6 Factors That Determine Domain Value

It can be incredibly difficult to determine the value of a domain. There is a lot of misunderstanding about how domains are valued.  But if you understand the fundamentals of domain valuation you’re more likely to know how to get a good price for your domain. 

Domain names are an essential part of branding and marketing in today’s business landscape. When you have a great domain it makes business easier. Business tasks such as marketing, positioning, and branding become simpler when the domain name supports the overall mission and focus of the business. When a business has an easy to remember domain name their sales and website traffic can increase dramatically, making a substantial difference to their bottom line. 

The law of supply and demand means that the prices of domain names will continue to increase as the number of businesses crowding into the online space increases.

Understanding how to accurately assess the value of a domain is challenging to most people and businesses in Australia, which is why we have put together 6 factors to help you understand the value of a great domain name. 

Supply And Demand

In Australia, there are 2.1 million businesses and a new small business is created every 100 seconds, on average, in this country. Every day, around 1500 .com.au domain names are released back into the public auction domain name system. There is a fixed supply of domain names. Particularly domain names that are short, highly-generic, two or three-letter or have concise names that appeal to many companies.

The law of supply and demand means that the prices of domain names will continue to increase as the number of businesses crowding into the online space increases. As more and more new Australian businesses enter the online space each year, each needing to stake their claim, concise, clear, and definitive domains increase in value. This means that domain names with a potential high-value increase through time. 

Who Acquires The Domain

The value of your domain will be radically different depending on the type and size of the company that’s attempting to acquire your domain. This is why domains that are short, highly-generic, two or three-letter, are valued higher because more businesses will be interested in acquiring them. 

What’s more is that the larger the business, the more ability it has to leverage a key domain name. For example, your local pub would never be able to leverage beer.com.au, but a large mega-brewery would. 

Both large and established companies and startups that are looking for venture capital investment will look to buy definitive, short, and descriptive domain names that make them stand out in a crowded marketplace. 

Large companies will want to further establish their domains. While startups will want to gain credibility with potential investors. So if your domain appeals to one of these two key types of purchasers it will drive up the value of your domain name. The more buyers there are for a scalable domain, the higher the valuation. 

The Size of the Market

Does the domain name appeal to multiple markets?

Does the name appeal to one key market with a lot of big potential buyers? 

Or is the name in a narrow niche with fewer potential interested buyers? 

The larger the market and the more competition there is within it, the higher the potential price you’ll get for the domain. 

For example, when the crypto market price surges in value, key domains in this category can likely get a very high price at the same time. When you understand how many markets your domain appeals to, and the potential size of that market, you’ll better understand the value of your domain. 

How The Domain is Used

How a domain is used will directly determine it’s valuation. A simple domain like amazon.com would have a much different valuation if it was promoting saving the Amazon Rainforest than as a huge online retailer. 

Furthermore, when a domain touches all aspects of a brand it will demand a higher price. An example of this would be the domain for amazon.com versus one for amazonbooks.com. The first domain could have all links to the company’s products and services. Whereas the second would be a much narrower usage. 

There are two key ways a domain is used. 

One is for branding. A business may, in fact, purchase several brandable domains that all point to the brand. For example, a big health and beauty brand might want to own the domains beauty.com.au, hair.com.au, and makeup.com.au(.) 

The other reason a brand may purchase a domain is for marketing and lead generation. When used this way the domain points to a specific marketing campaign for the brand. This might include something like holidaymakeover.com.au or 2020beauty.com.au for a marketing campaign that is focused on harnessing the new year and holiday markets involved with the above business. 

Naming Factors

There are 3 factors involved in the name of the domain that contributes to its value. Whether a domain is a keyword, the number of words in the domain, and the length of the domain. 

Domains that describe a market’s main keywords will be of very high value. Whereas domains that describe peripheral or nonexistent keywords will potentially have a lower value. 

