Beware of Inflated Domain Prices |
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Beware of Inflated Domain Prices


Investors were selling to one another, inflating prices. When the market figured this out in late 2005, it retreated with punishing speed.

While this quote from a New York Times article is in reference to the real estate market in Cape Coral, Florida, I think this should strike a chord with some domain investors. I believe some parallels can be drawn between the Cape Coral real estate market and the three letter .com domain market, where many domain investors speculate on these names by purchasing them for great sums from other domain investors.

As strong as the domain name market has been, the three letter .com market may be susceptible to dropping in value, and domain investors should use caution when buying at current levels. On average, three letter .com domain names have made incredible leaps in valuation over the past few years according to the price guide at From just a few hundred dollars a few years ago to several thousand dollars today, average prices for three letter .com domain names have seen extraordinary increases in valuation. In my opinion, we are in a period of inflated pricing, not really supported by any reasoning, other than the perceived rarity of the names (there are 17,576 in existence).

These short, easy to remember names might have tremendous value to a few companies, but many of these end user companies wouldn’t be willing to pay close to the current sales value for them. It can also be difficult to monetize these domain names. Frequently, consumers are looking for a particular product or company who may use that particular acronym officially or unofficially when they navigate to that domain name. If the domain owner uses the domain name for parking, and the parking company shows links for the company who uses the acronym, the domain owner may be at risk for a UDRP.

Inflated prices may also be affecting other types of domain names within the industry, however, it seems that this is one area where people are paying large sums simply because of the type of name, rather than what can be done with it, especially when the 3 letters don’t necessarily mean anything or stand for anything particular. In my opinion, this is like people buying houses in Cape Coral, Florida simply because the values continued to increase without a real impetus for the jump in perceived value.

I am not saying that all or most three letter .com domain names may be overvalued. I am merely suggesting that domain investors proceed with caution as the values of these names continues to increase. I would also say that like most nice generic domain names, I am a buyer if the price is right.

What do you guys think? As always, I welcome your comments…

About The Author: Elliot Silver is an Internet entrepreneur and publisher of 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 Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.

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Comments (15)


    in comparin’ to recent prices of .mobi ,
    the prices of may not b [too] overvalued

    cheers ThANKye 2w

    December 23rd, 2007 at 4:19 am

    Papa Noël

    Hello Elliot,

    Your article was promising but unfortunately the “3 characters domains” was probably not the best choice to ilustrate any inflated pricing.

    First, a significant part of these domains are simply top premium generic words. The others are accronyms, except rare exceptions.
    So very valuable names!

    Also the average pricing was 6K this past year. Just over the 5K barrier for which most companies buy domains “easily”.
    So we say it’s not even a pricing for domain investors!

    Merry Christmas

    December 23rd, 2007 at 4:23 am


    You make some very good points. I generally would agree with you that the fundamentals don’t necessarily support the current prices. However, a three-letter domain is the one category of domain in the whole world where every knowledgeable domainer would admit that there is some sort of minimum value.

    Not all domainers would spend a few thousand on a brandable name. Not all domainers would spend a few thousand on anything other than dotcom (or great .nets, for example). But every single knowledgeable domainer would spend a few thousand on a three-letter dotcom.

    It is going to be very interesting to see when and where the first significant drop in price occurs in the dotcom market. With each passing day many of the good and great domains go into the hands of buyers who are never going to sell, or at least not sell without getting an outrageously high offer. There is a chance that the three-letter dotcoms will become a group of names that haunts domainers for years to come, since each year that goes by represents another realization that there was major money to be made in buying three-letter domains the year before.

    You would think there has to be a breaking point, but these names are similar to prized artwork, and artwork just sits on the wall, while many three-letter domains provide reasonable returns. My guess is that there are many more legs up before the first drop.

    The future value of three-letter dotcoms is a great question to ponder. The prices will go up until the prices seem insane to most everyone in the business. Not there yet.

