Mark Evans

Domain Names Hot Again

There is a fascinating story in today's Wall St. Journal
(subscription required) about how domain names have become a hot
investment opportunity again. This surprised me because I thought the
business had disappeared after the dot-com bubble burst. But the growth
of online advertising such as Google AdSense has re-ignited the market,
including the creation of investment funds looking to buy thousands of domain names. A well-known player is Marc Ostrofsky, president and CEO with Internet REIT, who hit the domain name jackpot in 1999 when he sold business.com for $7.5-million
- four years after buying it for $150,000. Rather than create
businesses using these domain names, many of these investors simply
create a destination page with featuring AdSense. If, for example, you
owned mycarwillnotstart.com (which just happens to be available, by the
way), you might discover ads for car makers, mechanics and tow truck
owners. Since the person visiting this site is likely looking for a
specific product or service, it likely makes sense for more them click
on one (or more) of the ads - thereby generating revenue for the Web
site owner. Susquehanna Financial Group analysts Marianne Wolk and
Roxane Previty told the WSJ this “business” will generate $400 million
to $600 million in ads this year, and could reach $1-billion in 2007.
This growth could mean big sales for domain name sellers such as Tucows.com as investors take another stab domain name mania.