5 Domain Investing Risks
Neustar Domain Names

5 Domain Investing Risks

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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.

About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (19)

    Mike H

    To a varying degree depending on the types of domains an investor buys, illiquidity is a risk that all domain investors should consider.

    July 21st, 2013 at 12:48 pm

    Mike

    When most people ask about the ‘risk’ they are most likely refering to the financial risk. With Domains the number one risk is liquidity. Until there is a marketplace similar to the ‘stock market’ system, it will be the wild wild west. Its the classic risk-reward situation.

    July 21st, 2013 at 1:35 pm

      Elliot Silver

      I didn’t really think about liquidity as an issue, but it certainly is. Thanks for adding it.

      July 21st, 2013 at 3:18 pm

    owen frager

    Good stuff./ Much appreciated. And yes Mike, liquidity is probably #1. I would also add jurisdiction especially if you own a .ly or .tv where they can throw you out for not living there or political upheaval. Homeland Security is another seizing your name even if it sold knock off Gucci bags via an innocent ppc link.

    July 21st, 2013 at 2:25 pm

    Domains

    Agree on liquidity factor.

    Good post! Technology apps, chrome, etc, I continue to see my type in traffic stable and people will always type in the address. As people continue to hype up how development is such a great thing vs domain sales and parking at least I continue to get type in traffic.

    Facebook, twitter, apps dont think of a threat much.

    July 21st, 2013 at 3:19 pm

    BullS

    A huge chunk of meteorite hitting the Earth and all of you perish except me.

    July 21st, 2013 at 3:31 pm

    RaTHeaD

    one time i ate a potato chip shaped like a duck. i’m not making this up. it really did happen. if i had the foresight to sell it ob ebay to royal palace i could be rich i tell you… rich rich rich.

    July 21st, 2013 at 3:32 pm

    BullS

    Seriously, you all should be worried about Watson.

    Just ask Watson and the information will come right thru the screen and if you want an order of cups/plates or pizza, 3D printing will do the job.
    Every household will have a super duper 3D printer.

    The future is here, we will be living in the Star Trek age.

    Now, please Beam me up…Scotty

    July 21st, 2013 at 3:36 pm

    Patrick Hipskind

    Market risk can impact domain names just like stocks. The recession and the emergence of new gTLDs have lowered the value of domain names over the past few years. Political events in a country like Columbia could ultimately have an impact on the value and use of the .co extension. As with building a stock portfolio diversification helps to mitigate risk, but diversification can not mitigate systematic risk which is undiversifiable.

    July 21st, 2013 at 3:46 pm

    Mark

    Your #1 and #5 points are what I see as possible risks as well.

    July 21st, 2013 at 6:31 pm

    Irfan

    I think, SOPA can also be a risk factor.

    July 22nd, 2013 at 3:35 am

    Irfan

    Another thought: I hope not; the untimely death of the domain investor with no proper documentation for the beneficiary.

    July 22nd, 2013 at 5:19 am

      Elliot Silver

      Government regulations and laws are a risk – good call.

      July 22nd, 2013 at 7:26 am

    Kassey

    I’m most concerned with the risk that .brand will dethrone .com and become the new king. Just listened to Frank Shilling’s interview right after the ICANN meeting. He said “I do believe strongly that there will be, within a decade, tens of thousands of brand gTLDS”.

    July 22nd, 2013 at 7:39 am

      Stranix

      Well, there are tens of millions of brand .com’s today :)

      July 22nd, 2013 at 9:24 am

    Paul H

    Potential Technology/Internet issues are certainly not anecdotal. Here’s a reply from an End User I approached, a week ago, about a diet related domain: “Like most, we are really headed in a different direction – mobile apps.”
    It’s hard not to be a little concerned when you start getting replies like that but domaining in general still has a lot of opportunity.

    July 22nd, 2013 at 8:58 am

    Stranix

    About New gTLDs.

    The market is rather mature. YouTube or Twitter and most other sites are not going anywhere. And they all have .com Even if someone buys .brand, the .com will stay their main, because no one wants home.twitter website and also, it’s a very big problem to move from one domain to another, especially for a large site. Maybe some of these domains will be used as additional shortages in some services, like nickname.youtube Maybe there will be a lot of new sites, like about.me But I’m sure that .com will remain the king for a very long time.

    About Technology / Internet Changes

    Interesting overview from Business Insider:

    Mobile apps: Particularly at the beginning of the mobile boom, when some believed apps would channel virtually all mobile activity, businesses rushed to create apps. Apps may be dominant in some mobile markets like the U.S., but consumers use their mobile browsers too — and not just for casual browsing, searching and information look-ups. A great deal of e-commerce happens in the mobile Web browser, not in native apps. Not to mention: Apps are expensive. Apps are not the be-all, end-all for mobile.

    http://www.businessinsider.com/rise-of-responsive-design-pros-and-cons-2013-7

    July 22nd, 2013 at 10:07 am

      Kassey

      @Stranix. Very good point on the difficulty in moving site contents to .brand. Thanks. So, .brand can be used for marketing purposes and .com remains as the main site.

      July 22nd, 2013 at 5:28 pm

    Howie Crosby

    I would like to add a sub category to theft, albeit this is a worm incident that causes the risk. Thus being the Conflicker C worm, I have lost 2 very good .co.uk fresh drop registrations, due to this worm along with the lack of knowledge of the registrar.

    When registering a recent drop .co.uk domain, Nominet UK sent my registrar a note stating “action pending” as there was a Conflicker problem and the domain had to be manually registered, but as the registrar did not understand this message, I lost the valuable domain, one that I had spent a lot of time tracking down.

    July 22nd, 2013 at 10:25 am

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