I'm new to buying and selling domains, and after reading up on Huge Domains I really don't understand how they are making money. First, they claim to have over 4 million domains and according to their own site have sold 10,000+ since 2005. At that rate, they sell around 2-3 domains per day. Let's assume their average selling price is $3,000. That would come out to right around $2M per year in revenue. Even if we assume the average selling price is $5,000, which it surely is not more than that, that's still only $3.3M per year in revenue.
In terms of expenses, don't they have to pay renewal fees for the 4 million domains? I know the owner of Huge Domains owns a domain registrar, but don't they still have to pay something for each domain per year or no? Even paying $1 a year per domain comes out to over $4M a year, so it seems they aren't even paying that much per domain per year.
Also, I assumed that Huge Domains picked up the overwhelming majority of their domains for nothing, but apparently they are buying a lot of them at auctions, paying between $100-$300 per domain.
So, doing basic math, how is this working out to be a profitable business model? They have approx. 400 times more "product" than they have ever or will ever sell, since they have 4 million domains and have only sold 10,000+ of them. I come from a retail background where you buy and sell goods as fast as you can, so I don't understand how a company profits by buying and hoarding products that they most likely will never sell. What are the benefits of doing this? Do they have some really long term strategy that they are employing? How profitable do you think they are right now?
Also, can domains be fully written off as inventory or the like so that they can be fully deducted from taxable income? Can domains also be used as assets in order to acquire capital or be used in some other way to scale your business?
In terms of expenses, don't they have to pay renewal fees for the 4 million domains? I know the owner of Huge Domains owns a domain registrar, but don't they still have to pay something for each domain per year or no? Even paying $1 a year per domain comes out to over $4M a year, so it seems they aren't even paying that much per domain per year.
Also, I assumed that Huge Domains picked up the overwhelming majority of their domains for nothing, but apparently they are buying a lot of them at auctions, paying between $100-$300 per domain.
So, doing basic math, how is this working out to be a profitable business model? They have approx. 400 times more "product" than they have ever or will ever sell, since they have 4 million domains and have only sold 10,000+ of them. I come from a retail background where you buy and sell goods as fast as you can, so I don't understand how a company profits by buying and hoarding products that they most likely will never sell. What are the benefits of doing this? Do they have some really long term strategy that they are employing? How profitable do you think they are right now?
Also, can domains be fully written off as inventory or the like so that they can be fully deducted from taxable income? Can domains also be used as assets in order to acquire capital or be used in some other way to scale your business?
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