Letter domains have any real value? — Do 3

Is a domain name worth something if it’s just traded amongst investors with limited potential value to an end user?

Three letter .com domain names are very popular right now, with prices increasing significantly over the past year.

Much of the demand comes from domain traders in China. China itself is experiencing a bubble in tech stocks that rivals (or surpasses) the NASDAQ 15 years ago…perhaps counting the ensuing bust.

Will the value of three letter .com domains face a similar fate to other assets that have rapidly increased in value? Or is there underlying value in these domain names that will cause them to continue to appreciate?

Let’s take a step back.

Even ahead of Chinese buyers showed up, three letter .com domains were very popular and liquid for trading. They were popular, in party, since a combination of three letters matches a number of firms’ brand acronyms. A short and simple domain matching your acronym is worth a lot, e.g. DNW.com for Reglike.

I struggle to determine if the current run up in prices is tied to this value (short domains that match brands). Many of the three letter domains commanding top dollar these days are based on a different set of letters that work for the Chinese but are less likely to match acronyms or stand for anything.

So what value do these domains have? Certainly, any short domain — even if it doesn’t stand for anything — has value. But how much value do they have if the odds are low that an end user will ever come along and try to purchase the domain name?