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An Outlook On The Domain Name Secondary Market

The secondary domain market has gone from one extreme to another. First, huge sums were paid for some domains, raising the expectations of domain sellers. Now, however, in many cases the corporate sector expects to pick up a domain for next to nothing in comparison with the domain’s immediate sales and long-term investment potential. In my opinion, both situations are unrealistic.

In the last CircleID issue, “short, hyphen-free, number-free, and easy to remember” were some of the criteria mentioned by Roger Collins for domains used as companies’ main websites. It should, however, be emphasized that a domain name consisting of only 3 letters and meeting all these criteria may be worth little (unless it is a word or a well-known abbreviation). This is because if it does not constitute a word in the English language, it is meaningless from a search engine’s perspective. There are well-known exceptions to this as I mentioned earlier, such as CBS.com. But, for the most part, 2-, 3-, and 4-letter domains appear to be quite overrated!

Further, keyword domains can be just as valuable as those intended as companies’ main websites! Keyword domains’ main purpose is to drive traffic to a company’s main website by:

1. Achieving the highest possible search engine ratings for particular keywords, such as product type or service type (many search engines give priority to domains that contain the search criteria in their name—for example, it is likely that if someone uses a search engine to search for ‘John Doe,’ the domain ‘JohnDoe.com’ will have web ranking #1).

2. Allowing web surfers to “take a stab in the dark” by being able to type a product or service as a URL in the address field of their browser—such as, ‘YachtForHire.com’ (note that length is less important here than having 2 or 3 keywords contained in the domain name). For instance, if you are an investment banker, you ought to be keen to pay a high price for the keyword domain ‘investmentbankers.com,’ because it is likely to drive a lot of traffic to your main website year after year after year. Keyword domains are a form of advertising, but with the great advantage (in comparison to regular advertising) of having to be paid for only once. So in this sense the domain is a bargain even if you had to pay big money for it now.

Companies or organizations also register variants of their main domain as a defensive measure. For instance, if and organization intends to run a tourism site with its name in the form ‘visit

.com’ (which has become somewhat of an unofficial standard for tourism sites), then being able to buy ‘visit-

.com’ (with a hyphen) at the same time is a competitive advantage which could further increase the sales price.

Thus a successful web strategy, in part, involves the acquisition of a number of domain names with the criteria as to what constitutes a good domain name in a particular case being determined by the domain’s purpose.

Yet most Domain Evaluation Models generalize (one model to fit all domains) by concentrating on the general features of a domain (length, hyphenated or unhyphenated, etc.), while ignoring such things as earnings potential, which has created and now maintains the unhealthy obsession with short domain names when it is clear that the motto “the shorter, the better!” does not hold or holds only to a very limited degree for keyword domains.

Also, I there is a considerable problem with the indiscriminate use of hit counters to determine the value of a domain based on the traffic they generate. For instance, consider the domain: YachtsForSale.com, for which the hit counter shows that only one person viewed the website but that person ended up buying a yacht worth a few million dollars; and Liferafts.com, for which the counter shows that 50 people viewed the website and all 50 bought a life raft. If you were a yacht builder who also happened to sell life rafts, and you owned both domains but had to sell one, which domain would you keep? To use hit counters in this and similar cases is a bit like saying that a local supermarket is worth more because of higher patronage, than an exclusive car dealership, when the later is likely to make significantly higher profits.

The secondary domain name market is not mature so long as the criteria used to determine the value of a domain inadequately capture what is commercially valuable, and prices are distorted by being either too low or too high.

By Gerhard Schuhmacher, Founder & CEO

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