Stock vs. Domain Names

Posted by freezy | Posted in | Posted on 5:00 AM

... There are a number of parallels that can be drawn between investing in domain names and investing in the stock market. You can make money from stocks by buying low and selling high and by pocketing the dividend, if any, paid out on the stock during the time you own it.

Similarly, the primary profit in most domain name investments will be unlocked at the time the domain is sold or leased. Even a relatively minor transaction can yield a several thousand percent profit. After all, at $10 a registration, in the case of a new domain, it doesn’t take much to make a profit. At the same time, if the domain name is receiving even a modest stream of targeted traffic, this can be harnessed and turned into an ongoing revenue stream while you wait to complete a transaction for the domain (essentially, this is the “domain dividend” of owning that domain.)

There are also a number of significant differences between stocks and domain names. For instance, there is a well-established market for stocks with firm prices agreed upon by a large number of players – a liquid market in which stocks can generally be bought and sold at any time. The domain name market is far more nebulous, with many players and few rules. It is a highly illiquid market with no guarantees that a particular domain name can sell in any given time frame, or indeed, at all.

The following table compares and contrasts the major features of the stock and domain markets :

Stocks

Domains

You can make money from stocks by buying low and selling high

You can make money from domains by buying low and selling high

You can make money by receiving dividends (if any) on the stocks you own during the time you own them

You can make money from the traffic (if any) arriving at that domain during the time that you own it

A single share of stock is generally affordable (though some stocks can cost thousands of dollars)

A single domain is generally affordable (though some domains can cost millions of dollars on the secondary market)

All stocks of a given company of a particular class are identical and treated the same by the market

All domain names are UNIQUE

There are generally costs associated with the buying and selling of stock

There are generally costs associated with the buying or selling of domains

There is generally no cost associated with the ongoing ownership of a particular stock

There is an annual maintenance fee payable on each domain name

There is generally a highly liquid secondary market in any given stock (at any time, most stocks can be bought or sold within minutes if the market is open)

The domain name market is highly illiquid - it may take months or years to sell or lease a particular domain… and that’s if it sells at all!

Except in the rare case of a company going bankrupt, stock in a particular company always retains some value

Unless a domain can be sold or is producing traffic that can be monetized, it has zero value

There is a very well established market for trading stock, with defined players and clear procedures

There is a very chaotic market for domain names, with many players each with conflicting systems and procedures

You know the exact value of your stock portfolio at any one time

You have no idea of the value of your domain name portfolio at any one time

There is a vast pool of historical data available on transactions in any particular stock

There is no historic data available on transactions for 99.99% of domains (since they have never been resold) and there is very patchy data on any domain name sales

All players in the stock market (buyers and sellers active at any particular moment in time) agree very closely on the value of a particular stock

There is no definite value to any domain name - its value is whatever price can be established between buyer and seller at the time of a transaction

By diversifying, it’s relatively hard to lose all your money in the stock market if you’re purchasing ordinary stock

Even if you diversify, it’s relatively easy to lose all your money on domain name investments if you purchase the wrong domains

It’s very rare to be able to pick stocks that will bring a twenty-fold+ return on investment in a reasonably short time frame

If a domain name sells at all, it is quite common to be able to make back 20-times+ the initial registration cost of that domain

You can easily cash out of the stock market at any time (though you may of course have to suffer losses in doing so)

It is very, very difficult to liquidate a large domain portfolio in a hurry - most domains will simply fail to find buyers at any price.

By now, you should have noticed a pattern emerging. Stocks, while by no means a safe investment, are very low risk when compared to domain name investments.

Domain name investments are ultra-high risk,. They have the potential of a very high return on investment for the right domains, if a buyer can be found, and the prospect of losing the entire value of the investment if one can not. The latter scenario is by far the more common one as most people buying domain names to resell end up losing much or all of the money they invested.

The next section will provide you with some pointers that will help you stay cash-positive, even as you build up your investment in domain names. But before going into that, take a careful look at some rules for choosing the best domain names for investment.

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