What is domain investing?

Back in 1848, gold discovered in Coloma ignited the historic California Gold Rush, with around 300,000 people flocking to the West Coast seeking treasure. Fast forward to the 1990s, and something similar happened. This time, however, prospectors weren’t looking for nuggets of gold—they were searching for virtual gold in the form of domain names.

In the ensuing tech bubble, desirable domains bought by investors for peanuts sold for thousands, even millions, of dollars. And while the initial domain investment—or domain flipping—boom has died down somewhat, there’s still plenty of scope to make a pretty penny buying the right web addresses. Time has proven that individuals and businesses are always willing to invest big in coveted domains.

When domain investing goes right

There are numerous cases of domain name holders making millions of dollars from selling a web address. These high-yield domains are often generic names unmistakably associated with profitable industries, services, or places, so will likely markedly improve the holder’s chance of business success as a result. Take lasvegas.com for example, which went for a whopping $90 million in 2005, or insurance.com, which sold for an impressive $35.6 million in 2010.

Securing this type of domain is unlikely, however, as it is safe to assume that most are already taken. Perhaps the most effective way domain investors make money is by jumping on emerging trends and buying domains pertaining to them. Take BTC.com, for instance, which was bought by Bitcoin mining equipment specialist GAWMiners for $1 million in 2014 as the cryptocurrency craze escalated, or kanyeforpresident.com, which owner Tramall Ferguson was offered $80,000 for. That said, simply watching out for expired domains can be a useful strategy, like when former Google employee Sanmay Ved bought the google.com domain for just $12. He later sold the domain back to the search engine behemoth for a thousandfold profit.

Domain investing do’s and don’ts

Like any form of investment, there are certain tips and tricks you can follow for a better chance of success. Aside from keeping an eye on current trends and expired domains, what else can help you make a profit?

Do: invest in brandable domains

One of the easiest ways to make money through domain flipping is to buy brandable domains that businesses will want to buy from you later down the line. There are various aspects that boost a domain’s brandability, from offering a clue about what a business does, and its uniqueness, to being clearly pronounceable and not too bizarre.

Don’t: invest in trademarked domains

Buying a domain featuring a company’s name could land you in hot water, consequently losing you money due to infringing trademark laws. Take the case of Wayne Stephenson in the UK, who bought the domain ilovealdi.co.uk and set up a site paying homage to Aldi, the German supermarket. Despite Stephenson arguing that his site contained no advertising and wasn’t run for personal gain, he was ordered by UK regulatory body Nominet to hand over the domain—without being compensated.

Do: invest in .com extensions

A domain name’s extension hugely determines its value, and .com is easily the most valuable extension of all. This comes down to multiple factors, including the public’s natural preference for .com websites, the extension’s SEO benefits, and the perceived value it gives brands. That said, alternative extensions shouldn’t be dismissed entirely, and .net, .org, and country-code extensions like .co.uk and .de can are examples of types that can still be profitable.

Don’t: invest in novelty extensions

Although you don’t necessarily have to buy .com domains, investing in web addresses with novelty extensions like .party or .pizza is a big no-no. Such extensions are automatically associated with spammy websites, so are unlikely to accrue much value.

Do: invest in short domains

Generally speaking, the shorter a domain name, the more valuable it is. This is because it will be more concise and easier to read and remember.

Don’t: invest in unintelligible domains

While you want to go for shorter domains when possible, this shouldn’t be at the expense of clarity and brandability. For instance, although zyxq.com or some other random four-letter combination is short, it’s unlikely that anybody will want to buy this from you.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.