Boardroom explores the emerging world of .xyz domain names and how they are becoming the next best investment asset.
The opportunity here is two-fold: Web3 enthusiasts are catching wind of the trend and buying up .xyz domain names to sell, while investors are dishing out millions of dollars to secure domains in the new internet world.
The appeal for them is two-fold as well: Acquiring one is cheaper than investing in a .com, and there are a lot of options available. VeriSign reported nearly 365 million domain name registrations at the end of Q3 2021, 3.5 million of which are claimed by .xyz domains.
The .xyz domain became available to the general public in June 2014, and by the following fall, more than a million had been claimed. Popularity proliferated after Google’s parent company, Alphabet, secured its corporate site using abc.xyz. And honestly, come on, .xyz is pretty cool, catchy, and easily identifiable for crypto and blockchain companies claiming the URLs.
Are Domain Names Virtual Real Estate?
Statton Hammock, MarkMonitor’s vice president of global policy and industry development, said in an article that domain names are an often overlooked IP asset in general. With this rapid adoption of .xyz domain names, IP investors are uniquely positioned to make a good return on their investments as Web3 grows.
Some experts are even saying domain names are like virtual real estate without the haggle of taxes and tenants. Rob Petrozzo, co-founder and chief product officer of Rally, would have to agree with that.
“As the concept of living a digital life in a fully immersive digital world becomes more of a reality each day, the need to stake your claim and have your own home-base in that digital world will become a necessity,” Petrozzo told Boardroom. “Much like physical land, the most desirable domains are already being spoken for, and the premium on ownership is continuing to rise.”
He’s right, and fun fact: domain name registrations were free until 1995 because nobody really knew the power of the internet back then. And you’d be surprised at the money corporations have dropped to secure their desired domain names. Here are a couple of stats on some of the most expensive domains out there:
- Elon Musk bought the Tesla.com domain name for $11 million in 2016.
- Cars.com sold for a whopping $872 million in 2015 to Gannett.
- Beer.com is worth $7 million today after Andrew Miller and Michael Zapolin originally bought it for $80,000 in 1998.
- VEGAS.com LLC bought the LasVegas.com domain in 2005 for $90 million.
A Time of Opportunity
While .xyz domains are on the rise, Petrozzo said .coms are still leading for commercial use. He says .xyz is a top-five extension, and it’s definitely a more unique domain for personal use when you can’t get your .com or .io address.
“For [digital] wallet addresses, .xyz is more interesting to a lot of consumers,” Petrozzo said. “The truth of the matter, however, is that .xyz still lives within the DNS ecosystem and was born in Web 2.0, so it’s not inherently different than the other .com derivatives that have come and gone.”
DNS is short for the domain name system, the decentralized naming system used to identify computers, services, and other online resources. Domains related to blockchain and NFTs have gained more attention in the past year, which doesn’t appear to be slowing down. Domain names have grown to be recognized as an asset class of their own, and there are some investors out there seizing this opportunity to make some cash.
Take domain investor Swetha Yenugula for instance; she built up a hefty portfolio of .xyz domain names. Yenugula has been selling at least two domains a week since last summer, then sharing price data on her Twitter account. According to Domain Name Wire, she has sold more than 300 domain names and has made investment returns between $2,000 to $600,000 on each sale.
The Asset Class of the Future
I’m sure we won’t ever forget that .coms paved the way for .xyzs to thrive, but will the growing asset class create the new dotcom era? It’s impossible to predict the future — Petrozzo reminds us that there was a time when many people thought .biz would dethrone .com.
“I may regret saying this, but it’s hard for me to envision a world where a business would choose .xyz over a .com as their storefront,” Petrozzo said. “Individuals, and particularly those who choose to do the majority of their transactions via crypto, may gravitate toward .xyz in the near term but, .xyz is not a native Web3 product, so even breaking through for Web3 consumers seems like it may be a tough hill to climb, at least in my lifetime.”
Petrozzo makes good points, but we can’t ignore how anyone can purchase a .xyz for as little as 99 cents, and that alone makes them attractive enough to invest in right now.