Burn Down Value of .com Domain Names | DomainInvesting.com
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Burn Down Value of .com Domain Names

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House on Fire

I’ve seen this written in the past and I’ve said it as well, but I want to reiterate another reason for why I have been developing strictly .com domain names so far. There is significant burn down value to .com domain names – more so than other extensions, in my opinion. By burn-down value, I am referring to the domain name’s value if I tear down the website that is built on it. “Burn down value” is more of a physical real estate term quantifying the value of a lot of the home was to be destroyed – or burned down.

I’d like to use Torah.com and Burbank.com as examples. Before building websites on these domain names, I received offers that were significantly higher than I paid. This solidified my decision to move forward with development, because it gave me confidence to know that I could sell them if development failed, as there is significant burn down value. In reality, I don’t have to worry about doing something that would be detrimental to these brands (because I wouldn’t), but there isn’t much that can be done to impact the value of the domain names, as other companies would love to own them as well.

The name value in .com means something, and the value is great because a significant amount of people type in these domain names every single day, whether they know exactly what they want before they get there or are just hoping to find what I am offering. Type-in traffic may not be the be all, end all, but its something that has been significant before Google and will continue to be significant, despite what people might say, as type in visitors are potential customers that have no acquisition cost (aside from the cost of the domain name/websites). This could be a whole post, but it’s been said, and offhand I can’t even think of a major business that operates on a keyword domain name that isn’t .com.

If I spent $25,000 building a website on a vanity URL, it is likely that I will lose money if my venture fails or if I decided I want to do other things and attempt to sell it. What is a name like Burbank.notcom or Torah.notcom worth? I have no idea, but I would bet I couldn’t recoup my investment if I built either of those into expensive websites – unless it was self-sustaining businesses that made significant revenue with low ongoing expenses.

Does it make sense to build a multi-million dollar mansion on a low value piece of land in the middle of nowhere? Perhaps it does, but if that land is in the middle of Antarctica, and nobody is buying mansions in Antarctica when I try to sell it, I am going to lose a lot of money on the back-end. Sure, I might enjoy this luxury home while I live there, but it will be expensive to heat and furnish, and at the end of the day, it will be tough to find a buyer whose interests are exactly the same as mine.

With .com, people are coming because they recognize the keyword + .com as a brand. They are coming to the site and returning because of the brand – not necessarily what I put on the site. With many vanity extensions, people are coming more for the content (which isn’t bad), but there will be significantly less burn down value in the domain name if you scrap the website. The website owner relies heavily on the whim of search engines for traffic, and heavens forbid a website redesign or error where back-links are lost.

As a domain investor, you must be aware of this because if you put your heart, your soul, and thousands of dollars (or tens of thousands) into a project that doesn’t work, at least the underlying domain name would have significant value if you build it on a category defining .com.

BTW, don’t tell me that you can’t buy one because you recently started out in domain investing because I am no genius and have been buying them for a few years – and there are some good deals to be  had now.

PS: I do own a few domain names in other extensions, but those are purely speculative investments. I wouldn’t build websites on them right now, and that’s the point of this post. I have had several emails in the last couple of weeks asking for advice on which names to develop, and if you are trying to build a business – not just a mini-site or fun project – you should use the keyword .com.


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 (21)

    Leonard Britt

    While I see your point regarding development from a real estate perspective, I don’t totally agree when it comes to domain development. During the real estate boom there were condos in South Florida priced well over a million dollars. Yes, after the bust it would be easier to sell one right on the beach than one a few miles away. In either case, anyone buying in 2005-2006 likely is now sitting on a huge decline in resale value from their cost.

    But in the case of a domain, how many of us are spending six figures or more for a domain? If you can acquire a .Net domain for a searched phrase under a $1000 and your project doesn’t work out, you probably have more time or development cost invested in the project than you have invested in the domain. Google positions .NET sites well for exact-match terms. If my websites don’t make much money, my out of pocket was small to begin with. How much would I have had to pay to acquire the equivalent .COM?

    Now I will say that with limited experience I am seeing .TV is not positioned as favorably as .NET by Google. So while I have been working on a site in recent weeks which I was going to launch on .TV, I managed to acquire the comparable .NET for under $250. The phrase is searched for over 200 thousand times a month per Google adwords keyword tool. If the development doesn’t work, the value of my time is far above the cost of the domain. But that is precisely why I decided to acquire the .NET. I’m sure the .COM owner would insist on four-figures for the .com and yet how much more traffic will I gain by acquiring a two-word .COM? Perhaps a few hundred visitors a month but I don’t pick up any long-tail terms from type-in traffic.

    Now perhaps when I gain more development experience I can put more at risk with acquisitions and go for that built-in traffic. But for now I believe the .NET will do. And actually some of my .TV sites, while not positioned well for the domain’s keywords in the US, are getting traffic from outside the US (leading me to believe that ranking varies by search location). One of the .TV sites is positioned on pages 1-2 for several longer-tail search phrases.

