$500 (or are offered for more but could actually be negotiated down to this range.) A good name for $300 might fetch $3000 in a couple years. Who knows?

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