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Dispelling the hype behind domaining

Did you hear the recent stroy about the chinese guy making $23 million dollars a year with hit portfolio of domains?

Or the Swedish domainer who sold his domain name portfolio for $50 million?

Stories about seemingly average people making huge fortunes with domains occasionally crop up the major newspapers and internet forums create an enormous fury of discussion. The reader’s usual response to such stories is “Maybe I can register some domains and make a nice fortune”. Well um good luck because you’re about four years too late. At this point domaining is generally a waste of time and money for several reasons.

The first reason is that all the generic one or tow word domains have already been registered. Believe it or not, all the three letter combinations (26^3*3 or 52728 domain names) of dotcoms, dotnest, and dotorgs were registered before 1998. By 2000 virtually every word in the Oxford dictionary under six characters had been registered. In addition, nearly all generic longer compound phrases such as cellphone.com have also been registered. On average, generic domain names of dotcom or dotnet extensions carry substantially more value than other types of domains which is why the demand for these names is so great and supply is so scarce.

As a result of the scarcity of generic domain names and a renewed interest in domaining the price for domains has skyrocketed in the past four years following the dotcom shakeout of 2001-2002. When the dotcom bubble imploded millions of quality domain names expired and opportunistic domainers swooped in and registered those domain names. Generic domain names were selling in 2002-03 for a fraction of their value just a few years ago before the dotcom shake out. As internet commerce rebounded in 2004 the price for domains names surged and subsequently it become financially difficult for domain speculators to purchase quality domains. It isn’t uncommon for a short, one word domain name to sell for tens of thousands of dollars, or even more.

Making matters worse is that there are vastly more domain name speculators now than ever before. Domainers all over the world use sophisticated programs to immediately register expired domain names as well as engage in domain kiting. Domain kiting is the practice of registering thousands of domain names in bulk of various keyword combinations in the hope that a few of them will garner type in traffic. The domain names that fail to receive type in traffic are discarded before the grace period ends so the kiter will only have to pay for the domains that are profitable.

To give you an idea of how rampant domain name speculating has become, the day of the IPhone launch 425 Iphone related domain names were registered.

(I’ll finish the rest of this article later. Just wanted to get something out there.)

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