The number of words in a domain and the domain’s length also contribute to its value. When you add more words to a domain name it makes it harder for consumers to use and find the domain. House.com.au would have a high value. Whereas thehouse.com.au would have a lower value as it would be easily confused with house.com.au and lose a lot of internet and email traffic to it. Same with myhouse.com.au or ahouse.com.au(.)

This is also why one or two-word domains which are category-defining or “category-killers” fetch very high prices because they are easy to remember and are the default that people think about, as seen above. The closer a domain is to what a brand does, the higher its valuation. 

Cost Per Click and Search Volume

When researching a domain in google you can discover the search volume and cost per click. These metrics can help you determine the value of a domain as it helps you understand the interest level in the keywords involved and the demand for those keywords. 

With these factors in mind, you can begin to understand the value of a domain better. However, it’s always best to get professional advice when valuing a domain through a domain brokerage firm, whether you’re buying or selling a domain name.

38 thoughts on “6 Factors That Determine Domain Value

  • Avatar
    December 8, 2019 at 10:55 am
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    This is a pretty good summary.

    Some additional points:

    (1) As more and more Gen Y and Millennials find their way into key marketing positions and the dinosaurs leave, demand for generic .com.au names will increase even more;

    (2) Although 30% of small businesses fail within the first 2 years, 50% within the first 5 years and two thirds within the first 10 years (nb. quite often the name choice is the first and enduring bad decision among many), the failure of a business very rarely translates into abandonment of the generic domain name HELD by that business.

    Most of the time, the owner of the failed business will repurpose or sell the generic domain name or pass it on to a friend, family member or sometimes the IT guy. In other words, scarcity is increasing exponentially;

    (3) The auction results on Netfleet and Drop.com.au are for the most part WHOLESALE prices.

    End users rarely bid on these sites (compared to investors) as (i) end users generally get less 24 hours notice that the domain has expired and (ii) it is not rational for an end user to monitor these sites on a daily basis every year for the 1/1,000,000 chance that the prized domain name they want is dropping;

    (4) A new asset class. That’s what generic .com.au domain names are. Dozens of professional domain name investors in Australia have used SMSFs and Family Trusts to acquire and hold premium .com.au names for the long term.

    This trend will only increase as people realise you can make money while you sleep with a developed or even monetised domain name, whereas heritage number plates are pure vanity, precious metals are commodities and the market for gemstones is manipulated by those already vested; and

    (5) Five or six figures invested in a .com.au domain name will usually deliver a far greater ROI than any equivalent spend in magazine or newspaper advertising, outdoor media or transit advertising or even radio or television advertising. Fix the kink in the chain first, then ride your bike.

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    • Avatar
      December 9, 2019 at 2:46 pm
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      The above is a bit like telling Collingwood supporters that Collingwood is the best team. It is what people want to believe not where things actually are. Only Point (3) is an accurate statement.

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      • Avatar
        December 9, 2019 at 3:25 pm
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        You’re wrong Snoopy. Younger people ‘get’ domain names. For example I once sold a single word hand reg. for $6k more than the $1k the buyer refused to entertain buying it for only 5 years earlier. This was because a young girl was in charge of marketing instead of the older woman I dealt with the first time.

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      • Avatar
        December 9, 2019 at 3:50 pm
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        You sound so jaded Snoopy

        All of the above have been true for .com and are true for .com.au also

        Get over .com

        .com.au took over in Australia in 2007

        Everyone; Snoopy is a .com.au pessimist with a hint of antimony – on the one hand he won’t sell his domain Shares.com.au for $200k on the other he trash talks .com.au when questions of valuation come up

        https://domainer.com.au/valuing-domain-names/

        Stale opinions from the last millennium that linger like a bad smell.

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  • Ed Keay-Smith
    December 8, 2019 at 1:45 pm
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    Great article Ashlee, some very important points that all domain investors, especially ones new to the game, should follow.

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    • Avatar
      December 9, 2019 at 2:40 pm
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      Last I looked the number of .au domains had barely grown in years so disagree with the premise of the article.

      Resale prices are going nowhere also, I’d say values were somewhat higher 10 years ago for most categories.

