Many people don’t understand why domain names can cost a fortune, particular if it’s a generic domain name such as ‘insure.com‘ which sold for a cool US$16 million dollars.

As most of you know, the domain name is the url address you type in your browser.   I think to the average person, they don’t release how important the domain name is and how much is can potentially cost.  Picture this; a domain name is like a virtual address/property.  If it’s easy to remember, a domain name will cost more as there is a higher chance of a visitor typing the domain name directly.  In general, generic domain names have higher value for example; Realestate.com would cost more than MelbourneRealestate.com.   However, in some circumstances, if you build a brand name yourself, you could just register a domain name for US$8 for a .com or A$24 for a .com.au, but of course this could take years.

Why are generic domain names usually more valuable?  Other than being able to get more direct visitors as mentioned above, It arguably allows you to rank higher in search engines such as Google, Yahoo and Bing.   This is crucial for businesses as ranking in position 1; you usually would get 35% of the total searches compared to less than 2% if you’re ranked number 10.

Domain names can cost a fortune, for example ‘insure.com’ sold for US$16 million in 1999.   Although, I don’t have that much money purchasing million dollar or hundred thousand domains, I think there is still a lot of money to be made.  For example in February 2007, I purchased some brandable domains such as Pimpoo.com for US$8.5 registering it via domainsite.com (a domain name registrar).  I ended up selling it for US$6.5k in January 2008.   I actually developed it a little, adding a template on it, but it cost me around US$150.  So including expenses I made more than US$6k, not too shabby.

I recently read an article talking how domain names are being considered as an asset class amongst fund mangers.  This does not surprise me as domain names have become hot commodities to be in.  Another posts explains why can domain names be considered an asset class?

In the past 2 years, I’ve been slowly accumulating domain names usually in the .com and I have some in the .im, .hk, .info and .net TLDs.  However, I only really see value in .com’s, just being the fact it was the first and widely accepted TLD.  With the recent news, about how ICANN is allowing anyone with US$180k and a yearly fee of US$25k, to register their own TLD’s which means I could register .boy so it would become chanation.boy.  In some cases, these TLD’s will cost more, say .bank would see major bank competing against each other, so it would be done in a bidding system.  I kind of have a feeling a Chinese bank will win this battle.

Since June 2010, I’ve been purchasing more .com.au domains.   Now I have around 130+ and I will likely purchase more.  The Australian domain market is growing quicker compared to the average domain growth and surpassed the 2 million registered domain mark in May.  Although, significantly less than the 90 million +.com’s registered, there is still a lot of opportunities purchasing generic key phrases such as lazy.com.au which recently sold for only A$400.  If it were a .com, you can expect to pay north of $100k.