I was speaking about investing in domain names with my wife’s cousin in an attempt to give a very general overview of what I do and the business of domain investing. He is a finance professional, and one of the questions he asked was about the risks associated with domain investing.
I thought it was an interesting topic, so I’ll share and discuss what I think are the greatest risks to investing in domain names, and I welcome you to share your thoughts on these risks and to add other risks that exist that I missed. These risks are in no particular order, and they may pertain more to my business than to yours. Whatever the case is, I welcome your thoughts.
Risks of Domain Investing:
- Legal (Lawsuit and/or UDRP) – Anyone can sue anyone else for anything. Someone could file a lawsuit against my company for owning a domain name they think they have the right to own. Similarly, someone could also file a UDRP. Defending these actions can be costly and can prevent my company from selling a domain name.
- Google – As we’ve seen in the last year, Google algorithm changes can impact the value (or even the perceived value) of exact match domain names. Additionally, Google can lower pay per click revenue, harming the domain investment ecosystem.
- New gTLDs – As a .com domain investor, there is the possibility that gTLD domain names are going to harm the value of my holdings. As unlikely as it may be, none of us can predict what the future holds. ccTLDs are very popular abroad, and it’s not out of the realm of possibility that gTLD domain names hurt the value of .com domain names.
- Theft – With digital assets, guarding against theft can be a challenge. There are people far smarter than me who are looking for ways to exploit vulnerabilities at registrars and email providers, and one mistake on my part or the part of a domain registrar can lead to domain name theft. Although it is possible to get a domain name returned, it can take time and money.
- Technology / Internet Changes – In the future, something might replace domain names, or perhaps there won’t be TLDs at all. Additionally, voice recognition tools or apps may supercede the need for domain names. Advances in search engine technology or other browser developments may reduce or eliminate the need for domain names.