Does Investing in Domain Names Make Sense? How Much Can You Make from It?

Is it possible to make money with domain names? The short answer is yes but there are many things you need to know about it if you think of getting involved with domain name investing. Making money with domain names is unlike other business or investment venture.

How Making Money with Domain Names Works

The basic idea of making money with domain names is buying domain names to be sold later on. It’s similar to trading shares, currency, or other assets. You buy something at a low price to be sold later on  at a higher price.

Buying a domain name essentially means registering one under your name or your business name. There is no physical item that will be obtained. A purchase can be done entirely online.  Becoming the owner of a domain name, however, is not permanent. You will have to renew your registration if you want to retain ownership of the domain name.

One excellent way to make money with domain names is by signing  up with a domain name marketplace. Domain name marketplaces typically provide everything you need to buy and sell domain names. They serve as a registrar and they can conveniently facilitate the auctioning or advertisement of your domain names. You may not have to actively promote the domains you are selling as they are automatically presented to potential buyers whenever they search for available domains on the marketplace. If a buyer buys your domain name, you automatically receive the payment and the ownership of the domain name is immediately transferred to the buyer.

Nothing’s stopping you from promoting the domain names you are selling on your own, though. You can create placeholder or advertisement pages for your available domain names so if someone does online searches that are relevant to your for-sale domain name, they may find your placeholder site on search engine results and see the ad for the domain name you are selling. For example, you can create a single-page website (placeholder) for your domain name “thebestdomainname.com” wherein you indicate on the site that the domain name “thebestdomainname.com” is for sale.

If you don’t want to rely on domain name marketplaces or auction sites, you can register a domain name with less known domain name registrars that may offer lower prices. Many web hosting companies, for example, provide domain name registration services at highly competitive rates.

How Much Can You Make?

You may have encountered reports of domain names fetching prices in tens or hundreds of thousands. Some domain names were even sold for millions of dollars. These are not fictitious. Many domain names have been sold for envy-inducing prices. Insurance.com was sold for $35.6 million in 2010. VacationRentals.com fetched $35 million when it was bought by vacation rental marketplace HomeAway, Inc. PrivateJet.com was obtained by Nations Luxury Transportation, LLC in 2012 for $30.1 million.

Other domain names that instantly added millions to the bank accounts of their former owners are Internet.com ($18 million), Insure.com ($16 million), Hotels.com ($11 million), Fb.com ($8.5 million), Business.com ($7.5 million), Beer.com ($7 million), iCloud.com ($6 million), Casino.com ($5.5 million), Asseenontv.com ($5.1 million), Korea.com ($5 million), Freeport.com ($4 million), GiftCard.com ($4 million), and Shop.com ($3.5 million).

Take note, though, these million dollar prices are not the norm. These are a rarity. It’s virtually impossible to buy (at low prices) high value domain names similar to the ones listed above nowadays, let alone sell them for millions. Based on the most recent market study of major domain name marketplace Sedo, most of the domain names sold in 2011 were priced not higher than $2,500. Around 46% were in the 0-$500 price range while 40% were in the $501-$2,500 price range. Only around 1% of the domains sold were priced higher than $50,000.

The median prices of the most popular domain names based on the Sedo market study have been a mixed bag. For .com domains, for example, the median price in 2010 was $3,185 but it decreased to $2,775 in 2011 and $2,148 in 2012. For the .net domains, the median prices  2010, 2011, and 2012 were increasing, at $1,599, $1,602, and $1,880 respectively. When it comes to .org domains, the median prices were $2,217 in 2010, $1,289 in 2011, and $1,315 in 2012. The price trends are not clearly increasing or decreasing especially in recent years, with the introduction of new domain names. There has been no comprehensive recent study on domain name price trends across different marketplaces for both the traditional and new domains.

There’s money in the buying and selling of domain names. Domain name investing is not a lost cause. However, it’s  not something you can do as a major business venture. The profits are unpredictable and there are many things you need to take into account as you buy and sell domain names.

It is particularly important to look at the new dynamics with the introduction of the new domain names. Should you invest in new domain names like .cafe, .restaurant, or .store or should you stick with the traditional domains like .com and .net? Many would seem to believe that it would be better to focus on traditional domain names.  However, it’s worth noting that a new domain name, casino.online, was sold in early 2017 for a record $201,250. This is the highest ever price for a new domain, which may signal that new domain names are beginning to be acknowledged

Domain name investing at present seems to be sending mixed signals. You have to study various aspects and different factors to have a good estimation as to whether or not investing in certain domain names is worth it. You also have to take cybersquatting laws into account. If you want to engage in domain name investing, keep abreast with the trends and don’t risk large amounts for domain name investments.