July 27, 2019 (Sat). A domain investor friend called me the other day. During our conversation, I was reminded that I once said that many domains would one day be priced in millions of dollars. So, what do I think now? Let's talk about addresses first.
In 1989, Japan-based Mitsubishi Estate invested $1.6 billion to acquire a number of buildings at the address spanning West 48th and West 51st Streets and between 5th and 6th Avenues in New York. The purchase cost about 3 times the revenue (about $500 million) generated by the address. This is a physical address.
In 2012, Chinese entrepreneur Richard Liu acquired the digital address 18.104.22.168 which produced $67 billion in revenue last year. He invested $5 million for the digital address, but it cost only 0.0075% of the revenue. What a sharp difference in the prices! As the economy is shifting from the physical world to the digital world, this difference is even more significant.
The two addresses share one thing in common. The physical address is difficult to remember until you know it has a common name called "Rockefeller Center". The second address is also difficult to remember until you know it has a "common name" called JD.com. Unlike physical addresses, each digital address has a "common name" called domain. In other words, domains are digital addresses.
Look at the numbers again. Mitsubishi put 3 times the revenue into the physical address but Liu paid only 0.0075% of the revenue for the digital address (domain). Physical addresses are limited in terms of local traffic, floor space, and trading hours. However, digital addresses give you global traffic, unlimited "floor" space, and 24/7 trading hours.
When I compare the prices and usefulness between physical addresses and digital addresses, I can only conclude that domains are still tremendously undervalued, even though their prices have risen a lot over the last 30 years – from being free to register a .com domain in the early 1990s to many domains being sold for 5 or 6 figures. The recent sale of Voice.com for $30 million is an indication of what more to come.