Choice domain names pitched as investments

Forget real estate, the stock market or Internet startups, the new way to make fast money is to invest in domain names, argues a domain name brokerage that will auction off a passel of domain names on Wednesday in New York.

Stocks.com, Rate.com, Quotes.com, Reggae.com, Cable.com, Artist.com, Alcohol.com and voters.com are among the 934 names up on the block at this auction. Oversee.net, through its SnapNames service, will oversee the auction, which it expects to bring in millions of dollars.

While registrars such as GoDaddy and Network Solutions offer the ability for anyone to own an previously unclaimed Internet domain name, usually for less than US$20, a secondary market of already claimed but seemingly valuable domain names has long existed. And now the brokers in the field are pitching these domain names as an investment opportunity.

For companies that wish to increase their online presence, the appeal of buying a premium domain name is to "own the category" that the business is in, said Jeff Kupietzky, the CEO of Oversee.net. He referred to how Barnes & Noble owns books.com and Johnson & Johnson owns baby.com. Such names can generate immense traffic just by the virtue of being a commonly used word with an attached .com that curious people will type into browsers.

In addition to targeting companies slow to realize the value in a choice Web address, Oversee.net is also hoping to attract buyers who may not even have business interest in a particular domain name itself. Just buying a domain name, Kupietzky noted, can be a good investment opportunity.

"Domains, really, are almost like commercial real estate. They're investments on their own," Kupietzky said. He called them "Internet real-estate." Purchasers can buy a name with no intent on attaching it to some enterprise, but rather hold on to it, or perhaps run some ads on the site, and then resell it a few years later, hopefully at a profit.

"People could be buying, either for the sake of development, or because they expect to sell the name to somebody else," Kupietzky said. Verisign estimated that there are about 193 million top-level domain names registered across the Internet.

The domain name aftermarket seems to be a growing one. Another domain name broker, Sedo, has estimated that domain name resales generate about $500 million a year, and that the market grew in the second quarter of this year by 38 percent. At least one investment fund has been started ostensibly devoted only to investing in domain names.

Founded in 2000, Oversee.Net now owns over a million domain names itself. The company developed computerized algorithms to determine which as-of-yet unsold domain names have potential value, by scouring the Web for frequently used words and search terms. "It's much more art than science for evaluating the domain name for the purpose of reselling," Kupietzky said.

In May, the company sold Slots.com for $5.5 million, and dating.com for $1.75 million, both on the same day. On Tuesday, the company sold a set of t-shirt related domain names (Tshirt.com, T-shirt.com, T-shirts.com, Tee-shirts.com) for $1.265 million.

The company also offers a set of management services for other domain name brokers, including appraisals and escrow services.

Thus far, the company has held about 10 auctions over the past four years. This week's auction will be held at the Grand Hyatt Hotel in New York from 4 p.m. to 7 p.m. eastern time. Bids can also be submitted online, via a simulcast. A live caller, who has auctioned homes, cattle and all manner of other physical assets, will oversee the proceedings.

"The benefit of the live action is to allow everyone in the room, and on the Internet, to immediately know the value of a domain name through the auction process," Kupietzky said. The reserve, or the minimum bidding price, for the highest profile names, such as stocks.com, will likely start at $1 million or more.

Bidders are required to preregister, so Oversee.net can check to see if they have the financial wherewithal to purchase a name. Through a partner, Oversee.net can offer financing for up to 80 percent of the cost of the name, using the name as collateral.

Some of the domain names will also come with complete businesses as well. "We're seeing a model where the domain name has all the value and [the business] just comes with it," said Kupietzky.

"Think of it like commercial real estate. If I sold you a property on Columbus Circle in New York, there may be an old apartment building on it. While you know the apartment building brings in some rent, the real value is the location. Ultimately, you will tear that down and build a much more expensive property," he said.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is Joab_Jackson@idg.com