      • Avatar
        December 9, 2019 at 3:14 pm
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        People are realizing it is quality not quantity that is important Snoopy.

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        • Avatar
          December 10, 2019 at 1:14 pm
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          That is a meaningless statement, the numbers are there and they aren’t good, less than 2% growth a year.

          • Avatar
            December 10, 2019 at 4:17 pm
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            Which is in line with the Australian population growth rate of 1.5% to 2.3% pa.

            Most businesses that need to be online are online.

            Many domain investors are learning that its better to have a smaller portfolio of great names than a greater portfolio of crap names.

            IP managers are realising that not as many names need to be registered defensively, only one to two dozen perhaps.

            And online business is consolidating generally due to aggregators and big players crowding out verticals.

            Having the right domain name for cut-thru, conversion and retention has never been more important.

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            • Avatar
              December 10, 2019 at 7:18 pm
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              That is a sad state of affairs when we are down to “growth in line with population”.

              • Avatar
                December 11, 2019 at 10:28 am
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                It’s in line with population despite changes in investor behaviours and IP manager behaviours as well as consolidation due to aggregators and big players!

                .com growth is actually the same if you take out the growth in emerging countries (that rely on .com because they have weak ccTLDs of their own).

                .com and .net combined increase for 2019 was 4.3%. Take out e-commerce growth from emerging countries (that rely on .com because they have weak ccTLDs of their own) and the figure is just like Australia.

                Not a sad state of affairs at all, pretty normal!

                There are only so many traders needed in a marketplace. And it is the same for e-commerce, there are only so many online traders needed. Consolidation means many die on the vine while others grow plump.

                In Australia, having a great .com.au domain means you are less likely to die on the vine and more likely to grow plump.

                Why?

                Because people can find you and remember you for starters.
                Because you won’t leak emails and type-in-traffic to other sites and to Google.
                And because you won’t waste thousands or tens of thousands of dollars paying Google to re-route clients and customers to you when they are already looking for you.

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                • Avatar
                  December 12, 2019 at 10:48 am
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                  .com is growing at 5% a year and .net is shrinking. If you “take out” random nonsense made up stuff though you can come to any conclusion you want to think up.

                  • Avatar
                    December 12, 2019 at 2:48 pm
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                    Your dedication to trashing .com.au on .com.au forums screams desperation and sounds like a cry for self-validation

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                  • Avatar
                    December 12, 2019 at 4:12 pm
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                    Sigh

                    Nothing made up, here are the stats:

                    http://www.chandlernguyen.com/blog/2019/05/08/8-key-facts-about-india-e-commerce-landscape/

                    The truth is that China, India, Indonesia, Thailand and Vietnam have the the most e-commerce growth worldwide.

                    The truth is also that .cn, .co.in, .id, .th and .vn are all weak ccTLDs compared to .com.au, .co.uk, .de and .nl (which are the four strongest ccTLDs in that order).

                    Strength is measured by use vis-a-vis .com within that country.

                    .com.au wipes the floor with .com in Australia, and .com is only preferred where the entity is seeking to attract a global audience or has global customers.

                    Thus .com is usually only preferred in Australia for major tourism destinations (think Sydney.com, Queensland.com, MargaretRiver.com) and global corporations like Qantas which prefers Qantas.com for instance.

                    Even global banks and logistics companies are running off .com.au because its all Australians care to think of and remember. (eg. HSBC.com.au, DHL.com.au etc)

                    Getting back to the point. The point is that e-commerce growth globally is in China, India, Indonesia, Thailand and Vietnam, and these countries have weak ccTLDs and therefore rely on .com a LOT more than Australia.

                    Therefore, when I tell you that .com and .net combined increase of 4.3% for 2019 is predominantly due to growth in e-commerce in these countries, you can be sure that I am right, and you Mr Snoopy are wrong. Again.

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      • Avatar
        December 9, 2019 at 7:28 pm
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        “Resale prices are going nowhere”

        Not true at all, with .com.au the median has been climbing every year.