    December 23rd, 2007 at 5:03 am


    2007/12/23, ohussard surtoito :

    a often-overlooked useful function of a 3— ‘s

    by ‘the length of itself ,
    the length of each-n-every
    3— or even
    may be shorter than
    that of .mobi , this very high-priced tld ,

    ““`why”””” ?

    because : :::::

    .1. is a .com , i.e. ,
    it enjoys 1 of the privileges which only can enjoy ,
    : :
    e.g. :
    after you enterring “ABC” into your browser’s url bar ,
    then ,
    ye dont need to type in ‘.’ ‘c’ ‘o’ ‘m’ or any other matter like that ,
    just simply use your right-hand to press down together the key
    ““`Ctrl”””” and the key
    ““`Enter”””” at ‘the same time ,
    then ,
    voila ,
    your browser ‘d automaticcally go to
    total characters involved = 3
    it may even be better if u’r with iPhone ,
    which features the button ““`.com””””
    but ,
    in the case of e.t.c. ,
    then ,
    for typing ye have to press down the buttons
    ‘A’ ‘B’ ‘C’ ‘.’ ‘m’ ‘o’ ‘b’ ‘i’ ,
    total characters involved = 8
    here , shorter may be better , expecially web-navigating through mobile

    December 23rd, 2007 at 5:24 am


    i must stress that : :::::
    we dont own ,
    nor any share there-in ;–^), ‘s been taken out here just only to serve as
    ‘the example

    cheers ThANKye 2w

    December 23rd, 2007 at 5:27 am

    andy kelly

    Excellent post ~ confirms what I’ve been thinking for a while.
    As the post suggests, why buy a perceived investment when in all practicality it may prove difficult to offset the outlay with parking income and then be unable to resell to an end user at a profit !

    Sobering post but a very important one.



    December 23rd, 2007 at 7:59 am

    Dan Stager

    I see it your way Elliot. A lot of the 3 letter combinations seem inflated when looking at their development potential, and that’s the real bottom line when it comes to fundamental values. Of course they have their base rare “technical” value as well, which I expect will trail any increase in the extension prices too, but there’s a limit to that I think.

    As a side note, the 3character site needs some updating, as just this last couple weeks there have been some blocks of .US 3 letter names sold at an average of $200 each. ROI % wise, this pricing would indicate that the .US LLL sector overall has outperformed the overall % increase in LLL coms as well as any other 3 letter extension.

    December 23rd, 2007 at 9:02 am

    >> I believe some parallels can be drawn
    >> between the Cape Coral real estate market and the three letter .com domain market,
    >> where many domain investors speculate on these names
    >> by purchasing them for great sums from other domain investors.


    yes ,
    some three—-letter .com , e.g. , qxj , may be difficult to flip

    no ,
    if …. you could buy for only USD9989 , which-must-be-over-‘the-average-prices ,
    then ….
    could ye say that price of having been over-inflated

    it may be better to judge on basis on case-by-case ,
    it may be better to judge on basis on case-by-case ,
    it may be better to judge on basis on case-by-case ,
    it may be better to judge on basis on case-by-case ,
    rather than the whole category ,
    rather than the whole category ,

    equally ,
    not every .com domain ‘s necessary good ,
    e.g. : :::::
    must be so hard ………

    cheers ThANKye 2w

    December 23rd, 2007 at 10:11 am


    It has become as if domains are not soley an investment, but also a “collectible”. As if “he who has the most, wins!”

    Same goes for

    I believe there is intrinsic value simply by virtue of mathematical probability. I had someone recently tell me he thought any was now minimum $10K.

    But I do see domainers buying from domainers. A few end users perhaps.

    In the meantime, parking them is not (overall) going to generate enormous ROI in the short (and perhaps) long run.

    What I am also seeing is those that do get offers to buy price themselves so far out of reason those making the offers then look for alternatives. And alternatives are plentiful and reasonable and profitable.

    I look with astonishment sometimes on Sedo and other auction sites at what domains in general are going for. And I have to wonder how many are actual end users?

