Domain Names are Purchased as Investments — Majority of
Most big ticket domain purchases are by investors hoping to flip the domain or cash in on pay-per-click revenue.
Many high dollar domain sales are noted each week, but who is buying all of these domains? This is an notable question to answer in order to understand the future of the domain name aftermarket.
Reglike just concluded a study of high value domain name sales on the aftermarket and determined that 65% of domains are purchased by investors and 35% by end users.
The study considered the top 100 domain sales of 2006, as noted by DNJournal. International domain names and domains that didn’t resolve to a site were removed from the data set and then the remainder were checked to see if they resolved to a real web site or a parking page.
It isn’t always clear if a site is being used as a real web site or parking page. For the purposes of this research:
A domain classified as a real web site sells a product or advertises a product or service. Domains that forward to a real web site that aren’t affiliates also count as real web sites. Also, domains with a “coming soon” page that do not include pay-per-click ads are considered real web sites since they will likely be used for that purpose. Real web sites are considered “end user” purchases.
A domain classified as a parking site either resolves to a traditional parking page or a “made for adsense” site. For example, the domain Bike.com is considered a parking page even though it’s designed to look like an e-commerce site. You can’t actually buy a product; the content is designed solely to get you to click on Google Adsense ads. The domain was purchased as an investment and not by an end user. These sites are considered purchased for investment.
The research shows that 65% of these domains were purchased by investors and 35% by end users.
Examples of domains purchased by investors include:
Cameras.com, $1.5M
Blue.com, $500,000
CD.com, $277,750
Farm.com, $200,000
Vegans.com, $73,000
Examples of domains purchased by end users include:
Vodka.com, purchased for $3M by Russian Standard Vodka
Nav.no, purchased for $717,978 by the Norwegian government
Blocks.com, purchased for $130,000 by The Block Firm, LLC
Of course, these 100 domains may not be a proxy for the overall domain market. Here are three reasons the data may be skewed:
1. Some buyers may park a domain ahead of converting it to a real web site. The purpose of this research was to determine if a buyer purchased the domain with the direct intention of using it for a business. I waited until now to research 2006 sales since most people intending to develop a site would likely have some sort of non-parking landing page at this point.
2. The top 100 domain sales may not reflect the rest of domain sales.
3. This data only respresents noted sales. Most sizable firm sales are not noted, as are many investor sales.
4. Some of these noted sales may have been by investors who subsequently sold them to end users, artificially increasing the count of domains purchased by end users.
What does this data tell us? The domain community needs to continue to reach out to end users to educate them regarding the value of good domains. The industry can’t thrive by just selling domains to each other.
