Every website you visit has been purchased by someone, somewhere and while you might not realise it when you’re browsing the web, the world of domain names can be pretty lucrative.

But, as with all investments, nothing comes easy - and despite it being super easy to buy a domain name, figuring out which ones are potentially the most lucrative isn’t straightforward.

So in this investment idea guide, I'll cover:

• Quickly explained
• How domain investing works
• Tools you can use for research
• Potential legal issues to be aware of
• The numbers
• Examples of success stories
• How to get started in domain name investing
• Key terminology

Quickly explained

Domain name investing is easy in practical terms since all it requires is an internet connection and a bank card to make a purchase! The market is growing YoY as more brands seek to grow their digital presence and the passive nature of domain name purchasing means it’s a rare category of investment which allows you to buy a domain name and do very little else.

The payoff only comes, though, if someone is willing to buy it off you. And for that, you need to understand what the key drivers of the domain name market are and why a specific domain name might be valuable for a potential buyer.

Recently, domain names ending in .ai have become increasingly popular as the ai race kicks off. An indie hacker who registered the domain name pdf.ai for a small tool which allows users to upload a pdf and get an AI summary of the best bits has managed to build a $million+ business pretty much overnight.

This is rare, though. One study suggests that around 33% of domain names sit dormant and unused, which shows that as a domain name investor you’re up against millions of other folks who have also decided to take the plunge, too.

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How domain investing works

Domain investing is a bit like digital real estate investment. It involves acquiring domain names that are expected to appreciate in value over time. Investors can profit by selling these domains, leasing them, or developing them into profitable websites.

The goal of domain name investing is to buy a domain name and sell it at a premium in the future. Known as flipping, this is the most common approach. There are even auctions which take place to facilitate domain flipping. Godaddy Auctions is one of the best for this.

But there are other ways to monetize domain names, too:

1. Leasing - it’s possible to lease a domain name that you’ve bought to a third party who wants to use that domain name. You can agree the terms of the lease and collect a monthly fee for it.
2. Advertising - assuming you aren’t using the domain name to host your own projects, you can ‘park’ your domain with a provider who can collect advertising revenues on your behalf. Popular domain parking providers include Bodis, Voodoo, and DomainSponsor

Tools you can use for research

Research ****is an essential part of domain name investing. Before you buy a domain name (assuming you’re buying it to sell and not for your own personal projects), you’d need to hypothesise why this particular domain name could be valuable in the future.

Google Trends helps potential investors find out what’s currently in demand. You can search for specific keywords and see how popular these keywords are as potential domain name investments.

Other tools like Expired Domains will allow you to see which domain names have recently expired or been deleted so that you can potentially buy up a domain name that’s lucrative. It includes a database of over 630 million expired domain names.

And while domain name specific tools like this can be helpful, it’s sometimes a case of just keeping up to date with new emerging trends and niches on places like Instagram and TikTok (and the news cycle) to understand what domain names could potentially be popular in the future.

Criteria to use for assessing a domain name

There are so many different variable to consider when it comes to domain name investing, but here’s a snapshot of some of the most important ones to think about:

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Some of the best domains are easy to type and memorable, with keywords that are highly relevant to the audience you’re aiming at. Historically, the .com domain is the most lucrative and that still remains the case for the most part, but as I mentioned earlier, the .ai domain name is also becoming more in demand because of the AI boom.

Potential legal issues to be aware of

On the issue of legality, there are a few things to be aware of. The first relates to copyright. Ensuring the domain does not infringe on existing trademarks is crucial. Trademarked terms can lead to legal issues and reduce the domain's value. It's important to conduct thorough trademark checks before purchasing or selling a domain

The other most critical legal issue to be aware of is the practice known as cybersquatting. This involves registering domain names with the intent to profit from someone else's trademark. The Anti-Cybersquatting Consumer Protection Act (ACPA) in the United States allows trademark owners to sue for damages and potentially gain control of disputed domain names.

For example, in 1994, Uzi Nissan registered the domain nissan.com for his computer business, Nissan Computer Corporation. Nissan Motors, the automobile manufacturer, later sued for trademark dilution, infringement, and cybersquatting. However, since Uzi Nissan was using his surname legitimately for his business, the court did not find him guilty of cybersquatting. Nissan Motors had to settle for a different domain name for their online presence.

And in 2004, a teenager named Mike Rowe registered the domain MikeRoweSoft.com, a phonetic play on "Microsoft."

Microsoft sued for trademark infringement and cybersquatting. The case drew significant public attention, with many viewing Microsoft's actions as heavy-handed. Ultimately, the case was settled, with Microsoft compensating Rowe and providing him with an Xbox.

If you’ve done all of the necessary due diligence and you’re confident you’re not breaking any laws, once you’re ready to buy a domain name you can use services like Godaddy.com to buy and register it. More on that later.