    Unless we get a massive influx of new money and end users willing to pay the prices sellers are demanding, there is a great probability of stagnation.

    December 23rd, 2007 at 12:14 pm

    geoge domainer

    Yes somethings are overvalued, though some domains are not, a very overlooked domain name sold last month called for only 13k. It has a population of only 1 million. You can fairly judge if you owned the state of or which aprox has 3 million populatoin a piece you would be looking at least a 40k price tag. Lets not even get into what would be worth. Some names like are worth 5x over the 13k they bought it for because insurance clicks go for 40.00 a click alone. I believe any insurance names that you hold will rise in value very quickly.

    December 24th, 2007 at 1:30 am


    Your view hangs together except for the fact the current minimum value for a is only $6,000. This is still a very low purchase price, for a limited commodity (17,576 available), with intrinsic value. Any company that has its web address having only 3 letters, engenders thoughts that the company has a had web presence for a long time and was one of the first to recognise the potential of the internet and so was able to secure a short domain (i.e. a successful, forward thinking company). We in the industry know they are freely available on the secondary market but most people would assume they were long gone and registered by end users back in the late 90s. By and large 3letter .coms do not perform especially well on parked pages but that misses the point, these names are much more about branding and what it says about the company behind them. Having a very short .com has very positive messages, which is really important when people do searches and are confronted with a list of search results – the domain names of the search results, is one of a few bits of information that the a person has available to decide which of the listings to click on first. Being a very short .com will make most people think the people/company behind that search listing, are a leading company and worth clicking through to.
    3letter .coms will also become increasingly rare as more businesses get an online presence, especially from the growing markets in the far east, making the available pool a lot less: currently Sedo have none on auction, this will continue to force up prices. My guess is they will hit a plateau of $10,000 minimum wholesale value but will continue to rise to at least $30,000 before any correction will take place – I’ve held this view since early 2000 and believe they are still under valued


    I disagree in that I believe paying $6-10k for a nice 2 word generic would have more upside right now than buying a LLL .com for $6-10k. I think the margin is much more limited for people who invest in LLL .com names at this point. Of course, time will tell in this situation. As I’ve said in the past, there are many opportunities in the domain investment business, but I just happen to think investment in most names have peaked for now.

    December 25th, 2007 at 8:48 pm

    Mark’s advantage over one or two word domains is that they are universal. Chinese, Indians, Japanese, Koreans etc. are used to using the A-Z alphabet, and will recognize a domain like to mean Uze Xeu Zao, a Chinese Company (I made up the company, to demonstrait the point). So while appeals strongly to English speakers,’s appeals to nearly the entire online world.

    December 26th, 2007 at 5:47 am


    update by elliot
    **I disagree in that I believe paying $6-10k for a nice 2 word generic would have more upside right now than buying a LLL .com for $6-10k.**
    I hear your point but you need to illustrate a nice 2 word generic available for 6-10K – They are not obviously available when looking on the auction sites but prehaps Im looking in the wrong areas. DNJournal latest sales listings show a miss spelling ‘’ theatre $8,600 – $8000 $7,700 $7,200 $7,000.


    I’ve purchased many 2 word quality names for under $10,000. I would say that most of the private sales that take place in the industry are never reported. Almost all of my sales either have an NDA, or information is not released upon request. I think only 4-5 of my sales have ever been made public, and only 1 of my purchases.

    December 27th, 2007 at 4:12 am



    I honestly don’t know the definition of “domainer”. That notwithstanding, you touch on an issue that goes deeper than maybe you realize when you talk about sales between domain owners.

    There are many reasons for these sales that have little or nothing to do with the fundamentals of development, “monetization”, or investments.

    And with no central marketplace, no governmental regulation or disclosure requirements, and no serious journalistic exploration of the “industry”, I don’t think it would be too difficult to imagine a half dozen reasons to sell a domain – none of which really have anything to do with the domain name.

    Let’s see..

    Simple Positioning: If you and I both buy a domain name for $8 and then sell them to each other for $150K, we can publicize the sale and establish a public perception of value where none exist.

