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Should you own a Domain Name? Should anyone? What are the ways to monetize a domain name? Are domain names going to be important in the future? To find out this and much more, read on...
What is happening right now on this field?
We are reaching a stage where natural awareness on Domain ownership is beginning to emerge.
While the idea of domain ownership is not ubiquitous, It actually is in terms of the considerable number of companies, small businesses and would be investors realizing the intrinsic value of owning a domain name.
As a result, we have seen a steady increase in domain value appreciation since the crash of the dot com bubble. However, I posit the view that whilst the best words have indeed been registered mostly by domain speculators, investors and businesses, there still remains an immense opportunity for the novice investor to participate in what I perceive to be the biggest real estate boom of our time....online!
Imagine what it was like 100 to 150 years ago, when pioneers scrambled for land ownership to build their bricks and mortar in the Americas, parts of Africa, Australia and Asia;well, descendants of those pioneers are still benefiting from land acquisitions their forebears made decades ago. For instance, the Duke of Westminister owns vast hectares of land all over central london...how come? most of the bricks and mortar built on this premium part of London pays a monthly or annual lease to whoever owns that land and in fact, some properties may have their leases expiring in just a few years from now, which means the bricks and mortar may end up in the hands of the original land owner!! I'm assuming this practice is similar anywhere mostly in the developed world. Essentially, whoever gets there first buys the land and earns an income one way or the other on anything that is built on it, making them pioneers and the ultra elite...forever! By the same token, pioneers to valuable online Real Estate "Domain Names" are already or will be on their way to becoming the next wave of ultra elites forever.
It is also fair to say we are within the threshold of exponential growth in the domain industry. This exponential growth partly stems from the gradual emergence of what I term Domain Service Providers or DSP's in the last 3 years particularly.
To begin with, we had Internet Service Providers or ISP’s (entities who provide hosting services fundamentally) as it were, and Domain Registrars (entities who provide registration services of domain names to the public). However, most recently we have seen DSP’s fueling the domain marketplace. These very clever entities provide domain tools to help you find valuable domain names, monetization services to help you extract an income from domain names (Domain Sponsor, IMonetize), domain auctioneering services to help you sell domains to the highest bidder (Sedo, Afternic), domain media services to keep you informed (DNjournal, DNForum) domain conferencing for networking with investors and DSP's (T.R.A.F.F.I.C), domain financial services providing loans to help you acquire valuable domains or build a portfolio (Domain Capital, DigiPawn) and most recently, the first domain leasing service of its kind has just emerged (LeaseThis), which allows domain owners to rent or lease domains to any conventional or online business…small or corporate!
So what is a Domain Name? Essentially, a domain name is an asset like land and property that you own in cyberspace. In fact, a domain name is very similar to commercial property and stocks because you can develop them, lease them out or simply park them for income with a DSP or do nothing and hold on to them for long term appreciation value.
What has happened in the last 5 years in the field you are writing about?
In the last five years, we have seen domains acquired for considerable amounts of money. For instance, Diamonds.com was acquired within this period for $7Million. Business.com went for a $1million and some of the most generic everyday terms are constantly being bought and sold for an average amount of two thousand dollars to a hundred thousand dollars. What this suggests, is that domains potentially provide the highest return in comparison to other asset classes on your initial investment. Think about it!...you register a domain name for $10 and flip it for $100 to $2000 on average within 3 years making it the highest return on investment in percentage terms historically in a short time frame, more than any other asset e.g. property or stocks. If you take a closer look at what I’m suggesting here, unlike property you don’t carry any leverage debt on owning a domain in general, therefore your risk is minimal or zero and unlike stocks you don’t end up loosing your shirt! So what if you loose ten bucks! I will demonstrate later on why your ten bucks registration fee is intact as long as you register a name that makes sense.
What will happen in the next 5 years?
As the individual realizes that his future of work and making a living is on the internet and not in the workplace as it is today, there will be a massive rush to own domain names, in all extensions. Who knows, maybe .Name may all of a sudden take off! The domain industry will become a common sense industry like stocks or shares, but what is sure to happen in my view, is that everyone will want to own at least one domain name, under which to market his or her services. Due to this scramble and increased demand we shall see more liquidity, which is currently absent in the domain market place today. Thus, domain owners (domainers) with big portfolios will realize more sustainable sales. At the same time, we shall see further appreciation of premium domain names and more realistic prices for domain assets. At this point, domains become more enterprising for everyone.
At what point does Ubiquity or Singularity occur in the Domain Industry?
At the moment, the domain industry is still a very illiquid market place making it difficult for most of domainers to sell domains easily in the aftermarket. However, because of the emergence of sophisticated DSP’s and recent articles in tabloids such as the Wall Street Journal regarding domains, things are changing fast! Most importantly a paradigm shift is occurring unknowingly to most people as companies abandon conventional bricks and mortar operations permanently or outsource in order to operate efficiently online using technology and call centers. Because these entities must position themselves on the internet to compete effectively for market share, they are increasingly realizing the importance of acquiring the right domain name to leverage their brands and exploit online market penetration. Put simply, in order for your business to exist on the internet, you have to have a domain name, period. Having said all this, ubiquity or singularity for a better word will occur in the domain industry, when your mom says: “ hey son! I just bought a domain name to start my new business online today”, or when your local taxi drivers starts to tell you how much income or money he makes from flipping domains on the side and feels its better than speculating in bricks and mortar or stocks…. then indeed ubiquity has occurred.
