I read an interesting blog post written by Tim Berry on Entrepreneur Blog Network. Tim discusses a brief email conversation he had with the owner of SWOT.com who had cold-called him regarding the sale of the domain name. It’s interesting to see Tim’s (and his reader’s) perspectives of domain values vs. my own perspectives.   I was going to comment in his post, but it was fairly long and I decided to respond below.
Just wanted to clear up a couple of misconceptions about domain names.   Just because there isn’t a website, doesn’t mean there isn’t traffic as your reply to the domain owner would indicate – “However, you have no traffic. [Ed. note: He doesn’t. The domain is owned, but there’s no site.]” Direct navigation traffic, where people type their keyword and .com, is one of the most powerful forms of traffic.   Before CNN paid $750,000 (yes, $750,000!) for iReport.com, there was no website, but some people probably typed-in the domain name.   The name sold for such a high amount because CNN needed it and the previous owner didn’t need the money enough to sell it for less.
Domain names are virtual real estate.   I live in Manhattan, and behind my old building on 34th and 6th (Herald Square), there was a parking garage.   If a developer wanted to buy that space to put up a building for condos, he couldn’t tell the garage owner he would pay him based on a parking revenue multiple if the owner didn’t have a desire to sell.   The developer would have to do a ROI calculation to determine how much he could afford to buy the space for depending on his business plan.   The price he could afford and the price the garage owner would sell it for could be vastly different, but if the developer really wanted or needed that space, he would have to spend the money.
A real world real estate example is that of Donald Trump trying to buy Vera Coking’s home in Atlantic City.   Was her home worth what she was asking?   Probably not, but her reluctance to sell caused Donald Trump to alter his development plans.
Even in the tough economy, domain names continue to sell for record amounts of money. While virtually all other types of investments have seen pretty large decreases, domain values have continued to increase.   An unknown lawyer in Iowa owning a name like TrademarkLawyer.com would get him much more business than simply using HisName.com.
I am not in the travel or real estate business, but owning Lowell.com and Burbank.com gives me a considerable leg up.   Even before I developed them, they had significant traffic, and it has grown since developing.   Yes, some names like TropicalBirds.com wouldn’t get much direct navigation traffic on their own.   However, after owning and developing it, I’ve seen a considerable increase in traffic and return visits.   It’s much easier to remember than a cutesy web 2.0 domain name like CoolTropicalBirds.com or something like that – and I think Google prefers keyword rich domain names.
In any event, domain names are worth what someone will pay.   Knowing the market (and having a MS in Direct & Interactive Marketing), I would pay $5,000 for SWOT.com right now, so that’s the price floor.   I don’t really have a plan for the name right now, but I think it would make a great site for companies to learn how to perform a SWOT analysis. In this day and age, many brick and mortar companies face a huge weakness in that a competitor’s domain name is the industry defining domain name and it’s difficult to overcome.

I was watching the Fox Sports channel with my brother, and I saw an ad for Xoom.com, a global money transfer service. While their demographic targeting was smart (we were watching a soccer match), the domain name doesn’t pass the tv or radio test. Apparently, “xoom” is pronounced, “zoom,” so the announcer sounds like he is saying “goto zoom.com” when in fact, he wants people to visit xoom.com.
This is a major reason why those brandable web 2.0 domain names del.icio.us, flickr.com, and now xoom.com don’t really make sense and could cause major confusion.

I am not an active bidder on Namejet at all.   In fact, I’ve probably backordered less than 15 domain names there it total – with about 10 in the last few weeks alone. One day a couple of weeks ago, I decided to use “Lowell” as a keyword to see if there were any pending drops happening that might help bolster my Lowell.com network.
Lo and behold, I saw LowellRealEstateAgents.com dropping. I had previously picked up the .net for registration fee, but Domain Active (a subsidiary of Dark Blue Sea, parent of Fabulous) was selling the .com for more than I was willing to pay.   Since the difference in their price and my expectation was so far apart, I didn’t even inquire about it.   Surprisingly, I placed a backorder and was able to acquire it for just $69 as the only bidder.
A couple of days ago, I was doing some Namejet searching and I came across CheapEntertaining.com. While it’s not a cream of the crop name, I think it is fairly strong – especially in light of the tough economic times. I was the only person who backordered the name, and I was able to acquire it for $69. I did a bit of research, and I found that this too looks like it was owned by Domain Active.
Clearly the name wasn’t making much money as a parked domain name, otherwise they wouldn’t have dropped it.   However, I think this is a pretty good name for just $69. Now is a great time to keep your eyes on the dropped lists. Some scanning programs may not pick up on the good names that don’t look like they’d have strong revenue stats.   IMO, it sometimes takes a gut instinct to see a good domain name.

The domain industry is made up of a diverse group of people with vastly different backgrounds. I’ve always found it interesting hearing about how domain investors became familiar with domain names and ultimately decided to invest some (or all) of their money in these virtual assets. Today we learn about how Andrew Allemann, editor of Domain Name Wire, became interested in the domain industry.
“I started registering domain names in 1997 when I was in college.   At first it had nothing to do with domains: domains were just a means to an end to create web sites.   But as I created my first web site I realized their was a lot of value in the domains themselves.   I got addicted when I sold my first domain name on eBay.   I would track expired domain lists and look for good domains to register (back then you could get good expired domains even days after the domains expired).   The only problem was that domains were $70 to register, and that’s a lot of beer money.   I didn’t register nearly as many domains as I should have.
I still remember getting all of those paper registration notices in the mail from Network Solutions for each domain I registered.   My roommates thought I was crazy.   I also remember when registration became deregulated.   Dotster was offering domains for something like $15, and I went crazy.   I was one of their first dozen customers — I think my order number was 19 or something like that.”

The domain industry is made up of a diverse group of people with vastly different backgrounds. I’ve always found it interesting hearing about how domain investors became familiar with domain names and ultimately decided to invest some (or all) of their money in these virtual assets. Beginning today with my domain beginning, I will be posting stories from industry veterans, so you can learn how they became involved in the domain industry.
When I was in graduate school studying direct marketing at NYU, I wanted to earn some extra money – New York City is very expensive!   One week, a family friend was contracted to clean the theatre curtains in the Empire State Building, and since I lived next door, he asked for my help.   For 3 days, we cleaned the curtains, and I got some sage advice from him, an entrepreneur who has built a very successful business in California.
I was told I should find some type of unique product to sell online – maybe using a venue like Ebay. Since my apartment was small, the product would have to be compact, so the inventory didn’t take up too much space. I spent a few days looking on Ebay for products that were selling, and I saw that some domain names sold for hundreds of dollars.   I looked into this some more, and I found unregistered names that looked similar to ones that were commanding big bucks.
After a few hours, I made my first purchase at Network Solutions.   It was something related to the legal field, and I remember that it had a hyphen.   I still have the receipt packed away somewhere, but I forgot what the name was.   I do remember that I tried to sell it a couple of days later for a few hundred dollars to no avail.   I eventually broke even on the name and found Godaddy, where I could buy names for much less.
I spent the next several months buying and selling domain names on Ebay, reinvesting almost all of my profits along the way.   I continued to learn about what makes a good domain name, and had some good luck along the way.