The numbers

The global domain name market is expected to reach USD 2.4 billion in 2024 and grow to USD 3.0 billion by 2029, with a compound annual growth rate (CAGR) of 4.5% during this forecast period

As of March 2024, there are approximately 628.5 million registered domains worldwide. Of these, 43% have generic top-level domains (TLDs), making it the largest sub-class. If you’re wondering, a Generic Top-Level Domain (gTLD) is a category of top-level domains (TLDs) used in the Domain Name System (DNS) of the Internet. These domains are characterized by their general purpose and are not tied to any specific country or geographical location.

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A country-specific domain would be .ie for Ireland, .jp for Japan, .ru for Russia and .co.uk for the UK for example.

The .com extension remains the most popular, accounting for more than 37% of all domain registrations. Unless you’re specifically targeting a niche that is only relevant in a specific country then it’s probably best to stick to TLDs.

Source: marketdataforecastanalysis.com

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Examples of success stories

Want some inspiration? Here’s a couple of examples of some of the most lucrative domain name sales in history…

Cars.com - $872 million

Acquired by Gannett in 2014, this domain was valued at $872 million as part of a larger deal worth $1.8 billion. Cars.com has since become a significant player in the online automotive marketplace, driving traffic to numerous dealerships across the US.

CarInsurance.com - $49.7 million

Sold in 2010, this domain became a valuable asset for its owner, generating substantial traffic and revenue from car insurance leads. The site attracts over 300,000 visitors monthly, justifying its hefty price tag.

Insurance.com - $35.6 million

Purchased in 2010, Insurance.com serves as a platform for comparing insurance rates. Its new owner, QuinStreet, has successfully leveraged the domain to generate significant business in the insurance sector.

Voice.com - $30 million

Acquired in 2019 by Block.one, this domain is associated with the blockchain-based social media platform Voice. The investment reflects the increasing value of digital real estate in the tech industry, particularly in emerging markets like blockchain.

Here’s a list of the top 25 most expensive domain names that have been publicly reported which you can use for inspiration of your own.

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How to get started in domain name investing

To get started, all you need to do is register with a domain name provider like Godaddy and buy the name you’re interested in. For domains that are not yet registered, you can pick up a domain name for as little as $10. But for domains that are owned by other people, you can pay up to millions of dollars. Which I guess is the whole point of this alternative asset!

Key terminology

• Domain - A web address or URL (Uniform Resource Locator) that identifies a website on the internet.
• Domain Investor (Domainer) - An individual who invests in domain names, often generic or dictionary terms, to build a portfolio for resale or monetization through domain parking.
• Domain Parking - A method where domain owners lease out their domains to advertisers, displaying targeted ads on a landing page and earning revenue from visitor clicks (Pay-Per-Click or PPC).
• Primary Market - The market for domain names that have not been previously registered. These domains are available for registration through registrars like GoDaddy.
• Secondary Market (Aftermarket) - A marketplace where registered domain names are bought and sold. This includes auctions and private sales.
• Registrar - An organization accredited by ICANN that sells domain names to the public. Examples include Namecheap and GoDaddy.
• WHOIS - A protocol used to retrieve contact information for domain owners. It is often used to check the availability of a domain or to contact the owner.
• TLD (Top-Level Domain) - The last part of a domain name, such as .com, .net, or .org.
• ccTLD (Country Code Top-Level Domain) - A TLD specific to a country or region, such as .uk for the United Kingdom or .ca for Canada.
• Domain Flipping - The practice of buying domain names and selling them later at a higher price for profit.
• Domain Appraisal - A service or tool used to estimate the value of a domain name based on various factors like keywords, length, and market trends.
• Domain Broker - A professional who negotiates the sale or purchase of domain names on behalf of clients.
• Escrow - A secure service that holds funds during a domain transaction until all terms are met, protecting both buyer and seller.
• Expired Domain - A domain name that was not renewed by its owner and is now available for re-registration or auction.
• Backorder - A service that attempts to register a domain name as soon as it becomes available, often after it expires.
• Cybersquatting - The practice of registering domain names with the intent to profit from the goodwill of a trademark belonging to someone else. This is illegal under the Anti-Cybersquatting Protection Act (ACPA) in the U.S.
• Domain Tasting - The practice of registering a domain name to test its marketability during a grace period, usually five days, after which it can be canceled for a refund.
• Type-In Traffic - Visitors who arrive at a website by typing a keyword or phrase directly into the browser's address bar, often leading to domains with generic names.
• Direct Navigation - Accessing a website by typing its URL directly into the browser's address bar, bypassing search engines.

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And that's it for this guide!

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Jason

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DISCLAIMER: None of this is financial advice. Finbrain is strictly for educational purposes.

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