Domains As An Asset Class

How Virtual Real Estate Changed the Investment Landscape and Redefined Entire Sectors of The Economy, Including Branding

Written by Danny Pryor for InvestingFunds.com on March 16, 2011

Anyone who has been in the domain industry for long will recognize the face pictured at left; it is Rick Schwartz, widely known among domain industry folks as "The Domain King". The title is not meant to imply any royalty, although, oddly enough, royalty may define part of what happens with the acquisition of a solid, generic domain name.

The idea of buying land to increase one's wealth has long been viewed as sound practice; when the Internet began to emerge as a potent marketing tool in the 1990's, there were a few who recognized what was happening and capitalized upon the trend. Schwartz was one of those men. He and a handful of others started buying up generic .com registrations in the hope of capturing visitors who just may type in a name, like example.com.

The notion of organic, direct-navigation traffic was a new concept then, but what has been learned since those pioneering days of the web, since the upstarts first attempted to stake their online claim, is the more generic the name, the easier it is to remember, and the simpler the spelling, the more likely you have a hot piece of virtual realty that will continue to increase in value.

The reason is simple: While search engines provide a wealth of results for any given term, only one domain exists to exactly match the term, and chances are users will first try typing that name before running a search, particularly if they are seeking a product or service specifically related to a generic term.

This is how domains get their value. Imagine owning airline.com or cars.com or hotels.com. Interestingly, that last domain is cited time and again by Schwartz as the classic "dropped the ball" moment, when Westin, Hilton, Marriott, and a host of other hotel companies, had the chance to buy a generic domain, in addition to their own brand, and capture all of the traffic. Today, hotels.com grabs between 75,000 and 100,000 visits per day, depending upon seasonal considerations, according to the online traffic and advertising company, Quantcast.com.

While investments in real property generally have their up and down moments - in recent years there have been trecherous conditions for real property holders - domain names are just beginning to find new value. Hundreds of thousands of new Internet users are coming on line every day, and with a single domain name, a business owner can capture or lose tens of thousands of chances to make a profit. Imagine making just $1 per day, but you make that $1 from 10,000 people. That's $300-thousand per month, and that's just one domain. Would it be worth it to buy that domain for, say, $1,000,000?

Of course it would! Knowing the terms users are searching, finding the right niche, finding and holding the right domain name, for long enough, can make all the difference in how well or poorly anyone does whilst investing in domain names. But make no mistake about it, acquiring a name, and hoping to turn a profit from it, is investing!

Information sourced from RicksBlog.com, Quancast.com and other online sources.