The window of opportunity for making big money selling promising-sounding domain names to dot-coms is closing fast. From the high point last year when Business.com paid an entrepreneur who was holding the name a record $7.5 million for its domain name, the value of sought-after domain names has crashed, along with the fortunes of many once-hot dot-coms.
Hundreds of domain names were languishing last week on auction site eBay, with prices ranging from $25 to $25,000; very few bids were made on any names and none of the bids topped $1,000. This is in sharp contrast to earlier this year when category-encompassing, one-word domain names were selling for as much as $10,000 each.
The growing number of "used" domain names flooding the market from defunct companies has certainly diluted prices. Domain names on the block this month include Furniture.com, Pets.com, Mort-gage.com, Living.com and Garden.com; although negotiations for some of these are ongoing, prices on the secondary market have plunged.
BRAND SUPPORT CRITICAL
"No matter how catchy or simple or all-inclusive their names are, a mere dot-com address is not worth much without brand support," said Scott Kraft, a partner with the marketing consultancy Sterling Group, New York. "People thought they were buying incredibly valuable real estate on the Web with these one-word, generic names, but they forgot about the need to build real brands first."
Mr. Kraft speculates that if Garden.com was worth $2 million to $3 million at the height of excitement about business-to-consumer Web sites last year, it's worth one-tenth of that now. His company's formula: Without advertising or marketing support, a domain name would have to generate four visits for every $1 spent to buy the name to make the deal worthwhile.
A Garden.com spokeswoman said the company expects to sell the domain at auction at some point; Garden.com officials say they have no idea what the name will command.
Inheriting "ill will" from companies with poor customer service would cast a shadow on the buyer's fortunes, as well, and the brand-building efforts made by the previous domain name's owner have little value, Mr. Kraft said.
NO LONGER A SUSTAINABLE BUSINESS
But a few dot-com domain names are still selling in the thousands, said Doug Sherrits, president of Omaha-based DNIH, a domain broker who has sold hundreds of domain names since 1998, including many as high as $20,000. Although sales have dropped off, he said he still expects to sell domain names for more than $1,000 each, but added: "I don't think the whole idea of making money on the dot-com name space is sustainable anymore."
The announcement this month by Internet Corporation for Assigned Names and Numbers (ICANN) of seven new suffixes for Internet addresses is also likely to drive down the value of dot-com addresses, experts say.
"There was a huge scarcity issue around certain category-specific domain names that's going to be eliminated with the arrival of new suffixes, and it will force e-commerce companies to focus more on their business models than on the name of the operation," said Elliot Noss, president-CEO of Toronto-based Tucows, one of 19 members of the consortium that will be offering domain names under the auspices of ICANN. It will be registering the new suffix "info" next year.
Nevertheless, many marketers are launching businesses dealing in the dot-com domain aftermarket, brokering "used" domain names.
DEAD DOT-COM NAMES FOR SALE
VeriSign Inc., parent of leading domain registrar Network Solutions, last month purchased GreatDomains.com, the leading secondary market for domain names. Network Solutions expects to do a brisk business through 2001 buying and selling names from squatters and defunct dot-coms.
This month, Network Solutions launched two humorous 30-second TV spots in its campaign promoting the registration of domain names. (Network Solutions charges $35 for each name registered; competitors including bulkregister.com charge $10 per domain name.) The Martin Agency, Richmond, Va., handles Network Solutions' estimated $5 million account.
"The value of dot-com domain names is still high, and for certain names-short, memorable words associated with categories-there is a premium value," insisted Cheryl Regan, Network Solutions' director of corporate communications.
But the game has changed. Among the five sites with the highest announced price sold by GreatDomains-loans.com, beauty.cc, forsalebyowner.com, drugs.com, cinema.com-four sold before February. Forsalebyowner is back on the market. Drugs.com, bought with fanfare by a venture capital firm for $823,000, exists as a seeming placeholder portal with links to sites covering such topics as beer, bongs and mushrooms.
Advisers to e-commerce companies say that although the fever for spending large sums on new or used dot-com domain names has cooled, there is still plenty of action in registering new domain names.
"Don't lull yourself into thinking the market for buying and selling hot domain names is over-people are registering 30,000 to 35,000 new domain names a day, even without the new extensions from ICANN," said Burkey Belser, president of Washington D.C.-based Green-field/Belser, a brand consultancy. "The dot-com extension will continue to be a premium, first-choice extension and with almost every name you can think of already registered by someone, there's a lot of churn still going on," he said.
Just last month, PresenceWorks, an Alexandria, Va.-based instant messaging business targeting businesses, paid an undisclosed sum "in the thousands" for the domain name InstantWork.com because it described its service so perfectly, said PresenceWorks spokeswoman.
Individuals are also still willing to pay up to $10,000 for three letter dot-com domains, said Mr. Sherrets.
Even though Steve Antisdel, an online furniture retailer, said his first choice might have been Furniture.com, now that the company has gone under and the name is available, he said he's going to stick with Furniturefind.com, which he registered in 1996.
"Furniturefind.com is deeply embedded in all the top search engines and it's working fine for us; having an even more basic name wouldn't change things for us," said Mr. Antisdel.
Copyright November 2000, Crain Communications Inc.