People scoffed when investment firm eCompanies paid $7.5 million for the Web address business.com in 1999 from a person who had paid $150,000 for it.
The purchase, though, shined a light on a secretive world where people actively and aggressively buy and sell Web domain names.
Thousands of Web addresses were bought in the early days of the dot-com boom on a hunch by people who expected Internet real estate would appreciate in value.
They were right, and still are.
In July, directory services firm R.H. Donnelley (NYSE:RHD) RHD bought business.com for … $345 million. Reportedly, Dow Jones and the New York Times NYT also were interested in buying the site.
The domain name business has matured since the early speculation days. Business.com, for example, wasn’t just an empty site. It’s a repository for ad-supported business-to-business e-commerce Web links, ranging from business travel and construction services to legal services and industrial goods. It claims sales of $50 million last year.
The domain name industry has largely consolidated into a handful of big players that have received hundreds of millions in funding in the past year. Companies or individuals are paying tens of millions for thousands of domain names sold in a single block. Last year, Seattle-based Marchex MCHX paid $164 million to the holder of some 100,000 domain names.
The best generic names were taken long ago, but that hasn’t stopped domain name seekers from coming up with ideas for new ones. One analyst estimates that up to 45,000 domain names are registered each day; 146 million domain names were in use as of Sept. 30, 31% more than a year earlier. So says VeriSign (NASDAQ:VRSN) , which operates the Domain Name System servers that support the dot-com and dot-net top-level domains and provides services to companies that sell domain names to end users.
Domain names often sell for thousands of dollars into the many millions. In 2006, diamond.com sold for $7.5 million while sex.com sold for $12.5 million. Casino.com sold for $5.5 million in 2003. Computer.com sold for $2.1 million last year. In all, 33 sites have sold for $1 million or more, according to research firm Zetetic.
Bold Early Adopters
“This field got started by a group of very early adopters, bold business people willing to take the risk,” said Courtney Montpas, an executive vice president at Demand Media. The company buys and sells domain names and provides other services that help domain name owners build their business.
Demand Media, based in Santa Monica, Calif., received $100 million in a funding round last July, led by Goldman Sachs (NYSE:GS) GS. Demand Media has raised $320 million since its launch two years ago.
Another big player, Oversee.net, last month said it received $150 million in a funding round from private equity firm Oak Hill Capital Partners. Oversee.net owns 700,000 domain names and helps service and maintain another 2.4 million domains owned by others.
Oversee also has a $100 million credit line from Bank of America (NYSE:BAC) , says Lawrence Ng, Oversee CEO.
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