Brian Sharples, founder of the US-based holiday rental site HomeAway, paid a neat $35 million to acquire a website called VacationRentals.com . He didn’t snap up the site for a hefty price only to acquire another dotcom business. He did it so that competitor Expedia couldn’t have it. This deal, the biggest in the domain name market, is a great example of how real estate on the internet can turn out to be a gold mine.

Buying domain names on the internet, with the intention of holding on to them until you are offered big money for the same, is now an organised market. The payoffs can be big if you are an affluent investor. Sought-after names can fetch millions of dollars at auctions. But this is not a gamble for retail investors. Be prepared to dole out big cash if you want to pick up names that stand a chance of hitting the jackpot.

Domain names in the top 20 list are insure.com, fund.com and beer.com . And how can you ignore sex.com ? These fetched a cool $7-16 million over the last few years.

Domain names derive their value from being a unique address on the web. For anyone looking to set up shop on the world wide web, it’s the domain name that is the crowd puller. Look at it as the virtual world equivalent of owning prime real estate in Cuffe Parade or Connaught Place. That’s why there is only one hotels.com, toys.com, business.com — you get the picture?

Agreed, domain names are a great money-making idea, but how do you pick the right one?

Go with dotcoms For starters, you should know that in the hierarchy of the internet, domains with ‘ .com ’ are the most valuable, as this is the most widely accepted extension for a domain name. Others, ending with .net or .org or .in, seldom net you good money.

Businesses are always on the lookout for short, crisp names that are easy to type out. Therefore, maltbeverages.com may not quite carry the same price tag as the pithy beer.com . Fund.com certainly says it better than assetmanager.com . Chuck apparelretailer.com in favour of clothes.com .

Keywords Try second-guessing the Google junkies and select names which are keyword-rich. Put yourself in the buyer’s shoes and think up keywords that someone would type in when they’re looking for products or services to buy. For instance, loans.com was bought by Bank of America for $3 million. Toys’R’US, a leading toy store, paid $5.1 million for Toys.com .

If you have managed to find a sure-shot winner, be sure to grab other extensions as well. This will avoid someone else purchasing the same domain name and squatting on your territory.

How to buy one All domain names are approved by the Internet Corporation for Assigned Names and Numbers (ICANN). There are many companies that help you register the names — GoDaddy and register.com are some popular ones. If the name you’re thinking of isn’t taken, your job is easy.

You create the domain name, register it for a small amount (starting with $10) and then simply wait till someone bids big bucks for it.

But to find a top-notch name, auctions may be a better avenue. There are many avenues to buy domain names in the secondary market through online auctions — Sedo is the largest domain market place. Heritage, afternic, snapnames and GoDaddy are some of the other auction websites. While buying names at an auction, your bids may be as low as $5 or as high as thousands of dollars.

Here, getting your hands on that one big name is far more desirable than buying scores of low-quality names at a bargain.

Fads on the internet can arrive and disappear in a blink. So, keep yourself updated on hot new trends. This will give you a clue as to what’s in and what’s out.

Plot or build Just like with real estate, you need to decide whether you want to hold a domain name passively or build on it.

A domain name can be flipped (sold) in two different ways. One, you can buy a domain name and then resell it, without actually building any website.

The second way to monetise your investment is to build a website, market it, bring in traffic share and then sell it for a hefty sum. But you need to be a whiz at web development and set apart time and effort to invest. One of the best strategies is to buy domain names in your area of expertise. This way you can showcase good content.

You can also use Twitter or Facebook to market it. Once you bring traffic to your site, it can earn you revenues from Google adsense or affiliate sales. Voila! You are in business.

The winners of 2013

Sedo, the world’s largest domain marketplace, saw 34 of the top 100 sales. Netting more than $4.5 million in 2013, .com domains accounted for 83 per cent of the top 100 names sold. Leading the list for 2013 is Jobs.ca , which closed at $450,000, followed by Body.com at $380,000. Another unusual entry in the top 10 was Sandwich.com , which fetched $137,500 during Yahoo’s auction of more than 100 domain names in late November.

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