Why Are Some Domains So Expensive?

Why Are Some Domains So Expensive? 

As you build your digital identity, you’ll likely search for a domain name that accurately reflects your brand. But in your quest for the perfect top-level domain, you might ask yourself, “Why are some domains so expensive?”

The easiest answer to this question is demand. Effective, memorable, and eye-catching domains are highly sought-after—it’s just that simple. 

But in reality, there’s more to domain pricing than just demand. If you’re looking for an in-depth guide to domain pricing ahead of your next domain name purchase, this guide is here to help. Read on for an overview of the basics, factors that influence domain price, and some real-world implications of this pricing model.

Understanding the basics 

Before you look for your perfect domain in a domain name search, establish a grasp of the basics to understand your investment—and the price tag. 

Registries and Registrars 

There are two key entities in domain trading and management:

1. Domain Registries – Domain Registries are organizations that keep track of which domains are currently active and available. In many cases, Registries actually own the domain names they catalog.

2. Domain Registrars – Domain Registrars act as an intermediary between individuals or brands and domain Registries. These Registrars not only partner with domain Registries to facilitate the sale of domains but also provide a user-friendly interface for purchase. Additionally, they offer valuable assistance in managing the domains that entrepreneurs and businesses own.

It’s easiest to understand this relationship with analogies:

• If Registries are the stock market, Registrars are stock brokers
• If Registries are building owners, Registrars are real estate agents
• If Registries are clothing designers, Registrars are clothing retailers

Most importantly, both Registries and Registrars are companies trying to turn a profit in the domain marketplace. 

Factors influencing domain prices 

Registries and Registrars (and any TLDs they trade) are key players in domain pricing. But what other factors influence domain cost?

The wholesale cost and the role of Registries 

In many cases, Registries deal in bulk domain sales to Registrars. While Registrars sell one (or just a few) domain(s) at a time to individuals, Registries are trading in hundreds (if not thousands) of domains. 

Registries are the entities that own domain names and establish their base (wholesale) prices. Rather than setting a markup themselves, they sell domains to Registrars at these wholesale rates. Registrars then add a markup to these prices when selling to consumers, turning a profit in the process. Additionally, Registries sometimes offer promotions to Registrars, allowing them to purchase domains at discounted rates from the standard retail price, especially when dealing in bulk.

The pricing strategy of Registrars 

When it comes to how to buy a domain name, Registrars facilitate the transaction in real-time. They do not purchase domains in bulk from Registries to sell later. Instead, Registrars acquire a domain from the Registry at the moment a registrant (end customer) decides to purchase it. This allows Registrars to create client-facing pricing models that are applied directly at the point of sale, ensuring a seamless and immediate transaction process.

To make a profit, Registrars must:

• Cover their purchase price for a specific domain name
• Pay for overhead costs and other business expenses
• Meet customers’ expectations for domain pricing

The impact of sales and renewals 

Naturally, a Registrar’s business performance impacts their pricing model:

• When a Registry Increases wholesale costs, Registrars can and will increase pricing to recoup the costs

• When Registrars are trying to attract new clients, they might implement promotional pricing

• When business is booming, Registrars might stick with a pricing model that produces consistent results

Both first-time sales and domain name renewals are important transactions for domain Registrars. So, a Registrar’s ability to accomplish both will impact their pricing.  

Regular vs. premium domain names 

Understanding the difference between regular and premium domain names is crucial. Regular domain names are typically new and have never been registered before. In contrast, aftermarket domains, which are often considered premium, have a history of being registered, bought, and sold previously. These aftermarket domains can carry significant value due to their previous usage, branding potential, or desirable characteristics.

A premium domain name, as the term suggests, refers to a high-quality domain that is in high demand for various reasons. It’s important to note that premium domains are not exclusively aftermarket domains; they can also be designated as ‘premium’ by the Registry operator due to their perceived higher value. Conversely, not all aftermarket domains are classified as premium. The distinction lies in the specific characteristics and demand factors that elevate a domain to ‘premium’ status, regardless of whether it is newly registered or has been previously owned. Aftermarket domains can also have existing traffic which can increase the value of the domain names.

Premium domain names are typically priced higher than regular domains because they often have one or more of the following characteristics:

• They’re short, catchy, or memorable
• They feature a popular TLD like .com, .net, or .org
• They feature an innovative TLD like .app, .io, or .ai
• They include a keyword that’s highly searched
• They’re already connected to a popular or highly visible brand

The real-world implications of domain prices

What do all of these pricing factors mean for real-world brands? In other words, why do entrepreneurs keep paying top dollar for their ideal domain names? 

Branding and online presence 

Simply put, a domain name is key to building a digital identity. In today’s market, brands need a powerful, memorable domain name to stand out among their competitors.

Entrepreneurs typically want a domain name that:

• Includes their brand name or an associated keyword
• Uses a popular or relevant TLD
• Is easy to remember and recognize

Since all of these characteristics are in high demand in the domain market, brands typically must pay handsomely for them. 

The aftermarket and domain investments 

To avoid overpaying for an expensive domain name (an important business investment), many entrepreneurs turn to the domain aftermarket—in particular, to expired domains. 

When brands know how to buy an expired domain, they can potentially:

• Find a desirable, high-demand, or premium domain
• Secure a competitive price at auction

Of course, to accomplish any of the above, you must learn how to find out when a domain expires. That’s why many entrepreneurs work with Registrars like name.com—a team of domain experts that can help business owners secure premium, high-demand, or innovative domain names that keep customers coming back. 

Making the right choice with name.com

When it’s time to invest in a domain name, brands must contend with a wide variety of pricing factors. While the domain pricing landscape may be complex, navigating it doesn’t have to be.

name.com helps entrepreneurs find their ideal domain names without breaking the bank. With an industry-leading collection of TLDs, thousands of domain names to choose from, and a constantly updated list of expiring domains, name.com makes it easier than ever for brands to claim an eye-catching, memorable domain name.

Browse options in name.com’s domain name search today to get started.

Sources: 

TechRadar. What is a Domain Registrar? https://www.techradar.com/news/what-is-a-domain-registrar 

Forbes. What is a Top-Level Domain (TLD)? https://www.forbes.com/advisor/in/business/software/top-level-domain/ 

Forbes. What Exactly Is a Premium Domain Name? https://www.forbes.com/sites/forbestechcouncil/2021/07/06/what-exactly-is-a-premium-domain-name/?sh=1ff21cae3050