Are they worth less?: Domain names that get around

Rapid trading of domain names might reduce their value.

We’ve seen a fresh phenomenon in domain names in the past couple years: domain names that get around.

Chinese investors have piled in and helped turn short domain names into tradeable commodities. Some domain names have been traded multiple times within a year (sometimes within a month!).

So here’s a question that’s been on my mind lately…

Are domain names worth less if they’ve been traded between lots of owners?

I think they are since it complicates their chain of custody.

If a three-letter domain name has been owned by the same person for ten years, there’s a pretty good chance there aren’t outstanding disputes involving the domain name, such as a domain theft claim.

On the other hand, if a three-letter domain has multiple owners in historical whois records, any one of these transactions could have been a theft or illegitimate transfer. As a potential buyer, you might need to contact each of these previous buyers (some of whom might not speak your language) to make sure the domain isn’t stolen. This adds a transaction cost.

I also think that a domain name that has been transferred to eName at some point in time also raises the transaction cost. There was a time when it seemed like we were reading regarding multiple alleged domain thefts each month that involved domains transferred to eName. To be sure, there have been lots of legitimate purchases that result in a transfer to eName. But there have been lots of allegedly illegitimate transfers as well.

I believe anything that casts a cloud over a domain name’s ownership history reduces its value, and this includes multiple transfers…even if they are legitimate.