Investigating the Domain Name Market

The market for domain names is interesting. It's a little bit like the real estate market. Both have essentially finite (though extremely large) total inventory, both seem easy to understand, and both products fulfill the same basic function - providing space and an address for people to develop as they see fit.

Domain names derive their value from one or more of these four sources:

  1. Sharing a name with an existing firm. "Cybersquatting," or buying a domain that has the same name as an existing firm, could be valuable for two reasons. The first is that you could get traffic from people looking for the other company. The second, more lucrative and more risky, is that the firm might pay you handsomely for the domain. (They also might sue you.) I think that cybersquatting is of pretty questionable legitimacy and I don't like that part of the market.
  2. Brevity/memorability/scarcity. There are only 26 one-letter domains (not counting foreign alphabets). Each is worth many thousands of dollars, because they're scarce and they're memorable. Two-letter domains (676 in the world) also sell for thousands, though they are less memorable and less scarce than one-letter domains.
  3. Heavy or competitive search volume. Search traffic is very valuable for web companies, and domain names are part of search algorithms. So, hotelsinnewyork.com could rank high for the very common google search "hotels in new york," and it would be more valuable than "hotelsinnebraska.com" since "hotels in nebraska" is not as common on google.
  4. High advertising rates. Websites get money from advertisers, and advertising rates vary widely between fields. So if your domain is something like "asbestoslawyer.com," ads on your site could generate literally hundreds of dollars per click because asbestos lawyers pay that much for ads. That would make "asbestoslawyer.com" much more valuable than "funrecipes.com" since ads related to recipes are much less lucrative than asbestos lawsuit ads.

Like the real estate market has been at various times in history, the domain name market is full of speculators. I participated in some speculation myself (some successful and some not), and along the way I learned some things about the domain name market that I'll share with you now.

The data. I hired someone to collect information on domain name auctions from here. They collected data for several weeks, and in the end I got data on a total of 2,764 domains. It's just a small portion of the whole market, but it captures enough to see some patterns and to learn a little about the market.

Here are some interesting things in the data.

Quantiles

Min. 5th pctle. 25th pctle. Median 75th pctle. 95th pctle. Maximum
Value $1 $1 $1 $50 $400 $4,000 $233,000
Bid $1 $5 $21 $60 $200 $1,750 $60,000
Bid, non-Flippa $15 $15 $20 $50 $156 $1,281 $45,000
Length 5 8 12 15 18 24 34
Cost per Click $0 $0 $0 $0 $0.05 $2.26 $31.25

Here are some interesting standouts in the data:

Maximum bid. The listing in the data that had the highest bid from non-Flippa houses was adra.com. On Dec. 3, 2014, its auction was coming to a close at CAX.com, with about 16 hours left. There were only two bids, and the second and highest was $45,000. Here is some information about that site at the time it was sold:

  • Adra.com, adra.org, and adra.net were all taken.
  • The estimated cost per click was $0.52.
  • The estimated monthly searches were 3,568.
  • The estimated "frequency" was 11,200,001.

Maximum length. The listing in the data with the maximum length was southminneapolisrealestateblog.com, with 34 characters (5 words!).

Maximum cost per click. The listing in the data with the highest cost per click was income-tax-attorney.com, with $31.25 estimated per click.

Maximum estimated value. The listing in the data with the highest estimated value was terorist.org, with appraisal value $233,000. The bid on GoDaddy, with almost four hours left, had maximum bid $230.

You may have noticed that some of the links above lead to empty landing pages (so the domains were purchased but never developed). This is evidence that this is a high speculation market, where people are buying and selling without developing.

This post is perpetually under construction, and I will keep adding more as time goes on.

 

Post by Bradford Tuckfield.

I offer a full range of data analysis services, including market and price analytics. To set up a free consultation, email me at bradford@analytics-man.com.

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