What's in a (domain) name? Some serious cash.
At least 100 domain names sold for more than $100,000 last year.
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Online property can be developed into successful businesses, but this takes money, time, and talent. For example, an Internet firm bought the vacant business.com domain for $7.5 million in 1999. After years of branding and site development, the now-successful portal was sold last August for $350 million.Skip to next paragraph
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Domain ownership turns corporate
The mind-set toward domain names has shifted, says Jackson. Several venture capitalists now consider domain names to be appreciating commodities, much like stocks and real estate.
"This went right over the heads of Wall Street and investors," he says. "They finally learned in the last year or two."
Recent examples of this trend include:
•The Internet Real Estate Investment Trust in Houston, has gobbled up more than 400,000 domains since launching in 2005. The list includes Bands.com, CreditReports.com, and Shows.com. Its multimillion-dollar portfolio is backed by investment firms such as Maveron, cofounded by Starbucks chairman Howard Schultz; and Perot Investment, started by former presidential candidate and billionaire H. Ross Perot.
•At last month's DomainFest conference and auction in Hollywood, Calif., organizers reported that about one-third of the 700 attendees said that it was their first such event. The auction brokered $3.1 million in domain sales.
•A niche auction designed to sell online dating and social-networking domains will likely bring in several hundred thousand dollars when bidding closes on Feb. 7, according to Monte Cahn, founder of Moniker, which ran the event.
•Along with the genre-specific auctions, Moniker holds three general domain events a year, which Mr. Cahn says rake in between $10 million and $15 million each. As a whole, Moniker domain sales doubled over the last year. In January, the company itself was bought by Oversee.net, a large domain-services firm.
Overall returns on these massive investments remains slow. Sales are growing in both price and volume, but Jackson says most portfolios only sell 1 to 2 percent of their domains a year.
Schwartz says he has only sold six or eight of his 6,000 domain names since 1997. It cost him about $50,000 to maintain his sites. "But those I do sell more than make up for the rest," he says.
While the well of original ".com" domains dries up, Cahn says there are plenty of international names yet to be tapped. The German domain market has soared, with the country extension ".de" surpassing ".net" and ".org" to become the second-most-popular address suffix.
"Right now there are 145 million domain names," Cahn says. "By 2010, just two years later, it's going to be 240 million, with many of the new names coming from China, Latin America, and some African countries."