Domain Stability – How Safe Is the Investment in Domain Names?

While considering the significant losses in the financial market, the volatility of the crypto, the increase in the consumer price index, and inflation in the aftermath of the post-COVID pandemic, one vital question arises among investors – is the investment in domain names a safe bet?  

And what about domain stability – is the market safe or volatile; what forces affect its ups and downs? Which asset class holds fewer risks and a fair return on investment? 

Questions like that highlight the need for safe-haven assets (just like domain names) during exceptional times. So, the more we learn about the different asset classes and the associated risks, the better equipped we will be to safeguard against future exceptional risks. 

Crypto Instability – Can We Rely on Digital Assets?

The recent catastrophic failure of the stablecoin Terra made the whole crypto market unstable, whipping out more than $200 billion in a matter of days and creating a contagion sell-off across other crypto assets. 

Historically, crypto-assets, including the largest ones like Ethereum and Bitcoin, have been extremely volatile. And their prices in the crypto market fluctuate because they are heavily influenced by supply and demand, investor sentiment, government regulations, and media hype. All of these factors create price volatility and crypto instability. 

Domain investment, on the other hand, is not volatile. As long as the investment is reasonable, the return on investment is usually high, and the risk associated with it is low. Compared with stock investment, crypto-investment, and real estate investment, domain investing holds many advantages. 

First, a domain name investment doesn’t need to focus on the market as the stock investment does. The risk associated with the investment in domain names is low compared to cryptocurrency. Plus, domains have no cycle that dictates the value.  

Compared with real estate, domains belong to light asset investment, and you don’t have to deal with tenants or water leaks in the middle of the night.  

And even during the dot com bubble and during times of uncertainty and pandemic, domain investment remained fairly stable investment. 

The Domain Market Continues to Grow…

Before investing in any asset class, it’s important to take a look at how the market is developing and its stability. 

In 2021, the domain industry continued to grow without any sign of slowing down. With the rise of NFTs, domains experienced new heights. And even though the world economy continues to be affected by the pandemic and global wars, the domain industry remains buoyant.  

Over the past two years, the world has been forced to stay at home, giving a tremendous boost to the ongoing digital transformation. Forced by this new online-based normality, the domain industry continued to post record-breaking numbers.  

For instance, the ccTLDs (country code top-level domains) .de, which is one of the most successful domain extensions worldwide, reached 17 million domain registrations. Meanwhile, the domain prices in the aftermarket skyrocket.  

The domain market has been growing since the very beginning of the commercial internet. 

And “the domain year 2021 was a stellar year in many ways, with growth across all areas. Compared to 2020, there was a 15% increase in the number of sales, while the sales revenue increased by 49%.” (source) 

Those numbers only show that the domain industry is stable and growing (and will continue to grow). 

However, the fact that the domain industry is stable doesn’t mean that you can purchase any domain and expect to become the next millionaire. As with any investment, you have to be strategic in the purchase of your domain name and know-how to protect your investment so that it’s stable and gives you the return you expect. 

How Are Domain Names Protected?

Domain name protection entitles several steps starting from the process of registration of the domain through enforcing domain ownership protection. 

1. Use a trustworthy registrar to purchase your domain name and secure the setup.  

The protection of the domain name starts with the purchase of the domain name. We strongly advise you to stick with a registrar that has established a good reputation over time and is responsive to customers’ inquiries in case you need help.  

ICANN (Internet Corporation for Assigned Names and Numbers) -the private non-profit organization responsible for allocating IP addresses and managing the domain names system, provides a list of all accredited registrars. When you first register your domain name, keep an eye on your contact information and make sure that the password you have chosen to access your domain is strong and secure. 

2. Keep an eye on the expiration date.  

Keep a close eye on the expiration date to avoid losing your domain name. And this is highly important, especially if you have several domain names. Depending on your investment goals, you might choose to register the domain names for an extended period than renew them annually, or you can choose the auto-renewal feature. 

3. Monitor similar domain names.  

It’s a good idea to register alternatives to your domain name. This might include similar alternatives to your domain name or alternative top-level domain names like .org .uk .net, etc. If alternative versions of your domain name are already purchased, you might consider contacting the owner and buying them. This way, you might prevent becoming a victim of typosquatters who register fraudulent websites under alternative, very similar domain names. 

4. Domain ownership protection.  

Many domain registrars offer domain ownership protection feature, which protects your domain from the transfer, change, or deletion of your domain unless you as an owner give explicit permission. This way, you can save the loss of your domain name caused by malicious intent. Different registers offer different levels of protection, ranging from hiding your contact information, constant security monitoring, installing a proxy that filters email requests, etc. 

5. Register your domain as a trademark.  

You can consider registering your domain names as a trademark to enforce protection and secure it under intellectual property rights. A trademark is a word, symbol, or name that distinguishes a product or service from competitors.  

However, not every domain name will qualify for registering a trademark. Domain name trademark applies if the domain name is not generic but distinctive and if the owner is the first to use it. When a trademark protects a domain name, the owner has the right to prohibit the use of misspelled or similar domain names by others. 

What Is Cybersquatting?

A common threat that you want to protect your domain name against is domain name cybersquatting. Infringers use this technique and purchase a domain name in the name of an existing brand or a slightly different domain name with malicious intent.

It might be strange why someone would purchase a domain name in the name of your business. Still, domain squatters usually do so because they intend to profit from reselling the domain name (usually to the legit owner of the brand) for much more than the squatter initially paid.

Brands suffer from the repercussions caused by revenue loss, diverted customers, and reputation damage.   

Domain Spoofing- What Is It?

Domain spoofing is a common phishing scam that occurs when the attacker appears to use the company domain name to impersonate either a company or an employee. 

How to Protect Your Investment From Domain Name Abuses?

Domain name abuses can be a long and frustrating process as scammers usually don’t respond to or cooperate in any way to resolve a problem. Usually, such disputes can be resolved in court. But to avoid the delays and costs associated with a court procedure, it’s always advisable to resort to the domain name dispute resolution procedures managed by ICANN. 

Are Domain Names a Safe Investment?

The numbers prove that the domain industry is stable and growing, and brands will continue optimizing their domain strategy. Although a relatively safe investment, domain investing, should be treated as such – investment! And as with every investment, the return on investment and the risk associated are the same coin’s sides.   

To minimize the risk associated with the domain investment while significantly increasing the ROI, you should have the knowledge, expertise, and time to nurture and protect your investment. If you lack any of those, we advise you to always use the services of an experienced domain broker who knows the ins and outs of the domain industry and has a proven track record of dealing with complex high-acquisition deals, like our leading broker, Ian Garner. You can contact Ian, here.