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Thursday, April 21, 2016

The Great Domain Name Lottery

By Duane J. Higgins, ceo
xtradot.com and tagline.tech

Millions of people around the world are about to enter the great domain name lottery and they don't even know it. The point I'm making is that there is some very interesting historical data that suggests that Internet domain names are much like lottery tickets.

The main difference of course is that lotteries are pure luck. Selecting and purchasing valuable domain names is much more than pure luck. Actually much more skill than luck. However, the comparison remains. The obvious similarity with lottery tickets and domain names is that there is generally a low barrier (and cost) to entry (domain registration) with a possibility of a very high monetary reward. Same as with lottery tickets.

Why is the lottery happening now? Because the Internet Corporation for Assigned Names and Numbers (ICANN) is in the process of introducing  upwards of 1000 new domain name extensions onto the global marketplace. Also referred to as GTLDs (Global Top Level Domain Names).

Some of the new domain name extensions are .app, .book, .car, .deal, .eco, .fun, .green, .home, .inc, .kids, .law, .mail, .news, .online, .pets, .radio, .sale, .security, .shop, .tickets, .web, and zip. (no to mention nearly 1000 more!).

Just try to imagine the effects of upwards of 1000 new domain name extensions being poured onto the global marketplace to go along with existing extensions such as .com, .net, .org, .info, .biz etc.?

So what will the domain name marketplace over the next ten years?

With the only risk in buying a domain name being the minimal registration fee.  Which by the way, if you don't like the name you can just let it expire and go back to the registry. If you like they name and hang on to it -what is the potential upside? I would refer you to my list of all-time top domain name sales posted below.

There is no question that Internet domain names have been one of the fastest growing and most lucrative asset classes in the history of mankind. Since the first domain names were registered some 20 years ago (a large majority of first time registrations are from $10 to $50 for a one year registration) to date -that includes over 310 million domain names currently registered.

According to a Verisign industry brief released Dec. 2015:

...the year ended with approximately 314 million domain name registrations across all top-level domains (TLDs), an increase of approximately 15 million domains over the previous quarter. 


Keep in mind that almost all domain names were hand registered at some point from the registry for a mere registry fee.

Now the record prices paid for domain names are legend at this point. Here is a short list of some of the top all time sales:



# Domain name sold Sale price New registrant (domain buyer) Sale date
1 sex.com $13,000,000 Clover Holdings Limited November 2010
2 hotels.com $11,000,000 Hotels.com GP LLC September 2001
3 fund.com $9,999,950 Gentile, Philip March 2008
4 porn.com $9,500,000 Moniker Privacy Services May 2007
5 fb.com $8,500,000 Facebook, Inc. September 2010
6 diamond.com $7,500,000 ATTN DIAMOND.COM May 2006
7 beer.com $7,000,000 Thought Convergence, LLC January 2004
8 casino.com $5,500,000 Mansion Limited of Gibraltar November 2003
9 slots.com $5,500,000 Bodog Media June 2010
10 toys.com $5,100,000 DNS MASTER March 2009
11 korea.com $5,000,000 Korea.com Communications Co., Ltd January 2000
12 clothes.com $4,900,000 Domain Administrator January 2008
13 ig.com $4,700,000 IG Group Ltd September 2013
14 freeporn.com $4,000,000
February 2008
15 yp.com $3,850,000
November 2008
16 shop.com $3,500,000 Hunt, Vince November 2003
17 wine.com $3,300,000 Tomaszewski, William September 2003
18 software.com $3,200,000 Software.com Holdings Pty Limited December 2005
19 vodka.com $3,000,000 Russian Standard Co December 2006
20 loans.com $3,000,000 Bank of America January 2000

*When you reach the 76th name on this list ( topix.com) you are still at a cool 1,000,000 dollars.

OK, now I've got you thinking about money. Now, I want you to think about domain names and how they are very much like lottery tickets.

Who knew that beauty.cc was going to sell for 1,000,000?
Credit.fr for 850,000?
1stbandwith.com for 800,000?
ireport.com for 750,000?
aktien.de for 725,000?
MathGames.com for 725,000?
Exterminator.com for 600,000?
themortgage.com for 500,000?
AutoInsurance.org for 440,000?
CookingGames.com for 350,000?
RVRental.com for 325,000?
iSearch.com for 300,000?
45.com for 280,000?
Mortage.com for 242,000? (thats a mispelling that sold for that!)
Rhodes.com for 200,000?
CriminalLawyers.com for 195,000?
VisitFlorida.com for 186,000?
BoatsForSale.com for 162,000?
WebCity.com for 150,000?
Website.de for 141,000?
Sportsbook.mobi for 130,000?
CreditCare.com for 125,000?

*Keep in mind that there have been literaly hundreds of thousands of domain sales (of all extensions) in the $1000 to $25000 dollar range. None of those sales are represented here. Most of those names were originally purchased for 10-50 dollars.

Those are just a few examples of the appreciation value of domain names. So what will happen with the new domain name extensions? With literally hundreds of billions of potential names available on the open marketplace and (99%) for just a registration fee? (which is generally very affordable even for the poorest among us).

What will eventually happen is that more and more people are going to buy a lot of domain names. However, in order for the purchase to be wildly profitable it certainly doesn't have to be a million dollar sale. For example, what if you were to buy one of the newly available domain names for registration fee when the extensions become available. For example you purchase the name:

ecosport.green.

(which is available from the registry for around $99.00/year by the way if you are interested.) 

A nice little name however probably not highly sought after. Lets say a year from now someone else wants that name for a company they are starting and you negotiate and sell it to them for $1000. So what is the appreciation of your investment?

Well, from a $100 investment to $1000 is 1000 % profit.

A lottery ticket. Or at least, a very good investment.

Or let's say someone buys the following domain name for a registration fee and sits on it for a few years:

homemonitoring.app 

(.app domain registrations are not available yet and are in "preregistration" phase.) 

Then, in a few years they sell the domain name to a major security company for 6 figures. What was the profit?

Another lottery ticket.

Now, let me ask you one more question. What will happen the first time one of the new domain names such as software.shop, cruise.tickets, finance.web or jobs.online sells for $100,000 or $1,000,000,000 or more?

What will happen is that the .shop, .tickets .web and .online domain extensions will experience widespread and rampant speculative buying of any domain name that could have future value. Now multiply those scenarios happening hundreds of millions of times with tens of millions of people and billions of newly available domain names.

And what will keep the buying and selling going, and going and going?

The same thing that keeps the lotteries and casinos going. Speculators will continue to sell cheaply purchased domain names for moderate, large and massive sums. Enough sales to keep the rest of the speculative public buying and buying and buying the new domain names and extensions. There will be plenty of shocking and well publicized sales of five, six and seven figures that will keep the speculative interest in domain names at a fever pitch. Even though countless speculative domain registrations will probably be (at best) a 10 million to one longshot for a 5, 6 or 7 figure payday.

Wait a minute. That's better odds than a lottery ticket.

Good luck.

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