Domain Investing Remains Attractive, Even Amid Digital Asset Volatility

The last few years have seen heady highs and shocking slumps for digital assets. Back in 2021, the promise of Web 3 and the metaverse and the capabilities of the blockchain were an obsession in the tech sphere, with excitement reflected in the world of finance. The idea of reshaping the internet from the bottom up was tantalizing. So was the promise of making money by getting in on the ground floor (or at the very least, the first floor) of a new kind of investment. Throw in COVID lockdowns and life lived almost entirely online, and you’ve got a recipe for NFT mania.

Of course, it didn’t last. Since the market’s peak in 2021, some NFTs have held their value and proved excellent long-term investments, but far more have become near-enough worthless. This is demonstrated by the fate of Open Sea, an NFT Marketplace launched in 2017. In 2022, Open Sea was valued at a massive $13 billion. By late last year 2023, however, the NFT Marketplace’s own investors estimated its value at just $1.4 billion, a 90% reduction.

In a constantly evolving digital economy, picking out the next big thing can be tough. And the truth is, it may not be necessary. While the rise of Web 3, NFTs, and Season 1 of Tiger King were getting all the attention, domain investing held its ground as a viable and profitable investment strategy within the digital landscape. In fact, there has been increasing demand for premium domains, and some of the biggest domain sales in history occurred over the same period that saw NFTs burn bright before fading into the background.

Why Has Domain Investing Remained Profitable?

Domain investing first emerged in the mid-90s and, since then, domains have generally increased in value over time, while NFTs seem to have done the opposite. Here are a few reasons why:

• Domain Names Have Utility: Domain names serve a practical purpose. They offer an online home to brands, and in the modern world, every business needs an online presence. This means there will always be a demand for domain names, as well as an increasing demand for premium and ultra-premium domains that provide authority to businesses and ease of access to their users.

• Domains Have Tangible Value: Unlike most NFTs, domain names have a tangible, real-world value, which is tied to domain relevance and recognizability. This is why premium domain names, such as single-English words, category-defining domains, or memorable phrases, provide a particularly exciting investment opportunity.

• Domain Investing Has a Relatively Low Barrier to Entry: Because domain investing has a relatively low barrier to entry compared to many other investment opportunities, it’s a viable option for many people. There are costs and risks involved in domain investing which shouldn’t be taken lightly, but because it isn’t as gate-kept as many investment sectors, there’s constant innovation and creativity in the area.

It’s important to note here that, when I talk about domain investing, I don’t mean cybersquatting. Squatting involves buying domains that include trademarked names in the hope of forcing companies to pay above the odds for them, which is illegal. Domain investors, on the other hand, buy promising, brandable domains with no obvious connection to current businesses.

One of the factors that makes domain investing so interesting is the way naming conventions develop. For example, as consumers have become more brand-savvy and tech-savvy, and search engines and SEO strategies have evolved, trends have moved away from keyword-focused domain names and towards more brandable options like creative spellings (Lyft.com), abstract single words (Slack.com), and compound words (Instagram.com).

What Will the Future of Domain Investing Look Like?

With this in mind, what’s next for domain investing? Going forward, it seems likely that the increased demand for premium domain names that has been obvious to those of us in the world of domain sales over the past few years will continue. Brands want to differentiate themselves from the competition and be remembered, and increasingly, founders and CEOs recognize the right domain as a tangible asset, making premium the sensible choice.

At Squadhelp, we’ve helped thousands of business owners of all kinds find names and domains, and time and again our customers have told us they’ve come up with several great names themselves but can’t find an exact or partial match domain. This is why we tie naming and domain purchase together, and why I believe this will soon become the norm for many.

Ultimately, the folding together of name choice and domain purchase should lead to more awareness of premium domain marketplaces, pushing domain investors towards increasingly sophisticated marketing.

These changes are coming at the perfect time, as AI sales and marketing tools come of age. In tandem, advanced search functionality within marketplaces is allowing buyers to find industry-specific domains and raising the value and viability of niche domains. In fact, at the moment more than 60% of buyers who search for certain keywords on Squadhelp end up buying domains that don’t include those keywords. This implies that entrepreneurs are looking for metaphors or indirect connections to their industry within their brand name and domain, something smart search that truly understands buyer intent will make much easier.

Final Thoughts

The combination of utility and brandability provided by domains has kept their value rising for two decades, with no sign of the market slowing down any time soon. At present, NFTs may be brandable, but they lack utility.

That may well change in the future as blockchain technology becomes part of our lives. In the late ’90s it would have been impossible to predict how fundamentally the internet was going to reshape our world, including how we do business and build brands. But until there is a fundamental change in how blockchain technology affects our daily lives, domains remain the best digital assets available.

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