Can someone please explain Huge Domains' business model?

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?

 

I think HD pays just ICAAN fees $0.18.. I guess HD is ICAAN partner or affiliated company. jmho

 

Its that 10,000+ .....it could be anything above that and when was the last time time they updated that figure?.....

Some really good points raised though, hopefully someone replies with a detailed response, would be an interesting read....

 

Hi

why, is it a concern?
why, are you calculating their income and expenses
why, are you doubting, when they are doing

you ask questions about taxes, like you don't know
if... one has to pay tax on profits gained from sale of domains,
then one can deduct as an expense, the cost to acquire and maintain that domain.

imo...

 

A lot of good questions, but I can see at least one issue. That 10k+ probably is from 10 years ago or even more. A company like BB, who has for sale under 100k domains was selling 4-5 a day in good times, so for sure, at 4 millions domain, they are selling much more than 4-5 a day. Also, they revenue for the last year( just guessing the year, was not stated) was 19 millions, so your 4 millions a year is wrong as well. They have huge expenses but they are making lots of money as well, so probably if they were not doing it for profit they could not have survived for 17 years. Also, if I'm not wrong, they pay $7,85 to Verisign and they also drop lot's of domains every year, so nobody knows exactly the amounts, but they are making money, that's for sure.

 

I wonder if at some point in the future a buyout will be on the cards?.......Godaddy springs to mind 😉

 

• After the domain quantity reaches a certain level, all renewals will have a great discount
  

 

If you sit at the highest position in Huge Domain (or any other company) you will have all the answers.
Even employees in large companies cannot calculate an accurate model for large companies.
Only we can make some assumptions but exactly we cannot say.