Sex sells in the domain name game

How to tell if your unused domain names are worth big bucks on the secondary market

When Jed Clampett's shot missed its intended target, hit the ground and struck oil, we got "The Beverly Hillbillies." Part of what made the story interesting was that old Jed found unexpected riches in something he already owned.

Today, people are discovering value in a new type of real estate that many already own: Internet domain names. Granted, there have been only a few who, like Jed, stumbled onto millions, but there are lots of people now sitting -- unknowingly -- on domain names worth hundreds and thousands, and in some cases even more.

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So, how do you know if you have a domain name of value and, if so, what do you do with it?

First off, if you have domain names collecting dust next to those boxes of shelfware, you're not alone. Of the more than 200 million domain names registered worldwide, many go unused.

According to VeriSign, 12% of .com and .net registrations are unused. If that ratio holds for registered names in general, that would mean some 25 million domain names hold no website.

Of course, just because a domain name is not actively being used, that doesn't mean it's available to be sold.

Some domain names are registered, then parked for later use. An example would be the name of a new product to be released down the road. Or maybe the owner is waiting to resell the name in the secondary domain-name marketplace. Or a company might grab all the names that are close to its trade name, so that others don't register those names and capture people who want to find the company but misspell its name or hit a wrong key while typing.

Also, while not strictly a parked name, many companies register names that are uncomplimentary such as Lousy[YourProductName].com, so others don't.

Dusty domain names

But then there are domain names that are ignored or even forgotten over time. It may be that a company has gone out of business, a personal site is built then abandoned, or perhaps a planned site is simply never built. In such cases, the names end up collecting dust in a closet. I don't know about you, but I have several of these.

As Warren Adelman, president and COO of domain-name giant GoDaddy.com, says, "This is 21st century real estate. More and more transactions are taking place online. People go online for entertainment and communications. If the online environment really rests at the bottom line on the domain name, then it's obvious that that real estate, that domain name, has value."

GoDaddy has more than 48 million domain names under management, which is near a quarter of the Internet.

Buying an unregistered domain name happens in the primary market. Buying an already-registered domain name from another owner, whether through a direct transaction or through an agent or reseller, happens in the secondary market. Prices in the primary market are low, often a little below or above $10. What gets interesting is that prices in the secondary market average around $2,000.

According to Sedo.com in Cambridge, Mass., a major player in the secondary market, 49% of all Q1 2011 sales through their marketplace went for up to $500 while 45% were up to $5,000 (Sedo's Q1 2011 market study).

Examples of recent sales reported by DN Journal (www.DNJournal.com), the online domain industry news magazine, include CoolGames.org for $7,500, sofas.net for $18,450, Gospel.org for $35,000 and RunningShoes.com for $700,000. According to Guinness World Records, the highest price ever paid for a single domain name was $13 million for sex.com. It was handled by Sedo in October 2010.

What makes your domain name worth money to someone else?

Paul Nicks, director of aftermarket products at GoDaddy, says if the domain name marketplace is "... most analogous to real estate, then quality dot-coms are always going to be the waterfront properties. If you go with a name with dashes in it for a little less money then you are the behind-the-waterfront property ... behind a big condo high-rise."

So, for your domain name to be valuable it must be a location people want to get to, like waterfront property. Also, if the name is easy to remember and easy to type, it will likely have value. Another factor is the vanity attraction, like vanity license plates. People like seeing their company name or family name as a website address.

For the most part, it is a question of what the domain names are composed of and to what extent people are searching for them. Are they key words, acronyms, proper names, numbers or a combination? What is the extension? How many people are searching for those terms? The following factors describe some of what makes a domain name a valuable domain name.

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1. Length does matter

The shorter the better, partly because people are less likely to misspell it and end up at the wrong site. Also, shorter is generally easier to remember, which is always helpful when driving people to a place of business.

Correspondingly, acronyms sell really well, especially those with only two or three letters. American Airlines has www.aa.com and Comedy Central has www.cc.com. ABC has www.abc.com and the Better Business Bureau has both www.bbb.com and www.bbb.org (the .com address automatically routes you to the .org).

2. Keywords are key

Jeremiah Johnston, COO at Sedo.com, says, "People search the Internet by sticking keywords into their browser and sticking a dot-whatever extension is relevant in their country at the end of it. That kind of natural traffic is what we call direct navigation and it is the biggest thing fueling the entire domain industry as we see it today. If you have some simple keywords [in your domain name] and it gets hundreds or thousands of unique visitors a week or month ..." it has value.

In fact, people often skip the search engine and simply enter a keyword into the URL bar to see what pops up. Often this works well, and it skips the myriad of listings that Google, Bing and everyone else returns. Looking to buy a boat? Type in www.boats.com and you'll get a site listing 150,000 boats for sale. The same goes for www.insurance.com; you'll find a way to get quotes for many insurance companies. Having a keyword-rich domain name is an important factor of search engine optimization. If your domain name ranks high in searches, its value is more likely to be high.

3. Proper nouns

While keywords are king, proper nouns have their own draw, too. And if it is a name shared by a well-known brand, it will have value. So while www.cars.com is a valuable piece of domain name real estate, www.ford.com would be as well; it is a worldwide brand and has been for near a century. But be careful of trademark issues. If you owned an apple orchard and happened to own apple.com, you'd probably be OK selling apples from the website. But if you tried to sell computers or music from a website with that domain name, lawyers would be getting in touch with you. Therefore, if you happen to hold a domain name that is also the trademark (or even part of a trademark) of a company, trademark restrictions would likely limit its use and therefore its resale value.

