What’s in a (Domain) Name? The $2 Billion Secondary Market for Dot-Com Domains

Over half of online customers worldwide go to the websites of businesses to begin searching for products—either directly or guided by search engines. Even those guided by their friends and social media eventually go to a company website. Therefore, purchasing a domain name—often a Dot-Com—is an important early step in building and marketing a business.

Usually, end customers can purchase and register a domain name through a registrar—a transaction we call a primary retail market registration. However, not infrequently, a domain name one thinks of has already been registered by someone else—but not for business purposes; it is available for resale on the secondary retail market. Among the stories of domain names sold in the secondary market is Voice.com, which famously sold for $30M in 2019.
How often does this happen? Who holds domains for resale? Who buys them? What do they sell for? These are interesting questions, but it’s challenging to get hard data to answer them. Estimates of market size range from $1 billion to $3 billion and there is little understanding of the players and dynamics involved.

To better understand the secondary retail Dot-Com market and develop a high-level view of market dynamics, we conducted surveys and interviews with more than 60 domain investors (domainers) and service providers. We then quantified and validated what we learned by merging over 5 billion rows and 40 billion individual data elements from zone files and Whois records spanning 2017 to 2020.

Here are some findings that we thought were very interesting:

• Most new domain Dot-Coms are registered in the primary market. In 2020, there were a total of 39M new domain registrations in the primary retail market as compared to 1M secondary retail market resales.
• However, domain names that are resold can be 150-200 times as expensive with a typical resale ranging from $1,700-2,500.
• The net result is that, on a dollar basis, the secondary market, at $2.1B/year, is almost as big as the primary market, at $2.3B/year, and nearly double the size of the registry’s wholesale revenue of $1.1B/year. In other words, nearly half of the dollars end-users spent buying new domains go to domainers.
• Secondary market revenue is up by 26% since 2018 with domainer-owned inventory currently representing ~18% of all Dot-Com registrations.
• Domainers appear to fall into 4 segments based on their portfolio size:
  
  • Corporate domainers. These number in the dozens of domainers. Each of them owns more than 10,000 domains and together they hold ~26% of secondary market inventory.
  • High-volume domainers. This segment has a few thousand domainers. They each own 101 to 10,000 domains—and together hold ~18% of secondary market inventory.
  • Low-volume domainers. Each domainer in this segment owns no more than 100 domains. They are too numerous to count reliably, and together hold ~13% of secondary market inventory.
  • Private domainers. The final segment is one that is opaque, i.e., a segment where ownership patterns and numbers are difficult to estimate—these domainers hold ~43% of secondary market inventory.
• Corporate domainers seem to be consolidating the market. Corporate domainers have grown sales by 44% annually and inventories by ~7% annually, while high-volume domainers have seen sales decline by – 2% annually and inventories decline by 6.1% annually. This points to an overall consolidation in the industry as high-volume domainers sell their portfolios en masse to corporates, a phenomenon that is supported by anecdotal evidence and interviews.
• Most secondary market transactions (about 55%) occur in marketplaces, some of which are owned by registrars.
• The Chinese secondary market has decreased in size significantly, declining from 45% of all transactions in 2017 to 18% in 2020. At the same time, the US market has grown, accounting for ~30% of transactions in 2020, up from 10% in 2017.

Looking forward, the number of domains held for resale will likely continue to outpace the number of domains held by end-users—i.e., the share of Dot-Com registrations held by domainers will increase. Private registrations will increasingly obscure all aspects of the market, including inventories and transaction volumes. Secondary retail market consolidation will continue until few high-volume domainers are left. Among low-volume domainers, low barriers to entry will allow sustained inventory growth, and although low-volume domainers may struggle to monetize their purchases, their enthusiasm and enjoyment of domaining will likely be sufficient in the near- and medium-term to keep them participating in the market. Finally, corporate domainers may try to maintain sales volume growth with new business models—for example, through financed sales to end-users.