One of the more niche fields to invest in is domain names. They are akin to the digital real estate of the internet. Popular domain names such as “YouTube.com” or “Wikipedia.org” mark and define a website.Today, many are turning to invest in domains that will likely become more and more valuable. As a result, profits of hundreds to even millions of dollars can be earned simply by selling valuable domain names.Though investing in domains can be very profitable, most investors are either unaware of the benefits or lack sufficient knowledge of how to enter into the field. So, it is best to first start from the beginning and explore what a domain name even is.
Table of Contents
What Is a Domain Name?
Just like how physical real estate has an address, so does digital real estate—i.e., websites. The domain name typically consists of the name of the website and ends with “.com, .net, .gov, etc.”The domain name is arguably one of the most important assets to your digital presence. It not only brands your website but can also inform users of what your brand is and what it has to offer.For example, the domain name, “carinsurance.com” sold for around $49 million. There are many reasons why it sold for so much such as:
- It’s simple and self-descriptive
- It will draw in organic visitors searching for car insurance
- Car insurance is a large and competitive industry
In short, a domain name is the gateway to your online brand. A bad domain is like a restaurant that calls itself “Paper Inc.”—it will draw in the wrong target audience and the ideal target audience will simply pass it by.
How Does Domain Name Investing Work?
On that note, how does domain name investing work? Businesses typically invest in a good domain name to increase their digital presence and grow their brand. A thriving digital presence equals an in-demand and valuable domain name that can later be sold for a hefty profit.There are also those who simply invest in multiple domain names for the sake of selling it later on for a profit. Investors will conduct thorough research on the domain name and look at future trends that may affect the domain’s value.Once the perfect “candidate” or domain name is found, the investor will hold onto it until it is valuable enough to sell for more than they paid for it.
8 Reasons to Invest in Domains
There are many reasons to invest in domains especially considering that the internet and its digital real estate are only growing and becoming more and more competitive.
1. No Taxes
Unlike physical real estate, digital real estate in the form of domain names is not subject to property taxes. In other words, you can hold or own a domain name without having to pay quarterly or yearly taxes on it.
2. High ROI
Domain names have a high ROI (return on investment). For one, they don’t have much overhead as they do not need to be insured and are not subject to property taxes.
Oftentimes, a domain can cost as little as $10 to $50 a year to hold on to and can be sold for a lot more. On top of that, demand is only growing as more businesses come “online” and the supply of unique and relevant domain names continues to dwindle.
Even more, domain names often appreciate in value over time which makes them great investments.
Lastly, domains can also be leased out just like how a landlord can rent or lease out housing.
3. Capital Appreciation
As previously mentioned, domain names often appreciate in value. Since they require little upfront investment, they are one of the safer investments you can make.
Because demand is always rising and the supply is always decreasing, given some time, most recognizable domain names only grow in value—often by large margins.
4. Brand Reputation and Awareness
A good brand is recognizable, memorable, and relevant, and the same goes for domains. Since domain names are often the “face” of the website, they are a key part of a website’s branding.
But, they are much more than just a “face.” Domain names are also the gatekeepers to your website and can draw in many organic viewers/customers—provided that the name is relevant to what the viewer is looking for.
That is why domain names such as “insurance.com” or “carinsurance.com” are so valuable—they can draw any internet user in who is searching for insurance.
For example, an insurance company with a more unclear domain name like, “API.com” will likely be overshadowed by a competitor with the domain name: “insurance.com.”
5. Domains Are Less Risky than Physical Assets
Considering that domain names often appreciate over time and they have low upfront costs and little to no overhead, they are a less risky investment when compared to physical assets.
On top of that, there is less need for spending a lot of time learning about a certain industry before investing in domains. This is because you can simply invest in an industry that you already know a lot about.
For example, if you are in the real estate industry, then you already have background knowledge of where the industry is headed and what buyers are looking for and, in consequence, how real estate businesses are marketing their products.
As a result, you can more quickly find and invest in domains that has significant potential in the future of the real estate industry.
While the world is in an economic recession, the world of domain names seems to be going in the opposite direction. It turns out that even in a recession, the internet and its websites continue to grow.
As a result, demand for domain names continues to grow which makes it a “recession-proof” investment.
7. Limited Supply and Growing Demand
As more and more businesses and individuals see the value of digital real estate and the once “internetless” populations across the world gain access to the world-wide-web, the demand for domain names will continue to grow and the supply will continue to shrink.
As any good investor knows, a limited supply plus high demand equals the perfect investment. While investing in domains is already profitable, the profits to be gained are increasing over time.
In other words, an investment today vs an investment down the road will likely result in greater profits.
8. Good for SEO Exact Match Domain (EMD)
SEO is huge in the online marketing world. Good SEO can result in higher rankings in the search results and lead to an influx of organic visitors. Domain names can contribute to a website’s SEO in many different ways.
One of the more popular methods is by utilizing EMDs. EMDs are domain names that utilize the main target SEO keywords of your site.
For example, a pizza business based in Greenville SC may utilize an EMD such as “GreenvilePizza.com” if the business wants to target the keywords “Greenville” and “Pizza.”
Because of its SEO potential, exact match domains can be a great investment and are often in short supply.
Investing in Digital Real Estate Now
All in all, domain names are the digital real estate of the internet. Investing in domains is just investing in digital real estate.They are often low-cost investments that appreciate over time and can bring in profits ranging from hundreds to even millions of dollars.
There are many benefits to investing in domains, from better branding to more site traffic. When it comes down to it, domain names are one of the safer investments that can be made while still resulting in a high ROI.