Some register their given or family names. Such vanity domain name registrations are common but often don't draw a high resale value unless there is a business to take advantage of it. Warren described a recent trend where parents have changed the planned baby name because it wasn't available: "People want to give their child their domain name so that, as they grow up, they'll have that piece of digital real estate that's part of their digital identity."

4. The extension

Your domain name includes the extension, which is an important factor in value. Names with what are known as Generic Top Level Domains (TLD) generally draw the best value. These include .com, .net, .org, .gov, .edu and .mil. However, according to Johnston, "While dot-com is perceived as a global commercial extension, in practice it's really more the North American extension and, if anything, the U.S. extension. When you get outside the U.S., it's the Country Code TLDs (ccTLD) that are dominant, because companies realized local consumers want to deal with local companies so they want the Web address to brand themselves as local. If you are dealing with Volvo in Belgium, you are going to be dealing with Volvo.be." So while .com may be the best in the U.S., it may be the ccTLD that brings the bucks in another country.

A ccTLD is a domain extension specific to a country, a sovereign state, or a territory. For instance, .ca is for Canada, .jp for Japan and .to for Tonga. However, when assessing value, consider that online businesses sometimes use ccTLDs to associate with specific business areas. For example, .ch for Switzerland is used for some church sites; .dj for Dijibouti is used by some disc jockeys; .tv for Tuvalu is used for the television industry and .lv for Latvia is used to abbreviate Las Vegas.

If you want help assessing the value of a domain name, consider one of the domain appraisal services and tools available (a quick search of "domain name appraisal" will return loads of options). But, as advised Nicks whose responsibilities include managing GoDaddy's domain appraisal service, it "... will tell you this domain is probably going to sell in a general range, but do a good bit of your own research to support where that price range is; the appraisal is simply one piece of that process."

Selling your domain name

If you've decided to dust off that domain name and put it up for sale, how do you do it? Certainly you could find a buyer and sell it directly. Alternatively you could engage a company that offers resale services.

For the do-it-yourselfer, try sticking a simple Web page up that says it's for sale, and maybe someone will find it and contact you. Try contacting the owners of websites that have similar names and market to them. Visit social networking sites related to the topic of your name and talk up the offering. This is no minor effort. Be prepared to invest time. However, plenty of people have succeeded doing exactly that. Just be careful in the transfer process; more than a few have agreed to a price, handed over the rights to the name and were never paid. At the very least, use a service like www.escrow.com (even GoDaddy uses it). It will protect both the seller and the buyer whether it is a domain name or that collector car. Or consider using the escrow service of Sedo or other reputable offerings.

Or you can engage the help of those who specialize in the business of the domain-name secondary marketplace can make the entire sales, marketing and transfer process easier and faster, and may get you more money.

After all, some of these companies sell thousands of domain names per month, so you'd be stepping into well-established sales channels reaching far more potential buyers than you are likely to. Some of the key players in the market are GoDaddy.com, Sedo.com, Afternic.com, Snapnames.com and Namejet.com. Some newer players include Aftermarket.com, Bido.com and Boxcar.com.

Fees

The costs for using the services of a domain reseller vary considerably, both between companies as well as within a single company's offerings. For instance, Sedo will work a direct sale for 10% of the sales price and, if it is sold through their auction marketplace, 15%. GoDaddy charges 5% on sales under $1,500 and 7% for higher-priced sales (the added 2% is to add protection of escrow.com). If you opt for GoDaddy's Premium Listing service the fee jumps to 30%, but there is a corresponding increase in the service; first, your name would benefit from the massive advertising the company does (including Super Bowl commercials) that draw people to their sites to search for names.

They will also put your domain name on the domain available purchase path; i.e., if someone searches for your domain name, but it is already registered, GoDaddy will include it as available for a fixed price. The buyer just checks the box, it goes into the shopping cart then the buyer simply checks out. Automatically the domain name is transferred to the buyer's account and you are paid.

What if you don't want to sell it and want to ensure others don't take it?

In July 2009, Daniel Goncalves became the first person prosecuted for domain name theft, as reported by DomainNameNews. What did he steal? Why sex.com of course which, as mentioned earlier, later sold for a cool $13 million.

So, now that you've figured out that you have a domain name of value, consider that others may have come to the same conclusion. The problem is that, unlike that collector car you keep locked in your garage, how do you lock a domain name?

Sedo.com's Johnston said there are two things: "First, you have to be with a reputable registrar you trust and that has good service. The other is to NEVER use the same domain name in the whois email address when registering a name. Never do that. Hackers love that because it makes it easy to hack the email account. They'll use that access to change the password of the registrar account and ... they'll transfer the domain name."

So, are you sitting on valuable domain real estate?

Take a look at the names you own. Are you sitting on domain real estate of value? If you want to keep it, be sure it is well protected. If you want to cash in, consider listing it for sale in what has become a large, dynamic and profitable marketplace. You may not become the next Jed Clampett, but even if it only draws an average price, you could pick up a few thousand dollars -- per name.

Smith is president of Alexander LAN Inc., a freelance consultant and writer in IT.  He can be reached at DirkADSmith@gmail.com.

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