        In my own exp and chats with others, names that used to sell for $3-5k tend to fetch $8-12k now. Names that used to sell for $7-10k are going for $22-30k. High qual names are consistently hitting the mid to high 5 figures. 6 figures less often than 5 still.

        It used to scare people spending big, but annual SEO budgets are $20-30k for many SMEs these days, SEM usually higher.

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        • Avatar
          December 10, 2019 at 1:19 pm
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          There has been 3 reported sales over 20k this year. Even computers.com.au only managed $15k. That would have got $100,000 wholesale a decade ago.

          • Avatar
            December 10, 2019 at 6:14 pm
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            ‘Computers’ is a word from the 1990s, not as relevant today.

            Yes it would’ve gone for $100k+ wholesale a decade ago. But it’s gone for $15k wholesale via Uniregistry, so what, the investor who bought it got a bargain and owns dozens of domain names. Reminds me of Sold.com.au selling cheap on Sedo. Bargains can and do happen, Guide.com.au caught on Drop.com.au today is a good example.

            sold.com.au 15,600 USD 2014-01-09 Sedo
            computers.com.au 10,475 USD 2019-11-03 Uniregistry

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            • Avatar
              December 12, 2019 at 1:01 am
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              Sold.com.au wasn’t a bargain. It sold for fair value in a public auction and that’s all anyone was prepared to pay for it. It sold for well over the reserve too. And yes I know Yahoo paid over $20 million for it in 2001 but that was for a business that was closed in 2003 which was more than 10 years before this auction.

              • Avatar
                December 12, 2019 at 6:46 am
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                Snoopy is that you? Did Ned give you ideas?

                Sold.com.au was definitely a bargain. And just like Computers.com.au it was bought by an investor.

                Where do these silly comments come from?

                Hands up if you just came out of a Y2K silo. … Can I borrow your Backstreet Boys CD?

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                • Avatar
                  December 12, 2019 at 1:31 pm
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                  Everyone has their own idea on what they consider to be fair value for a particular .com.au domain name. There’s nothing like a public auction to sort out what the market is prepared to pay.

                  • Avatar
                    December 12, 2019 at 2:16 pm
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                    Sigh

                    As stated by Paul above, and a point that Snoopy (you?) concurred with, no one really watches or is abreast of these ‘auctions’ other than domain investors.

                    This means that ‘auction’ results are almost always WHOLESALE prices.

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                    • Avatar
                      December 12, 2019 at 8:19 pm
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                      I’m not Snoopy but there’s someone who has done well from domain investing. There’s end user activity in the domain market and unless you know who the bidders were you are only guessing that they were all just investors. I didn’t say that no one was informed about the auction but only a small number decided to bid. The auction was well publicised but like any auction it comes down to who is looking to buy or paying attention at the time. In your opinion it was a bargain and in my opinion it was fair value at the time. We’ll only know if it was a bargain when it is sold again. Have you had any offers Sean?

                • Avatar
                  December 12, 2019 at 5:43 pm
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                  No Sam, Peter isn’t me. A shock to learn multiple people don’t agree with you?

            • Avatar
              December 12, 2019 at 9:05 pm
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              With the current popularity of Fortnite and the game play favouring computer players over consoles perhaps the term computers is more relevant at the moment than you think. No doubt that game alone has generated a massive increase in high end gaming computer sales in recent times.

          • Avatar
            December 11, 2019 at 5:45 am
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            Generally only wholesale sales get reported per point 3 above that you said was accurate. Computers.com.au was bought by an investor.

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            • Avatar
              December 11, 2019 at 8:41 am
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              This is the kind of stuff new tld people argue, supposedly everything is under NDA except the low sales.

              If what gets reported is bad, the market is bad. There has been 3 reported sales over 20k this year, says it all.

              • Avatar
                December 11, 2019 at 11:13 am
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                I have personally purchased 4 domain names over $20k each this year and I know of dozens of other .com.au sales this year that are over $20k. All of which though “are private sales”, but still FACTUAL sales.

                .com.au remains KING in Australia.

