Domain Names, the digital 'real estate'
Why do I refer to domain names as "digital real estate?" I'll explain.
You're already familiar with domain names. They are unique, language-friendly web addresses. Commonly used domains include google.com and facebook.com. Every website is hosted (or housed) at a domain name. When you want to visit/use that website, you visit the domain name address.
Domain names, like cheatcodwealth.com (my domain), are registered to domain owners. These owners have the ability to use or sell the domains they own. There are many domain extensions (or Top-level domain TLD) including: .com, .org, .edu, .gov, .net, .ai, .io, and many more.
To help understand better, I like to compare domains to real estate.
In the world of real estate, every property has a unique address. Take the White House, for example. It's address is: 1600 Pennsylvania Avenue NW, Washington, DC 20500.
Anyone that wants to visit the While House would travel to that address. That's a physical address; domains are digital addresses.
The extension of a domain is like the City and Zip code of a physical address:
.com = Washington, DC 20500.
The second-level domain, what we think of as the "website," is like the street address of the property:
google = 1600 Pennsylvannia Avenue NW.
Then, there are subdomains that come before the second-level domain that are like the unit or mailbox number of the building:
mail. = Unit #3
Digital address: mail.google.com (gmail service)
Physical address: Unit #3 1600 Pennsylvannia Avenue NW, Washington, DC 20500.
This is a simplification, but it helps to understand the concept.
Furthermore, the domain name is similar to the taxlot property and the building that exists on the property is akin to the website that may or may not be built on the domain. Investors can buy both: domain addresses and websites, or either one.
Like real estate, some domain names are worth very little but some are worth a lot. For example, Gold.com recently sold for $8.5 million, Rocket.com sold for $14 million, and Chat.com sold for $15.5 million. Wow!
Some extensions, like .com, are worth more than others, just as some cities (think New York) have more valuable property than others (Prypiat, Ukraine, for the fans of Chernobyl). How do you know what a domain is worth? It's a difficult question. We published this blog to explain it.
Domain names are a digital asset in my portfolio. There are several ways to use domains to generate income. One example is to build a simple website on a domain that can generate revenue passively. Another example is leasing the domain to an end user who wants to use it for their own website.
Domain names can be bought and sold via marketplace platforms like GoDaddy, NameCheap, and Sedo. They are just as illiquid as real estate and sometimes less liquid. This means that it can be challenging to find a buyer. It can take years, sometimes decades, for a domain name to be sold to a wanting buyer. Just like owning a real estate property, careful planning and diligence is needed to manage it.
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