Domain names offer a unique investment opportunity with high returns
Domains are a type of assets that can either appreciate or depreciate in market value like stocks and real estate. Many view domain names as "virtual real estate." Each domain name is unique. Once a domain name is registered, no one else can register that same domain name. Domains are a pathway and an endpoint, meaning they navigate traffic to the website and are the destination.
Registering a domain name is inexpensive, with average registration fees being around $10 annually for .COM type domains. The .COM extension is the most popular and valuable Top Level Domain (TLD) in today's market. The dominance of the .COM TLD today is clearly evident, both in terms of market share and market value.
The .COM TLD represents 73.8% of the total number of general TLDs registered in the world. According to DNJournal.com, a significant amount of the top 20 all-time domain sales were .COM domains. What that said, online businesses are still often referred to as "dotcom" businesses.
|The 20 biggest cash domain sales ever reported by DNJournal.com|
What is the utility of a domain name?
The original intent for use of a domain name is to make it easier for people to use the Internet. The Internet is a global network of computers communicating via TCP/IP protocol. This protocol uses a numbering system of 32 bits to identify each computing device connected to the Internet. Each domain name is associated with an IP address. This allows users to navigate the Internet using easily identified names rather than a unique string of numbers. Think about it this way – if you wanted to visit IBM's website, would you rather remember IBM.COM or 188.8.131.52?
The utility of a domain name evolved beyond the phone book address format to provide value in many ways. They include improving search engine ranking, creating strong branding, and domain monetization.
Improve Search Engine Ranking
Search engines seek to improve the relevance of search results by using aspects of the domain name of a website in their search algorithm. Domains with keywords matching the search query are given a boost in relevancy points, improving the website's positioning in the search results. The goal of most online businesses is to get as much traffic to their website as possible, therefore, the choice of a company's primary business domain name can have a significant impact on the search engine traffic that website gets.
Another way to boost traffic to your website is to have many backlinks pointed to your website. Backlinks is defined as links from one website to another website. The number of backlinks is one indication of the popularity or importance of that website or page. Google uses this method to determine a webpage's PageRank. Domain names with a high PageRank and/or backlinks are coveted by webmasters, who either capitalized upon the domains search engine strength by using the domain to host a website, or to redirect the traffic to another website.
Creating a Strong Brand
There are two main uses of domain name with brands. The first is a traditional brand name domain. This is when companies use their brand name as the domain name. This practice is widely used by many companies such as Google, Yahoo, eBay, and Twitter.
The other type of brand name attributed to domain names is the "generic brand" domain. These types of domains have inherent advantages over the traditional brand type domain as they use generic keywords, which are usually followed by a .COM. Generally, this causes higher search engine traffic in addition to direct navigation traffic.
Often, companies with established brands use generic domains to attract traffic. Some high profile examples are:
Barnes and Noble – Book.com, Books.com
Campbell Soup Company – Soups.com
CNN/Time Inc. – Money.com, Mutual-Funds.com
Disney – Family.com, Kid.com
G&J Holdings – Candy.com
General Electric – AutoLeasing.com, CarLeasing.com
Honda – Motorcycles.com
Johnson and Johnson – Baby.com, Cancer.com, ThePill.com
Office Depot – OfficeSupplies.com, School.com
Procter and Gamble – DentalCare.com, Nails.com, ShowerGel.com, Tissue.com, Toothpaste.com
Zappos – Clothes.com
The primary motivation behind investing in domains is they can be easily monetized. Domains that have any direct navigation traffic are often placed on advertisement networks commonly called pay per click (PPC) networks.
Many consider direct navigation traffic to be the purest form of traffic. It denotes the act of entering the name of a specific product or service in the web address field rather than searching for it through a search engine. Examples are "weather.com" for weather news and "jewelers.com" for jewelry shopping.
PPC networks provide a service that matches advertisers to direct navigation traffic. When a user types in the name of a domain on a PPC network, the results would be a web page that includes advertiser links. If correctly done, these advertiser links are related to the domain name's keyword, which would result in a higher likelihood that the user would click on one of the advertiser links. Whenever a link is clicked on, the advertiser pays a fee to their advertisement media partner, which is usually Google. Google then pays the PPC company for the traffic that the advertiser received, and in turn, the PPC company shares the revenue with the domain owner. In the domain industry, the domain owner is commonly referred to as the "publisher."
Many domains on a PPC network will earn enough revenue to cover their annual domain registration fee, and some domains will earn significant revenue due to the high volume of direct navigation traffic. Domains with PPC earnings quickly trade on the domain aftermarket. The pricing of these types of domains is based off its monthly PPC earnings. However, it can be any number that a buyer and seller would agree to pay. The Marketplace in Above.com is a good place for discovering domains for sale, which have monthly traffic and revenue.
Other forms of domain monetization include using domains in affiliate networks and for lead generation sites. Affiliate networks use links from your domain's website, and traffic is directed to one or more affiliated sites using a special link (URL) that includes an affiliate identifier. Compensation occurs when either the traffic from your website is directed to the affiliate network, or when the referral purchases an item or performs some function stipulated in your affiliate agreement.
A lead generation site is a website that qualifies a user's intent, and only forwards a qualified lead to whomever is paying for the lead. This is a common application in the legal and insurance industry.
Whether you are acquiring a domain for building a strong brand, want to improve your search engine positioning, or to generate a monthly income, domain names offer a unique investment opportunity with high returns. You can start registering domains by creating an Above.com Registrar Account.