May
14, 2021
5 min read
Opinions expressed by Entrepreneur contributors are their own.
During the pandemic, Netflix’s Selling Sunset exploded in popularity, showcasing the glorified world of real estate. Millions of quarantined viewers tuned in to escape their homes and tour the luxe L.A. listings of The Oppenheim Group. While the show helped cure shelter-at-home boredom, it perpetuated a skewed view of real-estate success. Not exempt from volatility, real estate can be a riskier investment than portrayed through the media.
As real estate continues to fluctuate, there’s one investment trend that has gone undisrupted throughout the pandemic and recessions past: domain investing. If approached with strategy and vision, you might land yourself the next $40 million dollar domain. Here are some key reasons why domain investing is on the rise.
Safety
The goal of real estate is to buy low and sell high. But with extremely high expenses, upfront costs and tremendous effort, the return on investment is often not as compelling as reality television would leave viewers to believe. However, if done right, domain investing can be a relatively low-cost, low-maintenance investment. By purchasing multiple domains, the investor diversifies their portfolio and boosts potential profit. Because the price point starts reasonably low depending on the desirability of the domain, this investment strategy is also more accessible than traditional real estate investing. If purchased strategically, domain investors can acquire a domain that appreciates over time.
Some of the most successful publicly reported domain sales include:
- Insurance.com – $34 million
- Voice.com – $30 million
- Hotels.com – $11 million
- We.com – $8 million
- Beer.com – $7 million
A 90210 domain on a 91201 budget
What makes domain investing worthwhile is the possibility of landing a high-quality domain that can end up being worth a Beverly Hills home. In general, the return is much stronger when investing in better quality domains. However, just like real estate, locking down those domains will take strategy and foresight. Almost all high-quality names like the ones listed, especially those that will provide a six-figure return, are already taken. Therefore, you will likely need to acquire them from other investors via wholesale channels, e.g. a GoDaddy auction. For many domain investors, it’s beneficial to use a wholesale platform where they can easily liquidate domains for a fraction of retail prices, recouping their investments. Investors can also wait for names to become expired (or dropped) if the current owner does not renew them. In that case, you may be able to acquire them at a better value from expired domain auctions.
Related: Launch Your Home Business With a .store Domain
Digital economy
It only took a few months and a global pandemic to make working from home a cultural norm. Google and Indeed extended their work from home policies while Microsoft offered some employees the option to work from home indefinitely. Work isn’t the only place making a digital switch. Virtual baby showers and streaming living room DJ sets continue to grow in popularity, giving the digital economy a second wind. Health concerns initially forced many to embrace digitization, but now it appears virtual is here to stay. As our infrastructure and palette for digital connectivity continue to increase, so will our digital economy, even in a post-Covid world. While the pandemic fed the digital economy, it also created uncertainty among real-estate investment opportunities.
Related: How to Negotiate the Price of a Pricey Premium Domain
Boredom
The public flocked to Netflix and TikTok for binge-worthy content due to pandemic boredom. Boredom also sparked a wave of new hobbies that included bread making, knitting and horticulture. Among the micro-trends is a growth of creative investment opportunities.
Real-estate investing lacks an opportunity for individuals yearning to be creative. Many are turning toward domain investing as an outlet for creativity. Although LasVegas.com may be taken, there are inventive ways to land a high-quality domain. Compound names, transmutations, blended names and alternative extensions are all tactics to obtain a premium domain within budget. Domain investing does require a flair for names that strengthen a brand. Without that creativity and knack, you may fall short in investing in viable names.
Don’t miss the risk
As with many speculative investments, domain investing comes with its own set of risks. It can require investing in as many as a hundred names to sell two or three. This means you should consider the additional cost it takes to build and diversify your domain portfolio. Additionally, you may need to hold your domains for multiple years. You will need to pay renewal costs at about $10 per domain per year. If you have thousands of domains, these costs can add up.
Lastly, it’s important to stay away from trademarked names. You should not knowingly invest in names that are trademarked by other companies with the hopes that the company which owns the trademark will eventually buy it. This type of practice is known as Cyber Squatting. It is not only unethical, but it can land you in legal or financial troubles.
Massive unemployment, job uncertainty, and wage cuts have impacted real-estate growth throughout history. Yet, as digitalization continues to advance, the need for original domain names to house new ideas and businesses only grows. So the next time you think about scrolling through Zillow, you may consider scrolling through domain auctions instead.
Related: How to Navigate Domain Name Disputes