By Warren Stokes
Buying and selling domain names is the new property market.
Internet usage is increasing. Five years ago, just over half the US population had internet access. By the second quarter of 2008, the percentage of users in the US has risen to 74% showing a consistent growth rate.
That growth is the lowest in the world. The Middle East showed 1177% growth during the same period and still has only 21% penetration of its population. Each year the growth in new domain registrations increases with more varied extensions becoming a trend. Country code top level domains (ccTLDs) have seen huge growth with as much as 400% increase in China.
Why are websites bought? There are lots of personal reasons involved with buying websites; however, the logical reasons include:
Domains are sometimes bought with speculation that their stock value will rise. This means that they were bought in recognition of their undervalued price with hopes of reselling them. Often the basis of the profit for these aftermarket sales is dependent on the buyer.
There are valuation methods used to appraise domain names. These are used in conjunction with relative sales history of comparable domains as well as trends in the buyer´s market for similar domains.
The early investors were well aware of the search and internet trend value of products and services. Thus, some pioneers in the domain naming industry made lots of money speculating trends in web and search activity.
Even though domains are evaluated for worth, they often sell for a large difference to the actual valuation estimates. Timing of the sale has a lot to do with it. For example, UsainBolt.com would probably have been worth nothing before the Beijing Olympics.
Now since the Jamaican's excellent showing in Beijing, there would be countless domains registered in anticipation of a surge in search traffic for Usain Bolt, making them valuable. In other cases, it´s just the opinion of the buyer: JohnMaple. com may get no bids from any bidders but someone called John Maple may be willing to pay lots of money for it.
There is also an increasing trend in type-ins associated with brands, high volume and sought after search terms.
Website traffic is one of the main reasons for the high value of websites. Websites with traffic command big dollars as they have exposure.
This exposure is about users coming to a specific website address looking for something, whether that is a product or service or just information to help them make decisions. The more eyes on a website, the more activity and intended audience there will be.
Provided the traffic flow is consistent, the users can be served ads or tracked in a way to best serve them the next time they visit. Thus, having a good type-in domain means that the users bypass search results and head straight to the content landing page.
In some cases, the domains are bought to be used for a business. This is a more flexible means of choosing domain names, as no speculation is required, just branding and variations on a theme.
There is a huge interest in acquiring, development and selling of domain name properties. This is fuelled more by smart investors following the trend of money and mainstream business recognizing that great domain names are valuable, and like prime real estate – scarce.
There is value in building and selling websites. The more planning that is carried out around the strategies for buying and selling, the more overall value that can be derived from developing domains. When you acquire your domain with a plan in place, a short and longer-term strategy – you plan for online success.
