Differences Between a Domain Investor and a Cybersquatter

Differences Between Domain Investing and Cybersquatting

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I had a conversation a few days ago with someone in the legal department of a large company, and we discussed cybersquatting and the importance of buying potential typo domain names before a product launch, especially when the product is targeting children.

In our conversation, I mentioned that I am a domain investor. He stopped me me mid-sentence, and said something to the effect of, “I’ve had conversations with cybersquatters before who all claimed to be domain investors. With all due respect, how does what you do differ from cybersquatting?” In my opinion, it’s a very reasonable question, and I hope to be able to offer some clarity here, especially for people who found this site by way of a Google search for “what’s the difference between a domain investor and a cybersquatter?”

Domain Investing Definition:
Domain investors acquire many different types of domain names, and they either re-sell them (hoping) for a profit or monetize them with pay per click links, affiliate marketing, or web development. Domain investors actively buy, sell, or trade domain names that have these qualities: generic terms or phrases, made up terms or phrases, or trademarked terms or phrases.

Cybersquatter Definition:
Cybersquatting is the act of profiting from and/or monetizing domain names that either contain the trademarks or are typos of trademarks of known brands or famous people. Contrary to what some might believe, cybersquatting isn’t always clear and concise. In fact, more often than not, cybersquatting is a gray area that can really only be determined by a court, especially when a common term is trademarked by more than one company (Apple for example), or a domain name happens to contain a trademark but is unrelated to the trademark – like FurnitureBay.com for example.

Differences between Domain Investors and Cybersquatters:
Simply because cybersquatters would identify themselves as domain investors does NOT mean all domain investors are cybersquatters. Most domain investors I know choose to buy, sell, develop, or monetize generic domain names.

The business of investing in generic domain names is akin to buying real estate. Some people choose to buy land in an area they think will be developed in the future, rendering it much more valuable. They are content waiting for months or even years before selling. Others will buy property and build homes/apartments, and they will either sell or lease these dwellings, building a residual revenue stream.

One of the primary advantages of investing in domain names instead of real estate is that the carrying costs are much more minimal for domain names. In addition, there isn’t a MLS price guide, so domain investors with market knowledge have a distinct advantage when buying domain names privately.

The next time you think of a domain investor, don’t just assume that he or she is a cybersquatter. Domain investing is a legitimate business, and as with all industries, there are people who operate in gray areas.


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 (22)

    Gazzip

    Domain investors actively buy, sell, or trade domain names that have these qualities: generic terms or phrases, made up terms or phrases, (or trademarked terms or phrases.)

    Shoud’nt the last 5 words say (or non-trademarked terms or phrases)

    Buying trademark terms or phases is the definition of cybersquatting in most minds.
    (even though more than one person can have the same Trademark on the same words/phrase if its used for something completely different)

    March 10th, 2010 at 3:14 pm

    Elliot

    “Shoud’nt the last 5 words say (or non-trademarked terms or phrases) ”

    If they are non-trademarked, I would consider them “generic,” which is what I said.

    March 10th, 2010 at 3:17 pm

    Gazzip

    But you are also saying the definition of a Domain Investor is someone who also buys/sells trademarked terms or phrases.

    That’s what it says.

    “Domain investors actively buy, sell, or trade domain names that have these qualities: generic terms or phrases, made up terms or phrases, or trademarked terms or phrases.”

    March 10th, 2010 at 3:24 pm

    Aaron Krawitz

    Hopefully he understood the important point you were making.

    March 10th, 2010 at 3:41 pm

    Elliot

    “But you are also saying the definition of a Domain Investor is someone who also buys/sells trademarked terms or phrases.”

    As much as it may not be legit, I think it’s a sub-sector of the domain investment space.

    I didn’t explain it like this to the company when we spoke, but this is what I thought about after our conversation.

    The way I explained it to him was:

    “I only invest in generic domain names such as DogWalker.com, TropicalBirds.com and Torah.com. I am also a domain developer and develop many of my domain investments. Cybersquatters buy, sell and monetize trademark terms and phrases, which is something I do not do.”

    March 10th, 2010 at 3:44 pm

    Leonard Britt

    While the industry makes a distinction between domain investor/speculator and cybersquatter, individuals wishing to acquire domains for blogs & small businesses often refer to domainers as cybersquatters (search Twitter for the terms “cybersquatter/s/ing” “domain squatter/s/ing”). The industry needs to do a better job of explaining / communicating why domain investing is a legitimate business activity. Perhaps if domainers had more realistic price expectations, the sentiment toward the industry would be different.

    March 10th, 2010 at 6:33 pm

    Elliot

    @ Leonard

    “Perhaps if domainers had more realistic price expectations, the sentiment toward the industry would be different.”

    I disagree that this is a factor. I’ve sold a number of names where industry friends thought they were worth a few hundred dollars but sold them to others for several thousand dollars. Domain names are commodities that are unique, and as such, their value is somewhere between what someone will pay and the price at which someone will sell. I say it’s somewhere between because maybe nobody will pay a person’s asking price, and that name may never sell. It’s really the owner’s prerogative.

    March 10th, 2010 at 6:59 pm

    Basket Carrier

    It’s probably a good thing you used the terms “real estate” & “MLS” in your post instead of “realtor” or “realtors”, which are both trademarked. LOL. I’m just bitter because I received a trademark infringement email today on a geo realtors name I recently picked up. I consider myself a hobby domainer and not a cybersquatter, but sometimes it’s hard to know what’s trademarked.

