Home / Blogs

If the Number '5' License Plate is Worth $6.8 Million, What is Your Domain Name Worth?

Enrico Schaefer

Domainers can learn from what is happening in a similar market for — of all things — vanity license plates. The number "5" license plate sold for $6.8 million dollars in Saudi Arabia and another 300 vanity plates sold for another $56 million at last week's auction. It is estimated that the number "1" will be auctioned next month for up to $20 million dollars.

Domain names and license plates share some common characteristics. Both allow only one person to own a particular word or number. Of course, the exact same license plate 'word' or 'number' can be registered in every country and, in the USA, every state. There is only one internet. There is only one .com. And while we can all agree that the vanity market in Saudi Arabia may be somewhat unique, the parallel to domain names is still interesting to ponder.

The supply of good words, vanity words and generic words is finite. Demand for those strong generic or descriptive words is high. Where does supply meet demand on the price curve? In the vanity plate auction system, the supply-demand curve is driving prices higher with each auction. We are seeing the same thing with domain auctions as that market matures.

The free market is just realizing the value of a domain name, driven by the fact that each domain name is unique and — typos and cybersquatters aside — their 'one-of-a-kind' nature. Domain names are in many ways like lake front property. There are only so many lots on the lake. View the news story and read more here.

By Enrico Schaefer, Attorney & Advisor: Protecting International Business Interests
Follow CircleID on
SHARE THIS POST

If you are pressed for time ...

... this is for you. More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

Vinton Cerf, Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Share your comments

Re: If the Number '5' License Plate is Worth $6.8 Million, What is Your Domain Name Worth? Jay  –  Feb 06, 2008 9:33 AM PDT

Agreed Enrico, there are many similarities. But I have a few areas of disagreement.

The same domain names, like license plates, can be registered in different countries (such as using the extension .jp for japan for example). Also, with the use of international domain names now, the same words can be translated in different languages in the same extension (see IDN Traders).

There may be only 'one Internet' (well, unless China gets their way!), but when it comes to domain names, they are not limited like lake front property. It is just that some types of domains (such as those using the .com extension) are more valuable than others due to their market appeal. The value of domain names is based firstly on the status of the extension (.com is king), secondly on the language (English, for now, reigns supreme), then thirdly on their limited availability within that extension and within that language. Only then does the 'lake front' value of domain names come into play.

Re: If the Number '5' License Plate is Worth $6.8 Million, What is Your Domain Name Worth? Enrico Schaefer  –  Feb 11, 2008 9:57 AM PDT

Jay: 

It is an interesting parallel isn't it?

I agree there are a large number of domain extensions which might apply to a single word (just like there are many countries and states where the same license plate word or number might be assigned).  However, I've also noted above that there is only one .com.  My analysis is based on the premise that .com will remain the heavyweight of domain extensions into the indefinite future.  You are correct that the "lake front" analogy isn't perfect here, but certainly applies within the .com space and English language parameters. 

What is a domain name worth?  The answer is the same in the domain space as it is in the license plate space.  The domain is worth what a willing buyer is ready to pay to a willing seller.  The number of willing buyers continues to increase as does the status of owning a great generic word domain.

Re: If the Number '5' License Plate is Worth $6.8 Million, What is Your Domain Name Worth? Jay  –  Feb 11, 2008 11:31 AM PDT

Yes, when applied to just .com, the analogy is more or less appropriate. The different language possibilities now for .com are like license plates in different countries. Also, I suspect that the skills of a domain trader would be similar to those of a license plate trader.

There is one key difference - it is minor but important - the names for number plates are valued because of their expressive appeal, whereas domain names are valued by their commerciability (whether measured in traffic, keyword popularity or brandability). This just reflects the different purposes associated with license plates and domain names. The plate 'Sexy Suzy' has value because it connects with a person (no doubt someone named Suzy) and allows that person to express something about themselves to the outside world. The domain name SexySuzy.com, on the other hand, has value because it tells the world what they can expect to find at that site (no doubt pornography).

The license plate expresses meaning from inside to outside, the domain name is a sign for what to expect within. As such, the thinking involved in selecting marketable number plates would differ somewhat from domain names. However, at the end of the day, it is the market that determines the value of both, and on that basis there is little difference.

Re: If the Number '5' License Plate is Worth $6.8 Million, What is Your Domain Name Worth? Foong W.K.  –  Feb 18, 2008 2:58 AM PDT

It is just all about market supply and demand, when someone believe there is a value for it (be it just for showing off or potential future increase of value of owning such property), the rest is just how much it is worth that is agreed between the seller and buyer. Domain auction is hot topic now and that helps float the prices high, but hard to say paying millions of dollars for a common word domain is worth that value say 10 years down the road if that domain remain as just a dormant domain name without any actual business activities being carried out with it.

To post comments, please login or create an account.

Related

Topics

IP Addressing

Sponsored byAvenue4 LLC

DNS Security

Sponsored byAfilias

New TLDs

Sponsored byAfilias

Domain Names

Sponsored byVerisign

Cybersecurity

Sponsored byVerisign