overview

This page looks at domain name auctions and sales, supplementing discussion in the broader Domain Names & DNS profile regarding domaining and monetisation

It covers -

• introduction
• the domain names bubble
• sales - highlights of dot-com name sales
• offers - highlights of prices sought by vendors
• portfolios - sales of 'keyword portfolios'

The following pages covers questions about 'standard' prices, the absence of a domain name bubble in Australia, domain-based lending and the uncertain emergence of domain name derivatives (eg 'name futures').

Points of reference are provided in notes on benchmarks for the dot-com bubble and collectible prices over the past 500 years.

     introduction

As we noted in that profile, domain registration - strictly speaking - involves a licence (leasing use of an address in cyberspace) rather than unrestricted and perpetual ownership.

In practice it is common to speak of domain name ownership and domain name sales. In the dot-com gTLD and some ccTLDS (particularly those, such as dot-tv and dot-am, marketed as a competitor to dot-com) the registration regime permits ready transfer of domain names, whether direct between two parties or via an intermediary.

That 'secondary market' or 'after market' involves large numbers of registrations and considerable expenditure.

     the domain names bubble

The dot-com boom is examined in a separate profile on this site. It was characterised by -

wholesale registration of dot-com and other domain names, often on a very large scale (eg involving up to one hundred thousand names) for resale to individual consumers and other registrants. That registration was often automated. Retailing of those 'preregistered' names encompassed both online auctions such as GreatDomains, Sedo and Afternic.com and sale at a direct price. Some wholesalers also acquired names that had previously been registered by other entities.

small and large-scale acquisition of names on a speculative basis, ie in the expectation that the holder of a name would make a profit - generally of several hundred or thousand per cent - by transferring the name to an individual/organisation for active use or for speculation.

uncritical reporting in the mass and specialist media about prices received for transferred names and a lack of analysis about values and market trends. Unsubstantiated accounts of "million dollar names", unique opportunities and substantial profits in the "domain name gold rush" were not uncommon.

That activity was underpinned by - and in turn drove growth of - businesses that specialised in determining the supposed intrinsic/market value of domain names, in creating new names claimed to have a particular intrinsic value and in further commoditising names as an 'intangible' through for example name-based securities.

It reflected phenomena in past booms - examined in works such as Peter Garber's Famous First Bubbles: The Fundamentals of Early Manias (Cambridge: MIT Press 2000), and Charles Kindleberger's classic Manias, Panics & Crashes: A History of Financial Crashes (New York: Wiley 1993) - where markets were poorly informed and prices for the commodity (tulip bulbs, shares in France's Mississippi Company, 1840s UK railway shares, 1870s US railroad bonds) were uncoupled from any credible prospect of return from investment in tangible property or services.

As Anthony Perkins & Michael Perkins commented in their prescient The Internet Bubble (New York: HarperCollins 1999) at the height of the boom some domain name holders or valuation services asserted that particular names had an intrinsic value of several million dollars, independent of any investment in development of a site, establishment of e-commerce fulfilment infrastructure or other tangibles. Why bother to engage in the messy, difficult and often profitless business of e-commerce when you could make money quickly and simply by playing the name game? No pain, little risk.

One vendor for example advertised that

Domain name speculation is probably the very best way to make money on the Internet and probably one of the least known! It is also easy, fun, takes a very low investment and has a huge profit potential. Businesses and webmasters are always looking for high quality, marketable domain names and will pay you big bucks if you have the name they want. Many people are making a good living buying and selling domain names. And you can too.

Another claimed that

Here you can grab a million dollar domain name for $35 or less, and then you can turn around and sell it for hundreds or thousands of dollars

Lee Hodgson, self-styled DomainGuru, more soberly commented

The truth is that domain speculators are the backbone of the domain name industry. They are people like you and me - webmasters, site developers, students, investors, doctors, musicians, consultants and journalists. They are also small businesses and large corporations. Early in the year 2000 it came to light that the multi-national company Procter & Gamble had been busy buying several hundred valuable one word generic domain names and had decided to put them up for sale. If it's good enough for Fortune 500 companies I really don't see why it's not good enough for the rest of us.