So why would we reach this form of ubiquity? …Simply because the internet has seriously disrupted the way we traditionally did things say twenty years ago and in conventional terms as a whole. Today, companies are downsizing at alarming rates and outsourcing to offshore call centers because technology allows that to happen, save costs and reach a bigger market online. Soon everyone and their dog will participate in the internet in one form or the other in a Web 2.0 & 3.0 environment. Think Ebay.com, Myspace.com, Linkedin.com, Digg.com and all kinds of socialization networks. We naturally make friends online now, meet our future partners and perform all kinds of online transactions. At some point the average individual will realize he has no future or security in conventional terms and will naturally seek opportunities for work, business or consulting online through all these emerging environments….at that point Singularity in domain terms occurs.
What will happen between 5 to 25 years from now?
In my view, in the next few years we’ll see domains emerge as “de facto” real estate online without the stress and risk of traditional bricks and mortar. I suspect domainers with modest to very large portfolios already envisage this fact. Think about it for a minute, say you invest $1000 in buying a variety of domains at $10 each, now take a look at www.Afternic.com and will notice even the most stupid domain names sell for £100 on average in what I perceive to be an illiquid domain market environment as we speak. That’s a return of 1000 percent!!! on each of your domains assuming you stick around to flip them at $100 a pop on Afternic or Sedo. Suppose you take another route and monetize them cleverly just by parking or using SEO (search engine optimization) to make a net income of $0.10 cents a day on each of your names in a growing market year in and year out, do the math yourself and you will see why a lot of domainers are more keen to hold on to their investments rather than sell. You will basically be making a tidy income with long term appreciation value without gearing yourself to the tune of thousands of dollars like commercial or residential mortgages.
Hence, domain names will be perceived like commercial real estate with better annual yields and so on as people lease them out naturally. In fact, at this point, domains have become the “de facto” commercial real estate on the internet. Thus, I envisage the emergence of a domain share exchange that operates just like the stock market (I have pertinent ideas in this area myself) that adds impetus towards providing liquidity and broader common sense awareness overall.
Because domains are now recognized as financial instruments in real terms with tangible appreciation value, Banks will now treat it as such, “ASSETS”. Two interesting things are likely to happen when banks start to understand these new financial instruments: (1) Domain Investment products will be designed and offered to customers like mutual funds. (2) Domains will naturally be accepted as valuable collateral against all sorts of business loans and eventually, personal loans.
Furthermore domain leasing will have matured to such an extent, allowing online and conventional businesses to seamlessly lease domains of any kind, in order to exploit the tremendous opportunity that the internet provides and build greater enterprises online.
What are the social implications of these changes?
I’ll give you a picture of what I suspect the social changes and its implications are. Suppose you are about 22 to 30yrs old, you start a family and pop a few kids within the next year or so. Ask yourself a simple question, are my kids likely to spend more time online in terms of work and play or are they more likely to spend more time offline in terms of work and play. If you are convinced that they will spend a bulk of their time on My Space like you probably already do today and perhaps work virtually or remotely using effective technology, then imagine the massive paradigm and disruptive shift from the impeding conventional forms of socialization, work and business enterprise today.
If you are reading this article and aged between 18 to 60 yrs old, the chances are you will definitely witness this huge shift and cannibalization of conventional forms already taking place slowly but surely. I’m certain most people nowadays wonder every time they go to work whether this will be my last day…because my job just got outsourced to China or perhaps some effective techno gadget has just been implemented and can do my work faster, more efficiently without any lunch breaks. Have you been to a modernized grocery store lately? Like Sainsbury’s in the UK, you will notice how they sneaked in a few auto check out machines. I haven’t used one myself but I’d be very worried if I worked at Sainsbury’s because I’d realize my job is about to be replaced by machines sooner or later. This sort of thing is happening everywhere as technology gets smarter, even doctors will be affected. The only forms of conventional business that I see left untouched are restaurants and clothing boutiques…that’s it!
Nowhere in this article have I mention the impact of AI (Artificial Intelligence) which is another derivative of exponential technological changes…think Second Life.com or I hear Google is working on AI tools for future services for instance. I mean, on Second Life companies such as IBM own virtual real estate already…why?
So the bottom line is this, everything is set to change and move online gradually whether you like this form of disruptive technology called the internet or not, therefore Buy! Buy! Buy domains now and participate online one way or the other!! Go to DNjournal.com and you will notice the average price on domains selling in the aftermarket across all kinds of business categories is $2500.00 . Remember most of these domain names were initially registered for only $10.00 on average sometime between 1995 and today, so what is the average ROI in these cases?...did I hear an obscene percentage return? This is not magic or luck, it’s happening for those who are participating in the new world slowly evolving before our very eyes. Just try to be clever and thoughtful on what domains you purchase at registration or in the aftermarket for your portfolio and you should do ok for the future.