    Advanced Positioning: You could almost limitlessly manipulate stocks, loan collateral, you name it – all establishing a perception of value where none exist.

    Non-Reporting: If you wanted to travel out of the country with more than $10,000, but you didn’t want to report that, you might prefer to buy a domain name and sell it when you get where you’re going.

    Simple Tax Avoidance: If I earned $500K this year in regular income, it may be advantageous for me to start a small business selling domain names. In such a case, it may not matter to me that I just paid $10K for a $5K domain name – I still get the write off and I have a $5K domain name that may soon be worth what I paid for it.

    Advanced Tax Avoidance: If you and I had an offshore corporation in Bermuda or the Cayman Islands, we might be tempted to sell our portfolios to that corporation for a dollar per domain and let our company make the profits.

    Money Laundering: If you stole a painting and had a handful of collectors that were willing to bid for it, you might want to list that new domain name you just registered and tell the collectors that whoever wins the domain name will get the painting for free. Then everyone has an excuse for why a million dollars just changed hands.

    Illegal Escrow: If you were delivering something to me that I’m supposed to have (drugs, weapons, whatever), I could deposit the money in an escrow account to buy your awful domain name. Once I received the delivery of whatever, I would release the “domain payment”.

    How many is that? Anyway, you get the idea.

    Now, if you mix those sales (however many there may be) in with all the NDA sales (however many there may be) you realize that you’d have to to be Rain Man to use available data in any meaningful way.

    Really, until there is a central marketplace with reporting requirements, it would be foolish to use indiscriminate sales data for pricing. The alternative of using only verifiable public sales (think would have you working with a base so small it would be statistically worthless.

    I think there are many things that can assist in pricing a domain name or suite. If you have a good name it will be useful to a company in a number of ways. Value is added to the simplest of things (like letterhead, business cards, and advertising), to the more complicated (like visitor conversion and customer conversions).

    In any event…

    Turning to the thrust of your article, I’d have to lean towards betthelot’s way of thinking. The prediction of $10,000 minimum wholesale rising to at least $30,000 seems about right to me if you’re talking about good three letter domain names.

    If they are three good letters (not Q’s,X’s, or Z’s), the long-term chances look extremely good to me. Consider just one industry for its customer base: With almost a million lawyers in the US, how many companies will end up with names like Woolsey, Litchford & Patterson, LLP?

    Surely, some of these firms have partners that would be willing to chip in three or four thousand for a name like, rather than try to fit on their business cards.

    In my mind, the only reason such domain names are still priced as low as they are is because of the lack of communications skills in what is infamously known as a geek industry.

    If you give me a $5K 3-letter domain name, a VOIP unlimited long distance account and a week in front of, I believe I could sell your domain name and make $5K for myself in the process.

    Sitting around waiting for opportunity to knock on your door has never been much of a plan, but that seems to be the norm for today’s domain name seller.

    At $150 to $500 per hour, I bet you don’t have many lawyers sitting around typing in domain names in hope they will find your for sale sign. And, since nobody called or wrote them a letter to tell them about your eBay auction, they continue on their way using the first name that was available last year when their secretary checked at “that domain name place”.

    In conclusion, I don’t trust sales data that’s incomplete and can’t be verified, and if I were looking for an inflated market, I’d look at all the domain names out there that have no end-user business application.

    And, until the price for a good 3-letter domain name passes the price for a third of a page in the Washington Post ($32,095), I wouldn’t concern myself with fears of an inflated market.

    But that’s just me.

    December 29th, 2007 at 1:59 pm


    Elliot –

    In my post I said:

    “Value is added to the simplest of things (like letterhead, business cards, and advertising), to the more complicated (like visitor conversion and customer conversions).”

    It should have been:

    “Value is added to the simplest of things (like letterhead, business cards, and advertising), to the more complicated (like visitor conversion and customer retention).”

    Thanks for the edit.

    December 29th, 2007 at 2:07 pm

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