Domain Names As Real Estate

Similarities

As the Internet property industry grows, GoldNames expects the industry to look more and more similar to the real property industry. For example, the Internet property industry has already or will soon see the equivalents of the real property industry’s conventional characteristics and opportunities, including:

Formal Investment Funds: As the Internet property industry matures, it will graduate from the unprofessional part-time investors with limited capital, who today are the primary investors in the industry, to formal investment funds. Just like real property funds, Internet property funds will have three sources of returns: current income, appreciated value of property, and the best tax minimization legally available.
Leasing: By leasing out valuable sites, industry players will earn current income to cover operating expenses and to provide some return for investors.
Brokerage: By becoming the leading portal and marketplace for domain names, industry players will earn brokerage fees. 
Appraisals: Just as real property appraisal is a highly refined skill, so too is domain name appraisal. This is a valued profession in the real property industry due to the need for expert data – the same is true for domain names.
Bankruptcy Sales: If Amazon.com went bankrupt, buyers will be willing to pay a high price for its domain name, based on its mindshare, search engine placement, and inherent shortness and brandability. Analogously, certain real property investors were able to purchase Caldor’s properties relatively cheaply after their bankruptcy.
Distress/Divorce Sales: Investors will have the ability to buy quality names relatively cheaply when domain names become available for unforeseen reasons: cash crunch, the untimely passing of the owner, etc.Analogously, certain investors in the early 1990s bought Resolution Trust Corp. (RTC) properties very cheaply. Real property in Asia today is available at prices far lower than prices just a few years ago.
Bundling: By bundling related domain names together, firms can increase their value. For example, Surfnotes.com, Surfnote.com, Surfnotes.net, and Surf-Notes.com are each a good name for an Internet company, and have significantly more value when bundled together. The physical analogy is combining two storefronts to allow a larger store to move in. When a company owns a name, it does not want to lose a surfer to a competitor due to a typographical error. 
Leverage: Once the Internet property industry becomes established, GoldNames believes that professional name investors can increase after-tax returns by taking on reasonable levels of debt. Banks will become increasingly willing to lend against Internet property. In the short run, given the highly unpredictable nature of the industry, firms will probably not use significant amounts of leverage. Analogously, many real estate investors use mortgages to lift equity returns. Highly uncertain and unpredictable real estate investments (e.g., emerging market purchases) will often be unleveraged.
Economies of Scale: As market leaders emerge, they will gain economies of scale from growing deal making expertise, databases of completed transactions, name identification and registration technologies, and brokerage expertise.
Tenant Value Creation: A successful Internet tenant (e.g., amazon.com) creates tremendous value in an otherwise average name, by making it a traffic destination. Similarly, in the retail segment of the real property industry, a tenant can add significant value to an otherwise undistinguished retail development.  In some malls, anchor tenants (e.g., Nordstrom’s department store) can get their space free, because mall developers know that these stores draw tremendous traffic.
Lessee Control: When certain name lessors sign a leasing contract, they will restrict the lessor from engaging in illegal activities (e.g., child pornography). Such lessors may allow lessees to sublet only with the consent of the lessor, and with the lessor earning a percentage of the overage (the difference between the lease and the sublease).
Current Income: All current income helps to stabilize cash flows. In addition to the other forms of current income discussed above, name investors can create current income through advertising on not-yet-leased sites, attracting eyeballs from type-in traffic.
Pro-active Deal Acquisition: For example, currently library.com houses a library automation software company.  This is analogous to placing a large diesel engine warehouse on Park Avenue, New York; high-value real estate is not being properly exploited.  Industry players will pro-actively pursue firms in this situation and offer to buy their domain name from them. Similarly, professional real estate investors will often buy property that is not marked for sale, pro-actively asking the owners for the release of their property.
Accounting: GoldNames believes that accounting in the Internet property industry will become similar to the accounting standards used in the real property industry.  FASB 66 and 67 contain thorough statements of current GAAP for real property.
Land Grab: Just like the settlers who staked out property in the western USA in the early stages of the development of the American West, the opening of new gTLDs will offer enormous advantages to those who most speedily move into the new territory.
Co-Development:  With Pets.com and television.com, one party developed the site and another owns the name.  The owner gets a percentage of the resulting company.