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Domain trade: making money off of domains?

When done right, the domain trade is an enterprise that lends itself to particularly lucrative deals. The tactic is simple: domain names are purchased with the prospect of reselling them for a wide profit margin. But the trick of this trade lies in securing domains that may later be valuable to well-endowed buyers, such as a large company. We have laid out all the important facts and terms on the topic, including some of the highest sale prices on record for a publicly traded .com domain.

Selling a domain

Domains are nonmaterial goods. When sold, the only transaction taking place is transfer of domain rights from one user to another. Barring any form of copyright or trademark violation, virtually any domain name can be bought or sold. Generic domain names, such as car.com or computer.com, are not legally protected and can therefore theoretically be reserved by anyone.

What determines the value of a domain?

Domains that are indexed on Google and highly ranked are particularly attractive to traders. Other SEO aspects, such as backlink profiles or the search volume of the keywords in domain names, also play a significant role in appraising value. Design can also positively affect the price of a domain. Short and succinct names that are easy to remember are especially advantageous. Endings are further factors that should be taken into account. Top-level domains (TLDs) such as .com or .org are by far the most sought-after endings.

A short BBC documentary explains how domain traders, also referred to as “domainers”, can make hundreds, thousands, or even millions of dollars from buying and selling domains. In this video, find out how some of these entrepreneurs got involved in this big moneymaking business.

The most important criteria for determining a domain’s value:

  • structure of the domain name
  • relevance for the search engine
  • market potential and usability
  • bargaining power and legal situation

The market-driven principles of the domain trade mean that a domain is only worth as much as the buyer is willing to pay. It is for this reason that criteria such as market potential and usability play such central roles in determining prices. Values can change at the drop of a hat. The price of a domain that was once of little interest to anyone in years past can skyrocket once, for example, a newly founded company takes interest in that same name.

Keeping an eye on forthcoming trends, or already aware of the terms and names you are interested in for potential domains? With 1and1's domain checker, find out if your desired domain is still available in just a few moments.  

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  • .com
  • .org
  • .shop
  • .xyz

What do domain traders do?

Those trading domains for commercial purposes are generally on the prowl for lucrative domain endings. There are essentially two different ways traders go about making money off of domain names. One method entails purchasing already established names for a low price and selling them for a profit later once their value has increased. Another strategy involves buying and registering a domain that is thought to possess a high sales potential. Many domain traders use backorder services. These services automatically register a domain when one becomes available or is deleted (what are known as expired domains).

How are domains sold?

Domain trades transpire through a variety of different means. Domain name registrants are generally not anonymous and therefore are normally easy to get in touch with. Domain holders are also able to act as sellers and offer their virtual wares to perspective buyers.  Here is an overview of the three most popular ways of selling domains:

The buyer directly approaches the holder

Perspective buyers are able to directly contact domain holders in cases where the desired domain is no longer available. Most registries openly publish the names and contact data of domain holders. Once this information is gained, buyers can get in touch with domain holders and make an offer for the name. Sales are also known to occur in instances where the original domain owner had no prior commercial ambitions

The holder directly offers to sell the domain

Domain traders often inform website visitors that the page they are on is for sale by providing their contact data on the page. Another route that some domain owners opt for is to actively seek out potential buyers.

Market platforms for domain trade

Official marketplaces offer a third possibility for domain traders to peddle their product. Domain marketplaces, such as Sedo, GoDaddy.com, or BuyDomains.com, link potential buyers with domain holders hoping to sell their prized virtual property. These platforms function as a kind of domain real estate agency and are known to demand somewhat high prices for their services.

The most lucrative domain sales

With over 25 million .com domains registered with Google alone, this top-level domain is by far the most popular choice worldwide. According to the domain marketplace Sedo, the average sales price for a .com domain name during the second quarter of 2015 was 4,701 dollars. The most expensive publicly traded domain names have been known to fetch eight-figures. But don’t quit your day job just yet: such sales are the exception rather than the rule.

Most expensive domain names

It is not unheard of for domain names to reach the same eye-watering prices of products normally seen in more exclusive markets, like those of beach-front properties or private jets. Below is a list of ten domains that have collected particularly handsome sums for their unique names:

  • VacationRentals.com for $35,000,000
  • PrivateJets.com for $30,180,000
  • Insure.com for $16,000,000
  • Internet.com for $18,000,000
  • Fund.com for $9,000,000
  • FB.com bought by Facebook for $8,500,000
  • Diamond.com for $7,500,000
  • Beer.com for $7,000,000
  • Cloths.com bought by zappos.com for $4,900,000
  • Icloud.com bought by Apple for $4,500,000

Can you make money in the domain business?

While numbers like the ones seen above are impressive, most domains sell for significantly less extravagant prices and are generally in the two or three-digit range. Not long ago, those who were able to secure general terms (like icecream.com or pizza.com) not protected by trademark rights often found themselves sitting on virtual gold mines. The glory days of this boom have long since passed, and those looking for a profit in today’s market need a keen sense for coming trends.

Terms

DNS

The DNS (Domain Name System) is one of the central services for IP-based networks. Simply put, the DNS connects the domain name of a website to its corresponding IP address and ensures that the URL is routed to the correct computer.

Registry

Domain name registries or network information centers (NIC) maintain one or multiple top-level domains in the DNS. Through these systems, name servers and Whois servers are managed along with the contact data of the holder.

Registrar

Domain name registrars are companies or organizations (but for the most part companies, like 1&1) that are responsible for domain registration. Depending on which top-level domain is needed, an accreditation from the Internet Corporation for Assigned Names and Numbers (ICANN) or a Domain Name Registry may be needed.

nTLDs TLDs