Monday, February 4, 2008

Commercial resale of domain names

An economic effect of the widespread usage of domain names has been the resale market (after-market) for generic domain names that has sprung up in the last decade. Certain domains, especially those related to business, gambling, pornography, and other commercially lucrative fields of digital world trade have become very much in demand to corporations and entrepreneurs due to their importance in attracting clients.

The most expensive public sale of an Internet domain name to date, according to DNJournal, is porn.com which was sold in 2007 for $9.5 million cash.[citation needed]

There are disputes about the high values of domain names claimed and the actual cash prices of many sales such Business.com. Another high-priced domain name, sex.com, was stolen from its rightful owner by means of a forged transfer instruction via fax. During the height of the dot-com era, the domain was earning millions of dollars per month in advertising revenue from the large influx of visitors that arrived daily. The sex.com sale may have never been final as the domain is still with the previous owner. Also, that sale was not just a domain but an income stream, a web site, a domain name with customers and advertisers, etc. Two long-running U.S. lawsuits resulted, one against the thief and one against the domain registrar VeriSign [1]. In one of the cases, Kremen v. Network Solutions, the court found in favor of the plaintiff, leading to an unprecedented ruling that classified domain names as property, granting them the same legal protections. In 1999, Microsoft traded the name Bob.com with internet entrepreneur Bob Kerstein for the name Windows2000.com which was the name of their new operating system. [2]

One of the reasons for the value of domain names is that even without advertising or marketing, they attract clients seeking services and products who simply type in the generic name. This is known as Direct Navigation or Type-in Traffic. Furthermore, generic domain names such as movies.com (now owned by Disney) or Books.com (now owned by Barnes & Noble) are extremely easy for potential customers to remember, increasing the probability that they become repeat customers or regular clients. In the case of Movies.com, Disney has built a stand-alone portal featuring branded content. More and more large brands are beginning to employ a more comprehensive domain strategy featuring a portfolio of thousands of domains, rather than just one or two.

Although the current domain market is nowhere as strong as it was during the dot-com heyday, it remains strong and is currently experiencing solid growth again. [3] Annually tens of millions of dollars change hands due to the resale of domains. Large numbers of registered domain names lapse and are deleted each year. On average 25,000 domain names drop (are deleted) every day.

It is very important to remember that a domain (name, address) must be valued separately from the website (content, revenue) that it is used for. The high prices have usually been paid for the revenue that was generated from the website at the domain's address (url.). The intrinsic value of a domain is the registration fee. There is no such a thing as a current market value for a domain, it just takes what somebody pays. The Fair Market Value of a domain can be anything from the registration fee, the lowest known past selling price, the highest known past selling, price, the most recent selling price, or just any past selling price. These (or any sum resp. division etc.) are usually added to the current or expected revenue from the web content (advertising, sales, etc.). The price of a domain (name + ext.) should not be confused with that of a website (content + revenue). An estimate by an appraiser is always the addition of what they would like a domain to be worth together with the effective/expected/desired revenue from the web content. Some people put value on the length of the SLD (name) and other people prefer description capability, but the shorter a SLD is, the less descriptive it can be. Also, if short is crucial, then the TLD (extension) should be short too. It is less realistic to get a domain like LL.travel or LL.mobi than a domain travel.LL or mobi.LL. This illustrates the relativity of domain value estimation. It can be safely put that the revenue of web (content) can be easily stated, but that the value of a domain (SLD.TLD aka name.ext) is a matter of opinion and preference. In the end, however, any sale depends on the expectations of the domain seller and the domain buyer.

People who buy and sell domain names are known as domainers. People who sell value estimation services are known as appraisers.

According to Guinness World Records and MSNBC, the most expensive domain name sales on record as of 2004 were: Business.com for $7.5 million in December 1999, AsSeenOnTv.com for $5.1 million in January 2000, Altavista.com for $3.3 million in August 1998, Wine.com for $2.9 million in September 1999, CreditCards.com for $2.75 million in July 2004, and Autos.com for $2.2 million in December 1999.

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