One US 'investor' gained notoriety (and apparently quite a few dollars) through large-scale registration of names that were likely to infringe corporate trademarks and then advising the owners of those marks that it was cheaper to acquire the names from him than for them to resort to legal action. Such hostage-taking has now been crimped by punitive provisions in the AntiCybersquatting Protection Act.

     sales

The extent to which individuals and enterprises made money by playing the game is unclear. There are no comprehensive independent studies of prices and profits.

Most media coverage has centred on prices at which particular gTLDs and ccTLDs are reported to have changed hands. They include -

The Western Australian Tourism Commission spent $50,000 in 2004 on the westernaustralia.com name as part of a $1.3 million revamp of the state's tourism site. In 2010 the Northern Territory government paid $100,000 for a shelf company that comprised three names - northernterritory.com, tourismnorthernterritory.com and tourismnorthernterritory.com.au. The previous owner of the company reportedly paid $50,000 for the names.

Cd.com went for US$277,750 in 2006; rubbergloves.com fetched a more modest US$19,804.

     offers: it's worth what I ask for it?

Much coverage also concerned prices sought by vendors, either directly or as an indicative figure on auction sites.

One example was the announcement that the america.com name - just the name - was available for US$30 million. As of January 2003 it was on offer for US$15 million, somewhat less than the US$1 billion sought for usdemocrats.com at that time and presumably more realistically priced than adiamondgeezer.com (US$2 million), homejobtrade.com (US$5.36 million), fruitcakes.com (US$10 million) or foxyfriends.com (US$100 million).

Another was the report that the operator of the sex.com domain had been offered US$48 million for the name, consistent with problematical claims that the address received 25 million visits per day and that the site - effectively a portal - generated annual revenue of at least US$95 million.

The UK Financial Times more hard-headedly dismissed as a stunt claims that the sex.com operator had received an offer of US$85 million. In January 2006 it was announced that the name had been transferred for US$14 million after a US$11 million deal fell through in September 2005. The saga has been chronicled by Kieren McCarthy in Sex.com (London: Quercus 2007).

The registrant of Cool.com was supposedly offered US$60 million. Winding up of eToys.com supposedly involved sale of the domain name for US$3.35 million; in fact that figure related to all of the unsuccessful etailer's intellectual property.

Other figures include

Domain Name afterhourstrading.com deposit.com eautos.com airline.com ecommerce.com celebrity.com foreplay.com attorney.com in.com stocks.com broad.com sportinggoods.com human.com pay.com supply.com

Sought (US$m) 0.40 1.50 0.10 0.50 4.00 1.00 0.25 1.00 10.0 7.50 6.00 1.00 0.60 0.50 7.50

and a mere US$8 million for hell.com.

Consumer misunderstandings (or merely buyer remorse) are evident in reports in 2007 that the Dallas Cowboys football team sought to cancel its aquisition of cowboys.com after realising that it had agreed to pay US$275,000 rather than US$275 in a domain name auction.

     keyword portfolios

Interest has increasingly turned to sales of keyword portfolios - collections of sites that gain traffic because users have mis-typed an URL or intuited a domain name. Sites in those portfolios are typically used for advertising. Relevant names may be identified through domain name tasting.

In 2005 online marketer Marchex reportedly paid US$164 million for Name Development Ltd, offering keyword advertising across more than 100,000 domains. That deal followed US$155 million paid by SAVVIS for Cable & Wireless America (inc some 350,000 names) and US$176 million by Freenet for German hosting operator Tect (inc 2.2 million names). US-based NameMedia acquired 650,000 names for its own portfolio, with 'rights' to a further 350,000 names registered by other entities.

Domain name portfolios are discussed in more detail in a supplementary note elsewhere on this site.




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