Premium domain names are extremely valuable (if you’re not sure what qualifies as ‘premium’ see the first part of this blog post). However, unlike most other assets, it is extremely difficult to put a specific value on any domain name as each and every one is truly unique and the price can only be determined based on what a potential buyer is willing to pay combined with what the domain owner will sell for at that specific time. While there are appraisal tools for domains, they can be wildly inaccurate and off by orders of magnitude. There is no Kelley Blue Book for domain names like there is for cars. Even the most experienced domain investors and brokers oftentimes appraise the same domain name far differently based on their interpretation of the word/string of words and how they perceive it possibly being used.
While being very difficult to appraise, premium domains are also perhaps the most scarce and undervalued assets in the world today. Domain names are the base layer, the underlying foundation upon which the entire Internet is built. It is true that there is an unlimited number of domain possibilities mixing different letters, numbers and length. But again, we are talking about premium names that have been registered for many years that dozens if not hundreds of businesses would prefer to have over their current domain.
For example, my first name is Michael and even when I got into this business over a decade ago Michael.com was not available to register (it was registered in 1994). There will only ever be one Michael.com and it just so happens to be in possession of a company called MicroStrategy, the same company that sold Voice.com for $30,000,000 last year. The CEO of MicroStrategy is also named Michael (Saylor) and he was just recently on an episode of DomainSherpa discussing domain valuation. Saylor was reluctant to even sell Voice.com for the $30M because in his words “A great domain name, in the .com English sphere is like having clear ownership forever of one or more city blocks in Manhattan built on granite.”
Why aren’t domains their own asset class already?
Okay so premium domain names are selling for hundreds of thousands of dollars to millions of dollars on a daily basis..they are their own asset class now, right? Not quite. From my perspective, two factors stand out and they are correlated.
1) Education - most business executives today still do not realize how significant of an impact utilizing the exact brand matching .com will make for their business. If your company domain name does not exactly match your company's brand you are fighting an uphill battle by having to spend more on advertising to rank in search engines, leaking traffic and emails to the domain you should be using along with many other problems. Slowly but surely times are changing and we are observing and helping many companies upgrade to that perfect domain. As domain brokers representing some of the top domains in the world it is still a struggle and mind boggling at times to understand why it is so difficult to convince massive companies to acquire the generic domain that matches their brand name.
2) Liquidity - looking at the major asset classes of today (stocks, real estate, precious metals, etc) they all have one thing in common, which is that you know exactly what each asset is worth in $dollar value. While the uniqueness of domains makes it almost impossible to put an exact value on each one, we can see the tide rising and lifting all boats. Resale and auction prices for premium domains are increasing almost daily and we are seeing savvy investors spending more on domains than ever before. Digitalization of the economy has been pushed into overdrive this year and there are a lot of technologies being developed that will continue to help educate the world on the true value of an asset as useful as a premium domain.
We are getting there. There is no doubt in my mind that premium domain names will continue to appreciate until they have carved out enough of a slice of the economic pie that they will be seen as their own asset class. As this happens, there is huge upside for those individuals and companies that have the foresight to acquire these digital assets, and a lot of opportunities left behind for those that don’t.