What are the business implications and opportunities you see in these changes?
The main business implication of these changes is that enterprises now have access to a much larger market to exploit and penetrate, with limited boundaries such as border control or high conventional cost to market. At the same time, we shall see a small un-recognized business using domain name to potentially become influential online instantly and become a recognized brand using correlative domains. For example, a previously unknown real estate agency called “Robert Spanish Real Estate”, by simply leasing the domain name “SpainRealEstateAgency.com”, could immediately become one of the key industry players for that region overnight.
Notice that the new correlative keywords pertaining to that business category (in this case Spain Real Estate Agency) is what online users are more likely to search for in the search engines. I’m suggesting you are more likely to search for “Spain Real Estate Agency” on Google that “Robert Spanish Real Estate” . Therefore Spain Real Estate Agency is likely to get more natural clicks and sells real estate more efficiently or can be leased out to any real estate agency operating in this market…actually I think I own that domain…I’ll just check!
It is also my belief that for all of this to become commonplace, the idea of a Domain Exchange makes sense, because it would provide more liquidity to the market, thereby giving the opportunity to everyone to buy, trade and sell domain names as well as websites more efficiently.
Search engines will become more niche environments and vertical in nature as opposed to one size fits all like Google or Yahoo today. Examples could be law search engines, car search engines, health, travel etc…up to the point of regional localization.
Generic domain names will increasingly become more valuable. By owning the relative search term (keywords), you are more likely to do better as a domainer and realize a higher ROI (return on investment) e.g. if you search for Lawyer in Las Vegas and lawyerinlasvegas.com comes up in the search results, that domain will get more clicks thereby making the domain more valuable. In fact some browsers such as Opera will direct you to whatever is the dot com of the keywords you enter into your URL browser without the “http” or “www” included. Natural search without using search engines is becoming more popular everyday.
Advertising
I see advertising becoming more of a cross platform where businesses will narrowcast their advertising budget in relation to domain hubs. For instance, if you are a mobile phone provider and you want to advertise mobile phones, you may decide to buy advertising on “mobilephone.com” or “mobilephones.co.uk” for more precise targeting.
Your comments on these trends. The future as you see it.
Why is a domain important as an investment?
A huge paradigm shift is occurring before our very eyes. And for those of us who get involved now will benefit tremendously over the coming years, simply because, almost everything is gravitating to the internet, in terms of how we work, how we live and how we socialize. (play)
Because the internet itself as a medium is the most disruptive event in human history since the printing press, it is important to realize that is why domains are a valuable investment.pure and simple!
How to Monetize your Domain?
The best way to monetize a domain name is to develop it, making it relevant to its target sector and to extract some revenue through pay per click advertising systems such as Google’s Adsense.
How to Register and Develop a Domain
Find a good hosting service that can give you all the widgets that you could possibly need to develop your platform. e.g. DomainGirl.org
Rights, Ownership and Trademarks
Stay away from trademarks when you are investing in domains, as it is likely to get you into trouble.
Are all extensions equally valuable?
Potentially and ultimately, over the long term, yes. Simply because local communities worldwide will begin to use the internet to find domestic services, therefore local extensions will become more valuable. Dot Mobi is a new extension for Mobile Internet. There are four mobile phones for every computer on earth! More people have mobile phones in developing nations in Africa, Asia and other parts of Europe. A new consortium including Nokia, Microsoft Google, Siemens, Telefonica and a few others recently got together to launch the new dot mobi extension….what do you think? If those guys are investing to promote dot mobi, shouldn’t you consider it an investment as well? Flowers.mobi sold for $200,000 in October last year just one month after some bugger registered it for only fifteen to thirty bucks! I’ve collected a few good ones recently myself.
Parking Industry
This is essentially a quick way to start making some money from your domain portfolio. It basically requires that you have a portfolio of 50 names and upwards to park with some of the most respected parking companies such as Domain Sponsor or Fabulous. However Companies such as Sedo will park one name or more.
The Lease Industry
This is the most exciting aspect for the domain industry in my view and is only now emerging with DotLease.co.uk and LeasingDomainNames.co.uk rolling out what seems to be a potentially effective model going forward. Leasing means that I could probably get $2000.00 a month for SpainRealEstateAgency.com for instance or maybe fifty bucks a month..who knows. Prices will level through supply and demand going forward.
Domain Auction Industry
This side is already established but has a nascent rise in my opinion. As mentioned before, Sedo and Afternic are the leaders and they sell thousands of names every month from $100.00 to many thousands of dollars. Just visit DNjournal.com, click on domain sales to view a report of the top selling names each week. Bear in mind these are only the top selling names usually four to six figure selling domains that are reported to DNjournal by a few DSP’s. Thousands go un-reported every week all over the world.
Good luck and get in today! |
