Are we approaching a time when domain names will be considered an asset class, like bonds, stocks, real estate, currencies and commodities?
Will investors be able to hold domain name investments without the need to be directly involved in buying and selling of individual domain names?
Domain names as an asset class recently took a significant step forward with the recent initial public offering of shares in the domain name
Domain Names As Assets
Domain names already possess many of the characteristics of an asset class. They have clear business value, and at least top-tier names are seen to be appreciating in value. There are established marketplaces where they are sold.
Escrow.com first published in 2019 their report Alternative Investing: A Comparison Between Traditional Instruments and Web Domains. The document compares holding and transaction costs, returns, volatility, and taxation considerations for domain names versus other investment classes.
Escrow.com finds that domains have generally traded positively, that is at steadily increasing prices, and with less volatility than several other asset classes. A series of quarterly reports since then has updated the Quarterly Domain Investment Index.
Nevertheless, we have never had any sort of investment market where packages of domain names are traded in the way that other assets are traded through mutual funds and exchange traded funds. That is partly because of the challenges noted in the next section.
Challenges To Domain Names As Assets
There have been several challenges to domain names achieving acceptance as an asset class.
The
Shares in the domain name
The offering was a partnership between MediaOptions and RallyRd. Individual buyers could be in for as little as a $10 share, with shares purchased through the Rally app. There were 597 investors in the initial public offering. You can track the asset at places such as Vincent.
Essentially RallyRd creates a company that is the collectable, in this case the domain name, and then issue a set number of shares in that company. You can read more on how RallyRd offerings work here.
RallyRd previously used this model to sell shares in a wide variety of items including art, vintage automobiles, collectable objects such as the first Apple I computer, trading cards, vintage wine, sports memorabilia and more. You can browse the RallyRd collections here.
Masterworks sell fractional shares in valuable works of art in a somewhat similar way.
The primary roadblock to fractional ownership of domains in the past has been SEC acceptance. Andrew Rosener, CEO and founder at MediaOptions, explained
You can read the full RallyRd legal disclaimer here.
After 90 days of holding, owners can trade their shares via the app.
When the domain name sells, owners are compensated according to their share percentage, although most collectables at RallyRd are expected to be held for a long period.
The domain name
While this is the first public offering of a name via the MediaOptions – RallyRd partnership, it won’t be the last. Andrew Rosener publicly suggested that other single names, baskets of similar names, or collections from a single sector, like health, were future possibilities.
Earlier Fractional Ownership Initiatives
There have been several earlier fractional ownership domain name initiatives. For example, Aron Meystedt described in this NamePros thread that shares in
@garptrader started a NamePros discussion on Domain Name Tokenization early in 2020.
In summer 2020 @abstractdomainer started a discussion Part Ownership: Can I Own A Part Of A Domain?
Dan Supports Fractional Ownership
Dan (then Undeveloped) had fractional ownership in mind when they developed the Domain Automation Network.
Have Your Say
The rapid and smooth sale of all available shares in the initial public offering has helped validate the model. Packages of domain names will be an even more interesting offering.
The fractional ownership model allows even investors with modest investment funds to be part owners of elite domain names.
Will investors be able to hold domain name investments without the need to be directly involved in buying and selling of individual domain names?
Domain names as an asset class recently took a significant step forward with the recent initial public offering of shares in the domain name
Directions.com. Domain Names As Assets
Domain names already possess many of the characteristics of an asset class. They have clear business value, and at least top-tier names are seen to be appreciating in value. There are established marketplaces where they are sold.
Escrow.com first published in 2019 their report Alternative Investing: A Comparison Between Traditional Instruments and Web Domains. The document compares holding and transaction costs, returns, volatility, and taxation considerations for domain names versus other investment classes.
Escrow.com finds that domains have generally traded positively, that is at steadily increasing prices, and with less volatility than several other asset classes. A series of quarterly reports since then has updated the Quarterly Domain Investment Index.
Nevertheless, we have never had any sort of investment market where packages of domain names are traded in the way that other assets are traded through mutual funds and exchange traded funds. That is partly because of the challenges noted in the next section.
Challenges To Domain Names As Assets
There have been several challenges to domain names achieving acceptance as an asset class.
- Valuation The current value of stocks, bonds, commodities, real estate, etc. are generally known within small uncertainties. In the case of domain names, since each name is unique, even experts may significantly disagree on the valuation.
