Tuesday, July 11, 2017

Domain Names as Real Estate

People sometimes ask me to explain the whole domain name - web hosting business, and I find the following analogy helpful. While I know that the comparison of domain names with real estate is widely used, I think the following account has some unique characteristics. 

I tell them that owning a domain name is like owning land (well really it is more like leasing land for a certain period of time). You need that land before you can build a house (see next paragraph). Just like the price for land varies greatly, so does the price for domain names. An important criterion for the price of land is the location - land near a city normally sells for more than land way out in a rural area. The similar idea to location for domain names is the top level domain (TLD), some are more valuable (like 
.com.org or .net) and others less so. But just like not any piece of land in a city will demand a good price, just because it is a .com domain by itself does not mean it is valuable.

The new top level domains (nTLDs), things like 
.site or .xyz or .design, are sort of like new subdivisions that are being developed. Initially land there commands a lower price, even if the long term prospects look positive.

Some country specific domain names require you to be from that country to use that domain name. For example, I live in Canada, and .
ca domain name holders must reside in Canada. That is sort of like regions that have rules about foreign ownership of real estate. For the most part the nTLDs don't have specific requirements; you can own a .science domain without being a scientist (I don't think it should be that way, but that is a topic for another post!).

But while location is important, it is not the only thing that matters. Perhaps you really want a site with a nice view or forested property or privacy, these may matter more to you than location. In the same way you may be able to get just the perfect name with one of the nTLDs, so that name will be valuable. Just as we have observed with many cities, land further out has become increasingly more valuable over time, I expect that the nTLDs will increase in value gradually as acceptance grows. The acceptance will require that some people build good reputable websites on the nTLDs.

If you want both a great location and special features, for example waterfront property on a large lot near a city centre, that will indeed cost a lot. That is why a few domain names, mainly 
.com, go for such high prices.

The land analogy to domain names suggests another truth. Land is only valuable if it serves the needs (and desires) of someone. A domain name is only valuable if someone will desire it and find it useful for their purposes. While various factors enter into an evaluation of domain name worth, for example, is the TLD respected, is the name easy to remember and spell, does the name reflect your organization positively, etc.

After you purchase land you usually have a house built, and the analogous concept is to build a website. While you need land to build a house (well if we exclude strata developments, mobile homes or house boats!), the land by itself is not enough for a place to live (unless you want to live in a tent permanently!). Also, you don't need to build the house right away, and that is like those who hold domain names, hoping that they will become more valuable in the future. A good domain name without a good website is a wasted opportunity, so it does not make sense to build a poor website on a premium domain name.

In life our needs change, and most of us live in several homes, in different locations, over our lifetime. That may happen for your organization or business needs. You may need to purchase additional domain names, or may decide to rebrand yourself with a new domain name.

You also don't want people to confuse you with an unsavoury person who lives in the same city. Let's say there is someone who lives in the same area that has almost your name, and he has been in trouble with the courts. You want to take whatever steps are possible to protect your own good name, so people won't be confusing you with him.

For people to find your house they could use the GPS location that you give them (that would be like the IP address in the world of websites), but most will look in some sort of directory to see where you live. The domain name server (DNS) has this role, linking a specific numerical address to the domain name that you have registered. There are actually many DNS on the internet, but they rapidly share the information, so if you move your website to a new location they will be able to find you at the new location.

Just as you can sell land alone (domain name by itself) or land with a house (website with the domain name), both domain names and complete websites are sold in the market. While there are domain name advisors, and others who will act as agents for a domain name purchase or intermediaries in the sale, a standardized domain name agent like a real estate agent is not firmly established.

If this analogy is helpful, feel free to use it. I hope you find just the right domain name! 


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