What are the economics of sites like domainnamesales.com?

August 7, 2013 5:26 AM

I just got off the phone with domainnamesales.com and the representative told me that the domain I was looking at was owned by one of their customers who owns 300.000 domains - it was also on sale for $100.000 (a completely ridiculous price for the domain I looked at). How are the economics of this business, aren't there yearly registration fees that would make owning 300.000 domains unprofitable, isn't this doing a great disservice to the internet? Is there literature, opinions, … against this?
posted by lenehan to Computers & Internet (4 answers total)

Ads on the landing paged help offset the $10ish a year domain fee. And at $100,000 a domain, you only need one big rich company that absolutely has to have that domain to justify the business model.
posted by COD at 5:56 AM on August 7, 2013

domains can be held retail for a dollar a year, and I bet wholesale (if you do bulk business with a registrar) for significantly less than that. in the end, it's just a database record and costs the registrar approximately zero dollars to maintain.

assuming they pay $0.10 per domain annually (I'm just making that number up, but whatever) they need to sell 300 domains a year at $100, or 0.1% of their stock, to break even. also there's ad revenue as COD mentioned.

bulk domain holders are bottom feeders, but there's money in it so somebody is always going to fill that niche.
posted by russm at 5:58 AM on August 7, 2013

Firstly, he may not 300,000 domains. He may have agreements in place with other resellers that give him access to 300,000 domains. The ones he does have he will get a hefty discount on because of wholesale buying.

Secondly, attractive domains are not dormant. They host ads and links from which the owner gets fees. So if you look at, for example, timburton.org there are adverts all over it because in theory it is a "premium" domain that attracts inbound visitors.

Thirdly, when owners do sell a domain, they do several things to maximise the price. They don't sell it without a hefty premium, and in some "whale" cases it will be tens of thousands of dollars. They also include things like hosting as add on services, upon which they make a mark up.

Finally, the economics are about to change radically. ICANN is increasing the number of available top level domain names, which in turn will depress the value of the long tail of domains being held by URL 'property' speculators.
posted by MuffinMan at 6:00 AM on August 7, 2013 [1 favorite]

As part of domain front running, domain tasting is free, if only for a limited time. If by chance you are being subjected to domain front running (example), you could wait a few days to see if your domain drops back into circulation.
posted by rada at 10:02 AM on August 7, 2013