- Liquidity While some domain names are more liquid than others, in general one cannot immediately sell a domain name for market value the way you can a stock, bond, currency or commodity, or even many forms of real estate.
- Potential Legal Threats While all businesses face the possibility of legal challenges, for domain names the possibility exists that a name could be challenged the entire value lost.
- Type Of Asset Centralized domain names are different from property, in that the registry and registrants have rights, including renewal rights, but do not own the extension or domain name as outright property, and must operate within the ICANN framework. This is less true for decentralized domain names.
The
Directions.com Initial Public OfferingShares in the domain name
Directions.com were offered via the RallyRd service. The offering went public on Jan. 14, 2022. All shares in the initial public offering, $140,000 in total, were sold in only 14 minutes. The offering was a partnership between MediaOptions and RallyRd. Individual buyers could be in for as little as a $10 share, with shares purchased through the Rally app. There were 597 investors in the initial public offering. You can track the asset at places such as Vincent.
Essentially RallyRd creates a company that is the collectable, in this case the domain name, and then issue a set number of shares in that company. You can read more on how RallyRd offerings work here.
RallyRd previously used this model to sell shares in a wide variety of items including art, vintage automobiles, collectable objects such as the first Apple I computer, trading cards, vintage wine, sports memorabilia and more. You can browse the RallyRd collections here.
Masterworks sell fractional shares in valuable works of art in a somewhat similar way.
The primary roadblock to fractional ownership of domains in the past has been SEC acceptance. Andrew Rosener, CEO and founder at MediaOptions, explained
We have worked with RallyRd to get domain names as an asset class approved by the SEC for fractional investment through public offering. We believe this is a natural evolution of the asset class and an incredible leap forward for the domain industry.
You can read the full RallyRd legal disclaimer here.
After 90 days of holding, owners can trade their shares via the app.
You can sell some or all of your shares on the Rally app through select registered broker dealers. After an asset’s Initial Offering, we impose a 90-day ‘lock-up’ period during which shares cannot be bought or sold. Once the ‘lock-up’ period is over, the INVEST button is replaced with BUY and SELL buttons so you know the asset is Trading. You can sell your shares during ‘trading windows,’ which open for each asset about every 90 days, by submitting sell orders (“ASKs”) through the app.
When the domain name sells, owners are compensated according to their share percentage, although most collectables at RallyRd are expected to be held for a long period.
The domain name
directions.com previously sold for $75,000 in the 2020 NamesCon Auction. The name has a monthly search volume of about 2 million, with a cost-per-click of $0.64 currently. The domain name has been continuously registered since 1995. The Wayback Web Archive shows that the name was used for some years by a marketing and consulting firm just over a decade ago. It is likely this name was selected partially because it seems benign of potential legal challenges. It also had a recent sale, so valuation is less uncertain than for a domain name that has never previously sold. While this is the first public offering of a name via the MediaOptions – RallyRd partnership, it won’t be the last. Andrew Rosener publicly suggested that other single names, baskets of similar names, or collections from a single sector, like health, were future possibilities.
Earlier Fractional Ownership Initiatives
There have been several earlier fractional ownership domain name initiatives. For example, Aron Meystedt described in this NamePros thread that shares in
NNR.com sold out quickly. You can read the document that went with the NNR offering, that covers a number of points such as what would happen if there was a UDRP and how the decision to sell or not would be taken. You can read the NamePros announcement and discussion of the NNR offering here. In that case it was claimed the domain name was not a security. @garptrader started a NamePros discussion on Domain Name Tokenization early in 2020.
In summer 2020 @abstractdomainer started a discussion Part Ownership: Can I Own A Part Of A Domain?
Dan Supports Fractional Ownership
Dan (then Undeveloped) had fractional ownership in mind when they developed the Domain Automation Network.
We have built WHOIS 2.0, which also supports fractional domain ownership, to make sure at all times to be able to determine instantly who is liable for the hosted content.
Have Your Say
The rapid and smooth sale of all available shares in the initial public offering has helped validate the model. Packages of domain names will be an even more interesting offering.
The fractional ownership model allows even investors with modest investment funds to be part owners of elite domain names.
- So what do you think about fractional ownership of domain names?
- Do you see it as the way of the future?
- Would you like to invest that way, or do you prefer to manage your own unique portfolio?
- If new investors enter the market through fractional ownership, without particular domain expertise, do you think that would be good or bad for domain names in general?
- What do you think is the biggest single obstacle to domain names as an accepted alternative asset class taking off?
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