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Why a domain name is a good investment

Thursday, May 15, 2008
By admin

A weak U.S. dollar, a crisis in the U.S. mortgage market and skyrocketing oil prices have begun to create global economic uncertainty. There is also a very real prospect of faltering and failing stock markets. The U.S. dollar being the store of value for many investors, there is a general stampede to find newer areas of investment.

One of these areas lie in the as yet largely unorganized sector of domain investment, where sometimes a very low investment can yield very high returns. The domain market which had seen a slump in the period immediately following the dotcom boom of the 90’s is seeing a revival again. Examples range from that sold in 2004 for a posh $100,000, to that sold for a dashing $700,000 subsequently. One of the most recent domain sales was at a whopping price and it was for at $7,500,000, or 7.5 million dollars.

These look like unlikely one-off figures. But the fact is, though not all sales can be this lucrative, good money can still be made by investing in domain names.

One of the biggest reasons behind this is an absolute explosion of prospective website owners on one hand and the scarcity of good domain names on the other.

New website owners are always looking for short, brandable, generic, search-engine friendly domain names, and most of them are not available on the primary domain market. For a specific domain name, a prospective website owner would be willing to pay a substantial sum to anyone who already owns that name. A little research, backordering and watching the expiring domain names could yield a promising domain name worth investing into, which could be sold off with a big margin later.

Domain names with extensions other than .com, .org, and .info, like .mobi, .tv and .biz as well as country-specific domain names will all slowly appreciate as the internet widens its reach, from roughly 1 billion people at present to the total of 6 billion. Out of the 1 billion who are online today, only about 2% have websites of their own. This situation is likely to change appreciably in the next decade, as more and more people start websites for personal, professional or commercial reasons, which only means a bigger domain market.

Unlike stocks, however, domain names cannot be accurately valued or converted to cash at any moment in time, because the investor has to wait for the right buyer. But this disadvantage is balanced out by the fact that domain names can be monetized through cash parking, affiliate programs and simply by developing traffic. All of which may not only be enough to pay the renewal fee and become a paying online business, but also lead to an increase in value. A developed domain or a domain with traffic would bring in a higher price to the investor.

An astutely picked out portfolio of domain names can easily become a source of steady income, as well as providing the opportunity of high returns with relatively low investment.

Domain name investing has been largely under the radar for the last few years, but it is time it is seriously considered as a lucrative investment option.

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