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              • Avatar
                December 11, 2019 at 11:26 am
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                Your arguments are pure nonsense Snoopy. TBH I don’t know why you bother.

                It’s like saying .com must be doing crap because the world over there have only been 48 public sales at the six figure or higher so far this year (per DNJournal).

                In reality, most buyers don’t like disclosing how much they paid. They may have to buy again.

                In reality, most sellers don’t like disclosing how much they paid. They often want to buy other names and repeat the success.

                In reality, it’s only brokers who occasionally make some sales public, and do so for the good of the market.

                Kudos to Rob, Ned, Erhan, Shaun and James for announcing a few of the sales they have been involved in. But the vast majority are never disclosed. And most are subject to non-disclosure agreements.

                Unlike .com and new TLDs, .com.au and .net.au currently has red tape and so there is added reason for sales to remain undisclosed.

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                • Avatar
                  December 13, 2019 at 6:38 am
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                  That sounds like a lot to me, though I think your counting may be off as Dnjournal shows 53 x 6 figure sales.

  • Avatar
    December 10, 2019 at 9:23 am
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    Good article.

    Look who owns these premium generic .com.au domain names in addition to their often very well known brands and company names.

    This is the tip of the iceberg. Over 100,000 generic .com.au names are owned by savvy domain name investors and major corporations in Australia.

    This investment is what has funded auDA, Their foundation, the domain name Registry Ausregistry, Afilias, Registrars, resellers, IP lawyers etc.

    HappyBanking.com.au
    BestBank.com.au
    SmartBanking.com.au
    Mortgage.com.au
    BusinessBank.com.au
    PrivateBanking.com.au
    Photocopier.com.au
    Milk.com.au
    Vodka.com.au
    Rum.com.au
    Beer.com.au
    Scotch.com.au
    Tennis.com.au
    Honey.com.au
    Cows.com.au
    Pigs.com.au
    Ham.com.au
    ItJobs.com.au
    Bikini.com.au
    Kettles.com.au
    Toasters.com.au
    Oil.com.au
    Drinks.com.au
    Drink.com.au
    Chocolate.com.au
    Trucks.com.au
    Batteries.com.au
    Actuaries.com.au
    Fuel.com.au
    Petrol.com.au
    Steel.com.au
    Metal.com.au
    InterestFree.com.au
    Basketball.com
    etc

    Now with more budget for SEO spend Michael is right.

    When the right company builds out a premium generic .com.au domain name / uses it properly the results can be amazing and way above the value of just that domain name asset.

    “How an Exact-Match Domain Turned $60 Million into $100+ Million in 5 Months With Shaun McGowan”
    https://www.domainsherpa.com/shaun-mcgowan-carloans-interview/

    “How Much Is A Category Killer Domain Worth? CarLoans.com.au Generates $40 Million in 6 Months”
    https://www.thedomains.com/2013/11/05/how-much-is-a-category-killer-domain-worth-carloans-com-au-generates-40-million-in-6-months/

    “How getting the right domain name grew my business overnight”
    https://www.smartcompany.com.au/startupsmart/profiles/how-i-did-it/how-getting-the-right-domain-name-grew-my-business-overnight/

    The good news is the global domain name aftermarket and free trade now often allows people to go after the name they want.

    http://www.Netfleet.com.au
    http://www.Namebid.com.au
    http://www.sedo.com
    http://www.Afternic.com
    https://uniregistry.com/market
    http://domainmarketplace.com.au/
    https://www.godaddy.com/garage/aftermarket/

    GoDaddy auDA.org.au Accredited Registrar
    Domain Name Investing resources – MUST READ DECEMBER 2019
    https://www.godaddy.com/garage/domain-investor-resources/

    GoDaddy auDA.org.au Accredited Registrar
    5 tried-and-true tips for buying and selling domain names for profit
    https://www.godaddy.com/garage/5-tried-and-true-tips-for-buying-and-selling-domain-names-for-profit/

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  • Avatar
    December 11, 2019 at 8:44 am
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    “This is the tip of the iceberg. Over 100,000 generic .com.au names are owned by savvy domain name investors and major corporations in Australia.”