    July 25th, 2009 at 1:03 pm

    Jim Holleran

    It’s only about ROI. Elliot you made the right decision on Burbank.com because you can always sell the name more than what you paid for it.

    Many people buy a top .com for XXX,XXX and might not be able to even sell it for 1/3 the price if there development fails. The key is if the worst thing happens with your .com development will you at least be able to sell the name for what you costs were.

    If I can get an ROI on a .tv, .net of 1000% which I have, it’s still better than an $100% ROI than a strong .com which I have. It’s a case by case basis.

    Thanks, Jim

    July 25th, 2009 at 3:34 pm

    Bruce Tedeschi

    I’ll bite, what are the other extensions you are investing in? i am buying a lot of .info and .in names.

    July 25th, 2009 at 8:25 pm

      Elliot

      @ Bruce

      Some us and some org

      July 25th, 2009 at 8:30 pm

    Bruce Tedeschi

    @Elliot take a look at my names at http://www.xanmedia.com they are all mine. I am a huge .us fan and have some good .org names like seniorcitizens.org, calorie.org and genesciences.org.

    Thanks for fast feedback… I have been in the game since 98 and still going strong.

    July 25th, 2009 at 8:45 pm

    Jim Holleran

    Bruce,

    I am about 95% .com but do own some of the best .tv in the world such as Spain.tv Europe.tv, Religion.tv, Moscow.tv Actor.tv and many others. I got very good deals on the premiums so it’s a risk I will see if it will pay off. They will all be developed this year. I feel good about my ROI on them.

    My .com’s are my bread and butter such as my current money maker, ForclosedHomes.com but I like risk and I am going after top .tv names and time will tell.

    Thanks, Jim

    July 25th, 2009 at 10:31 pm

    Bruce Tedeschi

    ABout 70% of mine are .coms… My challenge is its just me so managing my 2600 domains is a daily event.

    here is a few .tv names I have…

    asbestosexposure.tv
    braininjury.tv
    cigarros.tv
    diamondbracelets.tv
    DrunkDrivers.tv
    executives.tv
    geschlecht.tv
    homalnddefense.tv
    mesotheliomalaw.tv
    mypodcast.tv
    oncologist.tv
    onlinetraining.tv
    pokerparlor.tv
    probiotics.tv
    stemcell.tv
    visitlouisiana.tv

    July 25th, 2009 at 10:53 pm

      Elliot

      @ Bruce

      I understand why people like .tv names. With all respect, I can’t see an obvious reason why someone would choose to use or develop any of those .tv names. I mean names like Comedy.tv, SportsNews.tv, BaseballGames.tv, Highlights.tv, GameShows.tv…etc all have obvious uses… I just don’t see the value in those.

      July 25th, 2009 at 10:56 pm

    Bruce Tedeschi

    should have been homelanddefense.tv

    July 25th, 2009 at 10:54 pm

    John Colascione

    I am always telling people about this sort of thing before they build out a new project or buy a web site….. I always look at the name first knowing that the worst case senario comes down to the domains value on it’s on in the event it tanks in the search engines or the project fails. Now I have a name for it… “Burn Down Value”..

    July 26th, 2009 at 9:48 am

    Josh P

    Unless I’m misunderstanding you, burn-down value = reseller value, a term that’s been plastered all over domaining literature for years

    While your .COM-only argument definitely holds water for those <0.1% of domainers who invest $25,000 in development per domain — as very few .NETs are worth $25K+ — I believe the the other 99.9% should search for great bargains, no matter what the TLD. If you consistently perform careful research and manage to purchase enduser-type domains at 50% their resale value, you'll crawl into bed each night knowing you could double your investment simply by liquidating your entire portfolio.

    Overall, my customers and I have experienced slightly more luck pinpointing these bargains in .NET than .COM. Domainers generally bid .COMs up much higher relative to their resale value and than they do .NETs. SMB End-users have stronger affinity for targeted keyword .NETs than domainers realize.

    July 26th, 2009 at 10:08 am

    Elliot

    @ Josh P

    I think my argument holds water for anyone spending more than a few hundred dollars and many hours of their time. I may have spent under $10k developing Burbank.com and Lowell.com, but if you count my time as an expense (which I don’t), it would be worth 6 figures.

    I think .net domain names are much more difficult to sell than .com. It would take more effort to sell a SMB a .net name at a fraction of the value of the transaction vs. the .com. It’s the same concept as my spending more time selling domain names than selling advertising space on my geodomains. The profit margins may be lower, but the actual profit is much higher. Why spend more time selling something at less of a profit?

    July 26th, 2009 at 10:25 am

    Jim Holleran

    Are .com’s #1 in all countries and are they growing in popularity faster than other countries extensions. For example, what is more valuable (German word.de or German
    Word .com)

    Are .com’s type-in traffic growing or decreasing? Many .com I bought 10 years ago are getting less type-in traffic now than they did 10 years ago I noticed. For example, I noticed many of them getting 500 uniques a day 10 years ago are getting 200-300 uniques a day. Other people telling me the same.

