Domain Name Sales Boom During Real Estate Bust - InformationWeek

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4/18/2008
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Domain Name Sales Boom During Real Estate Bust

The $10 million sale of Fund.com during the first quarter of the year helped spark $38,029,543 in domain sales ... and high interest in generic domain names.

The real estate market may be languishing, but Web properties -- domain names -- are booming.

In the first quarter of 2008, $38,029,543 in domain sales were reported, a 78% increase over the $21,253,105 in domain sales reported for the first quarter of 2007, said Ron Jackson, editor and publisher of DN Journal, in an e-mail.

"In the first quarter of 2008, 3,764 sales were reported to DN Journal, making the average sale reported $10,103," said Jackson. "In the first quarter of 2007, 3,086 sales were reported to us, but the average price was only $6,886. For all of 2007, 13,888 sales were reported to us, and the average sale for the year was $8,698. So 1Q-2008 showed a significant rise in both average sales price and total dollar volume reported."

This isn't just a reflection of the $10 million sale of Fund.com during the first quarter of the year, said Jackson. "Even if you pretended the Fund.com sale did not happen and just threw it out of the data, total sales in 1Q-2008 would still have been 32% higher than the same quarter a year ago when the general economy was in much better shape than it is now," he said.

Andrew Miller, president and co-founder of Internet Real Estate Group, attributes the strength of the market to the realization that generic domain names are incredible brand assets and Web addresses.

The Internet Real Estate Group has an interest in seeing the value of generic domains increase: It owns domains like chocolate.com, phone.com, and software.com.

Mike "Zappy" Zapolin, CEO and co-founder of the Internet Real Estate Group, observed that generic domains are proving to be particularly valuable because Google tends to rank generic domains high on search results pages when the domain is the search keyword. "From a search engine perspective, in 2008, Google and every other search engine is smart enough to recognize that if someone owns the category name, they're probably highly relevant," he said.

Google didn't immediately respond to a request for comment about how it ranks generic domain names. Typically, it does not discuss the details behind site ranking. But Zapolin's view appears to be supported by the high rankings of his company's sites.

Chocolate.com currently appears as the fourth Google search result for the keyword "chocolate," after the Wikipedia entry on chocolate, godiva.com, and hersheys.com. Phone.com appears as the fifth Google search result for the keyword "phone," after switchboard.com, Apple's iPhone Web page, anywho.com, and usa.gov. Software.com appears as the second Google search result for the keyword "software," after download.com.

Miller said that 21% of media consumed today is on the Internet, while only 7% of advertising dollars are online. He expects that generic domains will only become more valuable as ad dollars move online to keep pace with Internet-driven content consumption.

Zapolin pointed out that generic domain names have an inherent trust advantage over less-familiar domain names. Indeed, what he calls "insta-credibility" appears to be in short supply online, as scams proliferate. A certain legitimacy can be assumed at a generic domain likely to have cost hundreds of thousands or millions of dollars.

"You'll see more and more information come out about how important these are," predicted Miller.

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