    Who else are they going to be owned by apart from domainers and businesses? Same thing could be said of .top or .mobi…or any extension.

    • Avatar
      December 11, 2019 at 4:16 pm
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      Paul, you missed the point it seems on this one.

      This will go into more detail for new people also:

      These .COM.AU are all owned and are being renewed year in year out by major Australian Corporates with their own well know brand names… They see the benefit to get more .com.au generic domain names in addition to their own corporate brand name. These names are not held by “domainers”.

      The major corporates bought them to reinforce the product or service they provide.

      Sometimes sadly you really shoot yourself in the foot with your bias against the .com.au

      Yes the right .com is good just like the right .com.au can also be good, of use and of value. You need to learn to accept it or you lose credibility.

      I talk to a lot of people globally in the industry, plus IP Lawyers etc and it seems there has been an increase in Non Disclosure Agreements being used for sales. This is happening in .com.au as well as .com and some other markets.

      Do a Whois on these:

      HappyBanking.com.au
      BestBank.com.au
      SmartBanking.com.au
      Mortgage.com.au
      BusinessBank.com.au
      PrivateBanking.com.au
      Photocopier.com.au
      Milk.com.au
      Vodka.com.au
      Rum.com.au
      Beer.com.au
      Scotch.com.au
      Tennis.com.au
      Honey.com.au
      Cows.com.au
      Pigs.com.au
      Ham.com.au
      ItJobs.com.au
      Bikini.com.au
      Kettles.com.au
      Toasters.com.au
      Oil.com.au
      Drinks.com.au
      Drink.com.au
      Chocolate.com.au
      Trucks.com.au
      Batteries.com.au
      Actuaries.com.au
      Fuel.com.au
      Petrol.com.au
      Steel.com.au
      Metal.com.au
      InterestFree.com.au
      Basketball.com

      https://au.godaddy.com/help/why-should-i-register-more-than-one-domain-name-1280

      Why should I register more than one domain name?

      If you’re thinking about registering more than one domain name, you’ve got the right idea. Registering and using multiple domains names is great for building your business, protecting your brand name, and creating a dynamic online identity.

      When you register multiple domain names, you can:

      Keep your competition from registering a similar domain name drawing customers to them instead of you

      Promote the different products and services you offer

      Drive more traffic to your website

      Enjoy more opportunities to market to — and be listed in — search engines

      Create distinct advertising strategies reaching different target markets

      Provide customers more ways to find you when searching the Internet

      Capture common misspellings of your domain name, instead of sending visitors to an error page

      Protect your brand and online identity

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  • Neddy
    December 11, 2019 at 12:49 pm
    Permalink

    Please don’t post under different names on the same article to try and reinforce your points. We do see IP addresses. If you have something to say, why not be straight up and use the one “identity”? And if you can’t bring yourself to do that, then at least change IP addresses!

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  • Neddy
    December 11, 2019 at 1:01 pm
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    Ashlee, great article with lots of valid and commonsense points.

    As someone who has a lot of skin in the game with Aussie domain names, there is one other major factor that potentially affects domain values here in Australia. And that is our regulator auDA.

    Rules have seemed to change constantly; policies are proposed; policies are agreed to; policies are then put on hold or reversed. Red tape and uncertainty abounds. Anonymous complaints are allowed or disallowed. It can be stressful being a domain investor in Australia – but the fact is, it shouldn’t be.

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  • Avatar
    December 11, 2019 at 1:28 pm
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    Snoopy comes to post on here now because DNTrade sucks so badly.

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    • Avatar
      December 11, 2019 at 1:58 pm
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      Good to have diversity of views and someone’s gotta bat for those who have missed the boat. Snoopy keeps it fun 😀

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    • Avatar
      December 11, 2019 at 5:43 pm
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      The average thread here only gets one or two posts, there is a general level of disinterest in .com.au domaining over the last few years.

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