How to Make Money With Domain Names

Domain names, those unique words or catchy phrases that identify a website on the internet, are hot commodities in today’s tech-centric world. For example, the Gannet Co., Inc., reportedly bought “cars.com” for $872 million in 2014, which set the world record for a domain name sale. While this sale is an outlier, the right domain name can be a valuable asset for an organization or an individual who owns a website.

Buying and selling domain names, also known as domain flipping, represents a unique investment opportunity, with both risks and potential rewards. Here’s what you need to know to make a profit on it.

Key Takeaways

• A domain name is made up of a website name, such as Investopedia or Google, and a domain extension, such as .com, .edu, or .org.
• Investing in domain names often requires a long timeline for building a portfolio and realizing any gains.
• Generic, geographic, event-oriented, and business names can all be the basis of good domain names to invest in.
• Buying and selling involves three options: setting a price, attending an auction, or engaging in make-an-offer sales.
• Risks of these investments include their lack of liquidity, the subjectivity of their valuation, and potential legal pitfalls—such as when a domain name is too close to a trademarked name.

How to Build a Solid Domain Portfolio

Building a high-quality domain portfolio can take months or years to accomplish. Often, the key is looking forward to what domains may become popular in the future and hedging through numbers by purchasing hundreds of domains. Or, you might choose to purchase a few already high profile domains and sit on them hoping that they appreciate in value. Below are some different types of domain names that can be worth investing in.

Generic Names

Words that describe a product or service, including new and emerging products, can be a great investment. But it’s very important to avoid any copyright or trademark issues that could result in domain forfeiture. You can check the U.S. Patent and Trademark Office’s Trademark Electronic Search System (TESS) for applied for and registered trademarks free of charge.

Geographic Names

Names of cities or countries, including up-and-coming locations, can be great investments over time that can be sold to web developers looking to build out community portals or other businesses centered on those communities.

Business Names

Generic business names, such as dentist or chiropractor, can be great investments when combined with geographic names.

Timely Names

Timely names can be worth investing in when combined with events occurring in that year, such as 2022OlympicPlayers.com.

Note

Always verify that a domain is available to avoid legal issues.

Buying and Selling Domain Names

There are many different ways to buy and sell domain names. Many standard domain registrars, such as GoDaddy.com, will facilitate sales via auction. There are also specialized websites, such as Sedo, that are designed exclusively for buying and selling domain names. Finally, you can “park” domain names with a for sale page, which is a great way to draw targeted interest from potential buyers. Just keep an eye out for domain expiration dates so that yours don’t expire, allowing someone else to buy the names and capitalize on them.

Set Price

Setting a specific price is the preferred method for domain sellers that have a large portfolio of domains and aren’t in a rush to sell them.

Auction

Auctions are a great way to sell higher profile domain names where there is a lot of interest, since they typically result in the highest possible price.

Make an Offer

Make-an-offer sales are well-suited for niche domains that may not have a lot of interest and/or where the exact value of the domain isn’t well known.

Risks of Investing in Domains

There are many risks that would-be domain investors should carefully consider before buying and selling. The three largest risks are liquidity, subjectivity, and legality, but there are also others, ranging from misleading appraisals to faulty escrow payments. Would-be buyers should carefully consider these risks before investing in domain names.

Liquidity

Most stocks and bonds can be bought and sold with ease through a broker, but domain names can be much harder to sell. Finding the right buyer is often a matter of listing a sale for several months or even years, which means that investors should have a lengthy time horizon and the ability to stomach a loss.

Subjectivity

Stocks can be valued by the discounted value of future cash flows, while bonds can be valued by their coupon payments and interest rates. Domains are a much more subjective valuation that can be very difficult to pinpoint. And so-called domain appraisers are well known for issuing lofty valuations that can be hard to realize.

Legality

Domain names can be a sticky business from a legal standpoint. Choosing names that are too close to a trademarked name can result in a lawsuit and a court order to forfeit the domain name for free. In other cases, stolen domain names can be sold before the buyer has the ability to discover that they’re not the true owner.

Can You Invest in Domain Names?

Yes. Domain investing involves buying and selling domain names with the goal of making a profit. As with any investment, the idea is to buy names (preferably high demand ones) at a low price and sell them later at a higher price.

Is It Legal to Invest in Domains?

It is, but there can be sticky legal situations. One example is registering a domain with the intention of making a profit off someone else’s trademark—a practice known as domain squatting. It pays to avoid registering names that are similar to known trademarks and to make sure there aren’t any legal disputes or claims against a domain before you buy it.

How Do You Make Money Selling Domain Names?

You first have to invest in a portfolio of domain names, which can take months or years to accomplish. You can choose names that you believe will be valuable in the future or buy ones that are already high profile and wait to see if they increase in value. Making a profit from sales of your domains requires figuring out when and how you want to sell—through an auction, for example, or, if the domain’s value is hard to pinpoint, through make-an-offer sales.

The Bottom Line

Like any investment, domain names come with their own set of risks. However, for diligent investors who consider the risks and returns thoroughly, domain names can become an investment that yields high returns, and a unique way to diversify a portfolio of investments.