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Sex sells in the domain name game

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

By Dirk A. D. Smith, Network World
August 01, 2011 06:08 AM ET

Network World - 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.

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