    If that is true across the board than .com is losing it’s type-in power to search engines. If that continues the value of the .com (domain name only) may not be the best investment in the future.

    Thanks, Jim

    July 26th, 2009 at 10:44 am

      Elliot

      @ Jim

      I don’t own enough other extensions (and/or non – .com names with traffic) to give you an answer. I know that in many countries, .com comes second, but just like in a track meet, your team doesn’t have to be in first place in every event to win the championship.

      July 26th, 2009 at 10:46 am

    Josh P

    High-budget domainers ($50K+ liquid budgets) can and should think in terms of absolute returns (“I should buy XYZ.com because it would be easier to sell than XYZ.net”), but those with sub-$50K budgets — i.e. the vast majority of domainers — can and should think in terms of ROI maximization.

    Several weeks ago I grabbed LottoTickets.net off TDNAM’s fire sale for $11.59. Based on the sheer quantity and targetedness of prospects this domain would interest, I guarantee you I could turn it around for at least 50x my purchase price within 3 weeks if I so chose.

    LottoTickets.com is owned by Anything.com. If they allowed it drop, could you imagine how much LottoTickets.com would sell to the highest bidder for on NameJet or TDNAM? Let’s be conservative and estimate $2000. Could the winner then turn LottoTickets.com around for $100K to and end-user in the snap of a finger? Absolutely not — $10K maybe, but definitely. It’s extremely difficult to approach any end-user asking 5-figures for even a top-notch domain name; 6 figures, virtually impossible.

    I absolutely agree with your implication that “time is money”. However, if we’re talking burn-down value, the prospective end-users/resellers you target during your liquidation to could hardly care less what website was established on your domain a prior; yes, it might add some Google PR, but Google will zap this PR once website structure and ownership changes. You can’t factor effort spent on development in computing a domain’s true burn-down value.

    To summarize: rational domainers on <$50K budgets (95% of us) calculate their purchases to maximize burn-down ROI, which very often means opting for the .NET (or .US/.ORG where appropriate) over its .COM counterpart.

    Of course, if Anything.com would sell me LottoTickets.com for $200, I'd snap it up in a second and demote LottoTickets.net for $11.59 to an afterthought.

    July 26th, 2009 at 11:07 am

    Elliot

    @ Josh

    First off, your comments keep going into the spam folder, which is why it’s taking extra time to approve.

    I don’t think most people even think about burn down value. I only think about it when I am considering developing a website on one of my domain names. If I can sell it for more than the cost of the domain name plus my development costs, then its worth the risk – simple as that.

    In any case, I do dozens of Whois lookups a day – all for .com. I’d say 10% of these domain names have the .net available for reg fee. I don’t even touch the .net. Mind you I am offering nothing less than $2,000 at a bar minimum in these email inquiries, yet I wouldn’t buy the .net for reg fee unless I could secure the .com too. That’s just me, but I don’t like .net domain names.

    I don’t think LottoTickets.net is worth much at all unless developed (which was why it was available to buy at that price). Would you really spend $250+ developing a mini-site type website on a name for which you paid $12? Based on the search volume and other stats, I would be very surprised if you could sell it for more than a few hundred dollars. I hope you can, but if I owned the name at a $12 buy in, I would be very happy to get even $100 for it.

    July 26th, 2009 at 4:02 pm

    Jim Holleran

    Are .com getting more type-in traffic these days or is it decreasing? I got some strong .com’s and each year I see the type-ins decreasing.

    Does anybody have actual facts and data regarding this? Is there a reliable source that tells how many type-ins a .com get’s. It seems when I ask this question people get real quiet because the perception is that strong .com increase in type-in traffic each year but I feel it’s decreasing. That plays a huge part on the burn value of a .com.

    Thanks, Jim

    July 26th, 2009 at 4:03 pm

    Adam

    lottotickets.com would go for more than $10k . come on.

    July 26th, 2009 at 4:44 pm

    yamanote

    malpractice.md recently sold for $2,800 after being regged a year ago so there are some that see value in serious investment in exotic extensions. but as you say domain speculation and domain development are different, and developing an exotic is even more risky than buying one

    July 31st, 2009 at 2:24 am

    jake

    I see absilutely no value in any tld other than .COM.

    All others are an ebsolute waste of money, effort and time.

    July 17th, 2011 at 6:24 am

    Damon

    @jake
    Quote: “I see absilutely no value in any tld other than .COM.
    All others are an ebsolute waste of money, effort and time.”

    That kind of thinking will keep you in the pack, not ahead of it. Sounds like you should play it safe and stick with nothing but .COM. Let the innovators and the people with the visions make the serious coin. 😉

    I have many .COM’s, .NET’s, .US and .CO. All have performed very well, yet I have flipped several .CO’s privately for $X,XXX and $XX,XXX in the last 3 months. All hand registered.

    You just need to be ahead of the game, not in it. It’s a shame most domainers are hobbyists or completely clueless. Watch the news, read the paper, look for the future. That’s how you can bank big. If you do what everyone else is doing, you may as well not be doing it at all.

    July 19th, 2011 at 1:56 am

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