Written by Warren Stokes
The growth of Internet users is on the increase. 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 least in the world with regions such as the Middle East showing 1,177% growth during the same period and still only having a 21% penetration of its population. Each year the growth in new domain registrations is also increasing with more varied extensions becoming a trend. Country code top level domains (ccTLDs) have seen huge growth with as much as 400% increase witnessed in China.
When one buys a domain name, it is known as a primary registration. After buying the domain, you own that domain for as long as you register it periodically. Registrations can be done annually or for longer if you prefer. As long as the renewals for the domain are performed timely and when required, the domain can be used, owned by an individual and remain active and accessible on the Internet.
So for what reasons are websites bought? There are many personal reasons, however, the logical reasons include the following:
1. Domains are sometimes bought with speculation that their ‘stock’ value will rise. This means that they were bought in recognition of their undervalued price, hoping to resell them at a later date. 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 buyers’ market for similar verticals of domains. The early investors were well aware of the search and Internet trend value of products and services. Thus, there were quite a few pioneers in the domain naming industry who 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 anyone other than someone called John Maple, who may be willing to pay lots of money for it.
2. 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.
3. 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. If the domain name a business requires is not available as a primary registration, but can be found as a premium name being sold in the domain aftermarket. This could prove even more useful if it is an established domain name and already has unique visitors.
There is huge interest in acquiring, development and selling of domain name properties. This is fuelled more by smart investors following a monetary trend mainstream business recognising that great domain names are valuable, and like prime real estate – scarce. In summary, it can be stated that there is ample 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.
