Domains are a truly remarkable commodity. They are all issued in the limited edition of 1:1 by design. So much for "stocking up on bestsellers". As a consequence, domain investors must rely on their ability to build theories about the nature of demand, and to uncover evidence that supports them. How? Even though no domains are identical, the unique "physical form" of one domain (a sequence of characters) can in turn be host to a plethora of traits based on aesthetics and meaning. These traits give rise to interpretations and use cases. This means that some domains are inherently more versatile, evocative, descriptive, salient, beautiful, applicable, or useful than others. Something that enables the possibility of ranking one domain above another in terms of their likelihood to find demand. In essence; domain investing. As a kindergarten example. You have a business idea in the field of data analysis and you need an identity and a domain name. Would you go with Mango․com, DataAnalysis․com or Pioughd.com? The advantages of one choice above the other, and the explanations for them, is the subject matter expertise of the domain investor. In this regard, domain investing diverges from the business plan of a registrar for instance. A registrar cares less about what domains are registered. For them all domains are created equal. Why should they care? A registrar does not primarily sell individual domains, but the opportunity to register and manage all domains irrespective of their individual traits. (As a side note, new domain extension registries have tried to incorporate domainer ideals. The result is what they call "registry premium" - domains that before they are even registered are priced way above standard registration and renewal fees.) But a domain investor always needs to go one step further and push the envelope. What domains are registered and why is the critical question. Without an answer to that question, domain investing can not subsist, or even exist. And as it turns out, that question can be answered in different ways. Zooming out and speaking generally, the microcosm of domain investing can be said to be colonized by two main camps: The dominant legacy camp holds the descriptive, generic and the literal to be superior ideals when naming a business. Think ”NFTMarketplace.com” and not ”OpenSea.com” or ”SportsShoes.com” instead of ”Nike”. The less distinctive a domain name is – the better. This traditional way to define value in domains likely stems from the early days of the internet, since before brands barely existed online, the internet displayed a kind of phone book directory logic. The requisite to be found at all was based on using such a ”powerful” keyword for your domain that users found you by virtue of your domain alone. Early search engines also granted a ranking boost to domains that contained or matched the search term, and a phenomenon known as ”type-in traffic” where consumers opted to bypass the search engine and instead type the keyword directly into the URL address bar, further cemented the value of replacing the brand type name with a search friendly generic term. In short, it was taken for granted that the best search result for a consumer of ”Movies” would be ”Movies.com”. "Netflix.com"? Yeah right! These ideas of domain value have pretty much ruled supreme. The idea that it is a business advantage to ”name” your business the exact match of the most generic and established terms for the product or service you sell is the golden rule in domain investing. The topmost generic terms have earned mythical renown and are called ”category killers” and their slightly less omnipotent siblings are known as ”EMD’s” (Exact Match Domains). Metrics that are based on this definition of value guide the majority of domain investors. Here are some of them: 1. Search engine keyword data. The idea is that the most searched for terms are also the most valuable domains. Search is seen as a blueprint for domain demand in general. The more search – the more value. 2. Cost Per Click. The different search terms have different value not only in terms of search volume, but also in terms of the value of converting a lead into a sale. This is measured in ad-spend metrics such as ”Cost Per Click”, CPC. 3. Registered extensions. There are nearly 1&nbsp;600 domain name extensions; that is the letters that follow the dot in the domain name, also known as the TLD or Top Level Domain. The simple idea is that the more extensions that have a certain string registered, the stronger the indication that the registered domain is valuable. 4. Traffic. Some domains have been used and therefore sport backlinks that still drive traffic. Other factors are the extent to which so called ”type-in traffic” still exists for it, as well as the effects of the domain in search engine context, where it is sometimes argued that more descriptive domains exhibit a higher click-through rate; that is that they are more likely to make a consumer ”click through”. 5. Incorporations. There are databases that monitor all existing incorporations in the world. A simple search will produce an easily surveyed result with the number of active companies using a certain string as their business identity. 6. Trademarks. The number of trademarks can also provide an indication as to whether the domain in question is likely to garner demand. Subject to priority in the form of registration date of course. 7. Comparable sales. There are databases of historical domain name sales. The idea is that previous sales and prices will sufficiently indicate future sales and prices for "similar" domains. (For a crash course on one fundamental problem with this idea, get acquainted with <a href="https://en.wikipedia.org/wiki/Problem_of_induction#:~:text=First%20formulated%20by%20David%20Hume,things%20based%20on%20previous%20observations." rel="noopener noreferrer" target="_blank">the problem of induction</a>.) Metrics like these provide a basis for popular automated evaluation tools of the day such as the Godaddy appraisal tool that purport to account for the variables that go into a functional domain evaluation of any domain name. But it is sometimes overlooked that the legacy explanation is limited to a certain kind of value; that of the legacy idea, which only revolves around the generic and the literal. Another set of ideas can however also be successfully applied to domain name value, through an alternate approach to domain investing that takes aspects into account that are disregarded by the legacy idea. More on that in our next article. -Sten Lillieström- Next Venture <a href="https://www.nextventure.com/buy" rel="noopener noreferrer" target="_blank">acquires</a> taken domains, or helps you <a href="https://www.nextventure.com/find" rel="noopener noreferrer" target="_blank">find</a> a new name identity with the domain available for immediate purchase.

The legacy idea

Tags