Uncharted entrepreneurship in Africa’s domain name industry

During the heyday of the domain name business in the late 90s, entrepreneurs snapped up attractive .com domains for cheap. Like real estate, the value of these domain names would balloon over the years as businesses rose to claim not only the smartest word combinations, but also their online identities. Buying and selling domain names turned out to be a very lucrative business for some. Domains like sex.com and insure.com would go on to hold jaw-dropping price tags of US$14-million and US$16-million respectively.

That was then. It’s quite unlikely you’ll find a fetching unclaimed domain these days. Still, it doesn’t stop some from trying. Looking beyond brand registrations, an attractive or “premium” domain is considered to have a desirable top-level domain (TLD) — .com is still the most popular — with a short, memorable second-level domain, made up of simple keywords. For example, think of something like cupcakes.com, where “cupcakes” is the second-level domain and .com the TLD.

Today the best domain names can be found on the domain aftermarket. Sedo is one such aftermarket and one of the largest in the world. It has over 16 million domains listed that can be bought directly or through auction. These second-hand or premium domains sell for an average price of US$2 000. By the way, cupcakes.com is currently listed for US$530 000.

In 2012 Sedo recorded domain sale figures in the region of US$68-million, while independent industry reporter DNJournal reported on mega domain sales of up to US$2 450 000. Though industry sales are believed to have been lower than the last three years overall, the wheeling and dealing of premium domains remains a buzzing industry. Why? DomainNameSales reckons of the 200 million registered domain names, only five to 10% are the good kind and as more businesses come online, companies will go to great lengths to protect their brand identities and secure the most revenue friendly domains.

While .com remains popular, .net and .org also continue do draw notable interest. Some country-code second-level domains (ccSLD) like .co.uk is also popular. One that you are unlikely to find at the top of the list however, is .co.za, South Africa’s commercial ccSLD. It turns out, less popular TLDs might attract the entrepreneurial at heart. Here’s why.

As Africa continues to come online, it is likely to follow the trends seen in the early 90s in the developed world. A quick look at Sedo and it seems that some enterprising entrepreneurs who have already bought and listed sex.co.za on Sedo, have received 18 bids for the domain so far. The kicker? Sex.co.za is registered to an American company.

Stephen Gorman, Founder of digital marketing agency, Push Digital Media, is finding a lacklustre response among local entrepreneurs. It’s frustrating he says, as the relatively nascent market offers opportunities that have long since passed in the developed world.

Gorman has a hefty domain collection. He has built up, managed & optimised a personal domain portfolio of more than 70 sites which he claims to be worth over US$800 000.

Gorman reckons Africa’s domain name business is starting to become lucrative. For example, since 2010, Gorman has been developing Fly.co.za and has netted a tidy profit for Fly.co.za & Fly.co.ke, the Kenyan version of the site, he says. According to Gorman, the South African industry has seen six figure sales in 2012, but the public remains largely unaware due to non-disclosure agreements (NDAs).

“South Africa is unique because it is one of the only “English speaking” countries outside of the US, UK and Australasia, which gives some universal value to the domains. Investors in America can buy a domain and develop it into a revenue generating site without having to use translators. It’s not often you have this options with ccTLDs,” says Gorman.

Gorman also has a talent for spotting fix-me-up domains. Like flipping houses, he has for example, developed and sold MedicareConsumerGuide.com to E-health insurance; one of the largest insurance firms in the US; successfully achieving site ranking on the first page of Google.com for terms that are relevant to Medicare. Generally only .gov sites and end users occupy these positions. Gorman sees similar opportunities starting to emerge in Africa.

Very simply, Gorman is encouraging entrepreneurs to sit up and take notice, there is money to be made within the microcosms of the domain industry.

While the domain trade culture in Africa is still emergent, Gorman believes that it can be spurred by doing away with NDAs. Publishing domain sale price tags, especially high profile ones, could galvanise the industry.

“Failing that, it would take one of the big organisations to actively pursue a premium domain and build a brand around it,” says Gorman.

With the mobile industry’s push to apps, could it be that Africa is leapfrogging an industry destined to be extinct?

“It is undeniable that apps have made huge steps in the market but the days where URLs become extinct are some way off. On the flip side of that, premium domains are hugely important now so that you can win the race for people to remember your brand, download and remember your app rather than someone elses (memorable domains are generally premium generics),” says Gorman.

Finally, we wanted to know where the industry stands on domain squatting. Is it an actual, viable, albeit superficial business?

“It is one of those things that is massive, like it or hate it, its not going away anytime soon, it’s shrinking however because of the financial changes within the industry. I personally do not like the model as you can earn more money developing a site and from an ethics point of view, it is the way forward. A premium domain is worth a lot more when developed into a site offering people something that they really need.”

Now, how about that .africa TLD ICANN?