    Maybe I’m just dumb, but I had no idea “realtors” is a trademarked term. Is that why you only invest in geo “realestateagent” domains Elliot?

    March 10th, 2010 at 10:18 pm

      Elliot

      @ Basket

      “Maybe I’m just dumb, but I had no idea “realtors” is a trademarked term. Is that why you only invest in geo “realestateagent” domains Elliot?”

      Don’t know you well enough to say whether you are dumb or not, but that is the reason :) See this post for more: http://www.domaininvesting.com/use-caution-with-generic-terms

      “One of the most commonly used terms that I believe people don’t realize is a trademark is “Realtor,” which is a trademark of the National Association of Realtors. This organization protects the term “Realtor,” and has many rules about how the term can be used, especially when it comes to domain names and websites.”

      March 10th, 2010 at 10:20 pm

    Kelly WhyPark

    Great article Elliot!

    March 11th, 2010 at 8:17 am

    sc

    You have clearly and concisely summed up the difference between domainer and cybersquatter.

    Unfortunately there are so many people with different motives running around labeling anyone with a domain portfolio as a cybersquatter. They are not doing themselves or the domain industry any good.

    The gray areas are something to be worked out but reputable domainers will work those out, usually to everyone’s satisfaction if the claim is legit and done in good faith.

    Good article.

    March 11th, 2010 at 10:31 am

    Mike

    FurnitureBay.com is not squatting. No one can claim the usage of the word “Bay” and sorry, just because there is an “e” before “Bay” in that name, doesnt hold water in my book.

    If you want to know the definition of cybersquatting, then look up all of the WIPO decicions against Directnic.com / Kenyatech.com / IntercosmosMediaGroup / Parked.com and so on… they’re all the same company anyway. THEY hijack and squat like no ones business.

    March 11th, 2010 at 12:22 pm

      Elliot

      @ Mike

      I agree with you. I am pointing out that you (or anyone else) can’t just paint with a broad brush and say any domain name that contains a brand in it is cybersquatting. FurnitureBay.com would be a clear case of this and why I used it as an example.

      March 11th, 2010 at 12:23 pm

    Gazzip

    It does’nt look clear and concise to me, I guess I must be the only one that thinks Elliots Definition of a Domain Investor is innacurate, assuming and very misleading.

    Buying and selling trademarked terms or phrases is not a prerequisite of Domain Investing.

    Sure, I may have a few names that “could” potentially be a TM problem depending on how I use them but I don’t actively hunt for trademarked terms and phrases to resell to the trademark holder, and neither do you Elliot by the sounds of it.

    Your wording implies that it is the norm to do so and no non-domainer or Trademark holder is likely to accept that as being legitimate so good luck convincing them otherwise.

    I guess we’ll have to agree to disagree on that one :)

    March 11th, 2010 at 12:45 pm

    duh

    gazzip. he’s not saying that at all. you aren’t reading it with a clear head.

    He’s saying that people who buy generics and not tms are domain investors , just as much as people who buy tms are domain investors. BUT people who buy generics are NOT squatters. It’s simple logic really.

    One could clearly say that a giraffe is a mammal and a pig is a mammal too, but you can’t say that a giraffe is a pig, nor a pig a giraffe.

    replace the word giraffe with generic domain owner
    replace mammal with domain investor, replace pig with squatter.

    March 11th, 2010 at 3:16 pm

    borat

    i squeel like the pig

    March 11th, 2010 at 3:21 pm

    Samit

    All cybersquatters claim to be domainers or domain investors and herein lies the crux of the issue.

    Domain investing does not necessarily require one to deal in trademark names.

    Generics and brandables are both viable, yet non infringing, investment streams.

    Some domain companies are notorious for buying / catching / winning other peoples’ tms and demanding huge sums for them. That is cybersquatting.

    Even though if you ask them, they’ll classify themselves as domain investors.

    I had written a similar post a while back, if you click my name you can go straight to it.

    March 11th, 2010 at 4:05 pm

    Mike

    @Elliot (March 11th, 2010 at 12:23 pm): Sorry about that. I had actually meant the same (re: painting with broad strokes).. haha! The medium sometimes makes it hard to be interpreted correctly! Have a great day!

    March 11th, 2010 at 4:27 pm

    Jeremy

    I understand Eliot’s logic and of course know what he means but I have to agree with Gazzip that the wording is just not clear enough and most outside the industry would read the exact opposite of what he’s trying to say.

    With respect Eliot, I suggest you re-word that sentence or just remove the bit about investing in TMs entirely. It’s too nuanced of an argument to expect the average layman to understand and is not worth the potential for confusion and it reads fine without those last few words.

    March 12th, 2010 at 7:06 am

    Dan Holtz

    I call bullshit. They are all squatters exploiting poorly defined registration rules. This so called “legitimate business” adds zero value to the world. Personally, I think they should be stripped of their dormant domains, and prosecuted.

    Just sayin’

    January 2nd, 2015 at 3:44 pm

      Elliot Silver

      Prosecuted for what?

      Additionally, what do you think about large corporations that own (but don’t use) portfolios of domain names? How about VCs and startup founders who bought many domain names on the chance they need a domain name for a new brand?

      January 2nd, 2015 at 3:48 pm

      Steve

      When did it become my responbility to add value to the world by not buying domain names?
      Actually I monetize them and that adds value to the world. I also do environmental work with my leisure time that being a domain name investor allows me.

      Like Elliott said. Prosecuted for what?

      In reply to Elliot Silver | January 2nd, 2015 at 4:02 pm

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