Buying up domain names in order to turn a profit

Oct.October 31, 2011 10:16 AM


In the late 1990s and early 2000s, the Internet was like an up-and-coming neighborhood — early investors who recognized its potential snapped up property at bargain prices. Now, the value of their investments has increased exponentially.

Donna Olshan, president of Olshan Realty in Manhattan, was one of these investors. After reading “Being Digital” by Nicholas Negroponte in 1995, she began to realize the potential of the World Wide Web and started buying unused domain names, or, as she calls it, “Internet real estate.”

“I became convinced that the Internet was going to change the way people bought and sold real estate,” Olshan said. She bought gems like Townhouse.com, NY RealEstate.com, Coops.com and many others, for $75 each.

Olshan’s instincts proved prescient — to say the least. Currently, those domains redirect to Olshan Realty, driving traffic for her business, and she now regularly fields offers from domain investors and industry professionals eager to buy the domain names she owns. But she’s not selling — yet.

“When I buy art I hang on to it; when I buy stocks, I’m in it for the long haul,” Olshan explained. No offer has yet matched the value she believes she holds. When asked how much she’s been offered, she laughed and said, “Not enough.”

Olshan is one of a number of New York City real estate professionals who apply their investing know-how not just to brick-and-mortar buildings, but to online property. It’s often a natural fit, since the concept — and process — of buying and selling online real estate can be similar to investing in physical real estate, though the scale and price are generally much smaller.

The buyers and sellers of domain names — known as “domainers”– often employ brokers to negotiate deals, and use contracts that are only a slightly altered version of standard real estate brokerage agreements, said Dave Parkinson, an Internet marketer and founder of Utah Domain Holdings, based in Lehi, Utah. The company owns roughly 250 domain names purchased for prices ranging from $7 to $450,000 — the latter for boardgames.com.

“This is the real estate investing world of the 21st century,” Parkinson said.

Parkinson is currently marketing the domain NewYorkApartments.com, which he purchased in a private sale two years ago. While he declined to disclose his purchase price, he said he’s hoping to sell the domain for $150,000 to $200,000.

So, how did he arrive at that number? According to Parkinson, there are two main criteria to look at when valuing a domain: First, there’s the search-engine volume of the component terms. According to Google’s advertising arm, an average of 18,000 people type the exact phrase “New York Apartments” into Google Search each month; about 1 million type some variation of that phrase.

Second, the comparable sales of similar domains are helpful pricing tools — just as with physical real estate. As possible comps for this sale, Parkinson points to sales of BoiseRealEstate.com for $50,000 in 2004, and ParkCityRealEstate.com for $60,000 earlier this year. His domain is more valuable, he said, because the search volume is higher, as are New York’s population and real estate values.

That’s why Eric Gordon, owner of Manhattan-based real estate technology company Real Plus, recently jumped at the chance to buy NewYorkApartments.co when the new .co domain extension became available a year ago. He also nabbed FindNew YorkApartments.co, NYCoops.co and many other New York- or real estate-related domains.

“If the .co extension becomes popular and common, then I could see some of these being worth a significant amount of money,” he said. “A thousand dollars? Half a million? Then again, maybe nothing.”

And at $9.95 a year for each domain, Gordon can afford to speculate, saying, “Some people who have a million dollars can invest in an apartment, and those with ten dollars can invest in a domain name.”

But there are, of course, significant differences between online and offline property investments, said Shaun Osher, CEO of the Manhattan brokerage Core.

“An apartment can be bought, sold and lived in by many families,” Osher wrote via e-mail. “An Internet domain name is only valuable to the person or business the address specifically relates to.”

Osher’s strategy is to buy domains that relate to his specific business or goals, rather than to purchase broad key-word phrases, like Gordon and Olshan have done. One such site is CoreTalks.com, on which he currently hosts his blog. He said he’s not even concerned that someone else currently owns Shaunosher.com. In fact, he turned down a recent offer to buy it because the price was too high.

Parkinson, though, has a slightly different take. He looks for domains with a geographic and an industry focus, from NewYorkApartments.com to UtahMortgages
.com. Then it’s just a matter of finding a buyer for whom a domain will have value.

“Just like real estate, it’s about finding the right buyer,” he said.


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