ll of us buying domain to an Internet market
names for several years now consolidation, in the event of an
can share a few stories on open Internet with relaxed domain
the satisfactory return on extension creation protocols
investment that we’ve had. (read ICANN) the market could
Nevertheless, when considering become saturated with domain
investing in more domains (or extensions. In this scenario
simply holding to the ones you domain supply goes ad infinitum.
already own) there are some When users have the availability
factors to evaluate on the and Internet knowledge to browse
durability and appreciation of through .whatever, then
those assets. The following are whatever.com could lose value.
potential domain investing
scenarios where the asset could * Increased user knowledge - Many
depreciate in value: of the wealthiest domain
investors rely on type-in traffic
* Internet market consolidation - at generic domain names as its
In a mature Internet market major source of revenue. The
consolidated into a few dominant current user, unaware of the
leaders, there is a possibility existence or nonexistence of a
of encapsulating the user (think website is wrongly trained to
of AOL) into a user experience type in the topic they are
controlled by the roles set out searching for and add the “.com”.
by those leaders. In this Thus, owners of generic term
scenario, users could be led to a domain names are currently
new form of browsing dominated earning millions of dollars from
mostly by “proprietary” keywords this practice. These domain names
owned by influential players. are usually resold based on
yearly earnings multiples ranging
* Excess domain supply - Opposite in average of 8 to 15 times.
However, as users grow more tech investors facing an urgent need
savvy, there’s a possibility that to sell their domains will most
the type-in water well dries up. likely see a huge decline in the
selling price from the actual
* Widgets and applications - domain worth. This by itself
Similar to the first point, as reduces greatly the amount of
Internet widgets and applications investors and investment money
proliferate user browsing available by traditional and
behavior could change. A user wealthier investors.
that interacts with the Internet
through a collection of widgets The constantly evolving Internet
and applications could reduce its technology poses many more risks
dependence on traditional domain in the way a user interacts in
browsing (think Facebook apps). cyberspace. A recent example of
how a domain extension’s
* Evolution of television - viability was seriously
currently, there are powerful questioned is the .mobi extension
companies pushing for the in response to the launch of the
creation of an interactive iPhone and the way the cellphone
television experience, studies allowed for regular browsing,
show that users are ready. rather than limited mobile
Depending on the extent to which browsing.
televisions supply the tools for
browsing the Internet, users When deciding to purchase a
might find themselves interacting domain name as an investment, the
in a whole new way detached from investor should consider the
the need of domains. above factors and understand that
domain investing is a high risk
* Liquidity - Domain names have investment with a strong chance
very low liquidity. As a result, of having a relatively low
durability. size="-2">http://www.circleid.com
/posts/iphone_dotmobi_domain/New Top Level Domain process nt>
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nouncements/announcement-10aug07.
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About the Author:
Rafael Sosa has been a domain name and Internet business investor since 2000. He has worked extensively in the construction of search engine optimized websites, search engine reputation management, and Internet technology patents. RafaelSosa.com
