The Domain Name Game - Expired domains
A few days ago I mentioned what looks like a good way to make lots of money by buying expired domains. Some of them may come with a bit of traffic, a few may even have a good Google PR.
After watching the undergoing auctions at a popular expired domain broker, I can tell you people are jumping on them like crazy. And some are paying top money for good web real estate.
Deciding to get my feet wet on the expired domain auctioning, I placed two bids of $60 each - the minimum bid one should place to be eligible to move on to phase 2 - on two domains that were just about to be deleted in a few days.
A day later I received an email letting me know both were successfully acquired by the expired domain broker. Both had at least 20 people interested in purchasing them, so we moved into phase 2. The auction.
Any hope I had of landing on any one of these two domains was shortly dismissed. It was quite exciting to see the auction unfold from the initial bid of $60 to reach hundreds within hours. But at the same time it was soon more than I was willing to pay for any of them.
Three days later, when both auctions ended, first domain was sold for $1,000. And the second one for $10,001. Yep, that's right, ten thousand and one US dollars for a single expired domain!
Well, so far we've all heard rumors about domains being auctioned and sold at fabulous prices, but now I witnessed it first hand. If this domain will be sold back for a million in a few years, I could tell my children I had the opportunity to become a millionaire but decided to pass.
In case you're curious, the $1,000 domain was adn.net. The $10,000 domain was vpn.net. Agreed, both are short, nice, catchy. And I wouldn't have minded paying 6 times the price of a new domain name to get any of these. But $10,000? No sir, thank you.
And I wonder… besides the "readability" of a short domain like these two when - and if - they're spelled out, is there really another benefit that is so big and that may be worth paying a premium just to grab one of these?
If you think about it, the amount of work one should put into creating and promoting any website, be it on a premium domain like vpn.net or on the much longer how-to-create-the-best-vpn.net, is roughly the same. One still has to write (or buy) good and attractive content. One still has to submit the website to directories. Even the link exchange process is the same, no matter how many characters are there in the domain name. So unless you plan to read it loud quite often or can afford to pay a premium just for the privilege of having an email address that looks like coolguy@vpn.net, your 3 letter domain looks as good as any other more affordable 10+ letter domain.
I mean, it's not even a very popular brand that you're buying now and hope to sell it to the brand owner for an even bigger price next month. It's just a sleek looking domain.
If you come and think about it, for the very same $10,001 one paid for the privilege of owning vpn.net you could easily get 1,020 other new domain names of your choice each priced at $9.8. If you're really cheap and go for the lowest possible price, you can get even more. Think about how many keywords you can target with 1,000 websites, each on it's own domain. Even you were to invest only $1,000 in domain names - and that's over 100 brand new you would get - you could use the remaining $9,000 to buy good content, to manage and to promote all 100 websites. In a few weeks you could end up with 100 money making websites, versus just one.
Heck, just stop and think for a second. Owning over a thousand websites or a single one, for the exact same cost. What would you choose? Even if each one would be making just $1 per day, that's $30,000 per month! You would get your initial investment back in just 10 days!
And what do you think is more easily reachable: one website making you $1000 per day, or 1000 each making you $1?
So, what's the gain? Just the prestige of writing a short email address on your business card?
It may be just me being blindsided, but I fail to see the whole point of this. Agreed, it can be looked at as an investment, and domains such as this are almost as good as real estate property. They can be sold in the years to come, and for even bigger prices, but to whom? If you place yourself in the position of someone looking to buy a new domain, would you be willing to pay $100,000 for a domain like vpn.net?
If your answer was a yes, I'd like to know why. If your answer was a no, I'd like to know why. 
What's your take on it?
May 12th, 2006 at 1:03 am
FYI, 2-3 character domain names (like the ones you mentioned) are mostly registered but will never be allowed to be re-registered if ever any of them aren’t renewed on time. It’s the scarcity thing that’s made them command high dollar figures.
I don’t know what adn could be “known” for, but vpn is a known acronym in the technical world (i.e. Virtual Private Network).
May 14th, 2006 at 6:38 pm
Dave, completely agree with you here. Yet, my main point was a domain is just that, a domain.
One’s online success doesn’t measure by the domain name length. And that’s my main point.
Rather than spending 1000’s on a very short domain name, or what I like to call vanity domains, one could easily spend $9 on a 10 character domain name and use the remaining money to build and promote his business.
Regarding ADN, you may be more familiar with the english acronym DNA (http://en.wikipedia.org/wiki/DNA). Well, ADN is the same but in other languages
May 20th, 2006 at 7:59 am
3 letters of anything on the internet can go for really high prices. A friend of mine sold an AOL Instant messenger screename for a couple hundred bucks, all because it only had 3 letters.
Another thing I was thinking, is that it could be possible to exploit bidders. I have not put any research into this, so I am working off of theory, feel free to correct me if I am wrong. Say that a domain registered with godaddy.com is about to expire and a certain company wants this domain name. Godaddy realizing that this company will get it, puts in a fake bid, causing the company to bid higher, meaning Godaddy gets even more money, because the company is forced to bid higher. Would this work, or am I missing something?
May 23rd, 2006 at 9:28 am
Tom,
Thanks for dropping by again
Yes, that’s why I call them vanity domains. They don’t add any benefit to the buyer, or I fail to see it, except for his “vanity” to have a shorter URL and email address
As to exploit the bidders by making artificial bids, many are already doing this. And that shouldn’t come as a surprise. If there’s lots of money to be made somewhere, someone’s probably already doing it, legal or not.
I don’t think GoDaddy does it, but I know of at least of a not so reputable service who may do it. I will not name names however until I’m 100% certain of their practices.
And if I’m not mistaken, those who do may actually be breaking the law by placing fake bids for the sole purpose of artificially inflating the product costs. IF and WHEN they’re caught they will be out of the business in the blink of an eye.