With more business moving towards the digital space, and away from brick-and-mortar operations, domain names (particularly dot-coms) have never been more valuable. A Boston Consulting Group (BCG) report finds that “over half of online customers worldwide go to the websites of businesses to begin searching for products—either directly or guided by search engines.”
Due to this shift, more businesses are looking to buy a domain name. Names can be purchased through a registrar – this type of transaction occurs in the realm of the primary domain market. If, however, the name is already registered, the buyer must buy the name from the current registrant. This type of transaction is referred to as the secondary domain market.
Primary Market Versus Secondary Market
According to BCG, while “most new dot-coms are registered in the primary market… domains that are resold can be 150-200 times as expensive with a typical resale ranging from $1700 – $2500.” The study goes on to explain that as a net result, the secondary market, worth more than $2.1 billion per year, is nearly as large as the primary market at $2.3 billion per year. In other words, even though a vast majority of domains are purchased in the primary market, nearly half of the dollars spent go towards domain investors selling unused domains for profit.
Comparing Apples to Oranges?
Many business owners find this trend irritating and see it as a distortion in the market. They also argue that domain investors provide no value to the domain name ecosystem. And it makes sense that some feel this way. For instance, if you see dot-com domains going for $15 on a registrar, and turn around and find that a similar domain you need is being sold by a domain investor for $2500, I’m sure you wouldn’t be pleased.
That being said, it’s not fair to compare primary market prices with secondary market prices. And many complaints about the secondary market are simply untrue. For one, the primary market price does not represent the true value of a domain name. In other words, registrars do not sell domains at full resale value. When you purchase a domain through a registrar, what you’re really doing is paying for the registration for the domain – and that’s it. It’s the same registration fee you would have to pay each year to renew your registration. The registrar doesn’t own the domain, and cannot use the domain. It simply manages the purchase, sale, and registration of the name.
On the other hand, when you buy a domain in the secondary market, you’re paying for the digital real estate of being able to use that domain for your business’ website. And you’re paying for that price because someone else already owns it and has the right to use it. So you’re paying for the true value of the domain.
Think of it this way – the primary market of unregistered domains is essentially a marketplace of freely available domain names. The secondary market, on the other hand, is more like shopping for real estate, where you have to negotiate the price with the seller, based on the true value of the property. In other words, when dot-coms are registered from the primary market, the buyers could be getting absolute steals (depending on the name, of course).
What Does the Future Hold?
In the future, as savvy domain investors take advantage of this growth of the secondary market, more and more domains will be purchased for resale (especially for dot-com domains). For business owners and brand owners, the implications are clear. If you have a brand and do not own the domain, you should register it before someone else does. If you fail to do so, you may pay for it later (literally).
However, it’s not all doom and gloom in the domain market. We are not in a situation where domain investors are gobbling up all the good domains and selling them for 1000% profit. While the secondary market is growing, a vast majority of domains are still sold on the primary market (1.25 million in the secondary versus 39 million in the primary). Additionally, in 2020, end-users registered 128 million domains while domain investors registered 27.7 million domains.
Ultimately, however, you may find that the dot-com domain you want to purchase is already taken, and you have to go through the secondary market anyway. This is not the end of the world, as you still have options. The experienced domain broker team at Saw.com will work on your behalf to acquire the domain at the best possible price.
The Saw.com domain broker service is a team of professionals with years of experience buying and selling premium dot-com domain names. We know the market inside out, and will always get a fair price. Understanding the value of domains, we can also provide consulting services for how a dot-com domain could help your business find and keep new customers. Speak with a Saw.com domain broker today!