If its approved next week, the sale will keep the domain at the top of the list of highest-priced names. Escom, the current owner, paid $14 million for Sex.com in 2006 before filing for bankruptcy earlier this year.
Sex.com's sales price took many by surprise, given the beating the porn publishing industry has taken in recently years from all the free pornographic photos and videos available on the Internet. Some industry watchers expected to see a sales price of between $5 million to $10 million.
Domain name sales that fetch hundreds of dollars are a dime a dozen and sales in the low six-figures are fairly common too, with at least one happening every week, says Ron Jackson, editor and publisher of Domain Name Journal. But domain sales of $250,000 and up are rare -- especially those that hit $1 million or more.
Industry experts say this mega-deal is likely to lead to a feeding frenzy among buyers looking to jump into the domain-name market and existing players looking to sell. "Every time there's a big sale, we see a huge uptick in domain [name] registrations and after-market sales," Jackson says. "This is just one big sale, but big numbers get people interested."
Jeff Kupietzky, CEO of Oversee.net, was less surprised by the deal. Kupietzky's company, which registers, sells and develops domain names, operates a massive portfolio of more than 1 million domains. He says generic names carry a premium value: Look at the $1.75 million sale of Dating.com, which his company handled earlier this year.
"We have seen a 50% increase in the sale of domain names this year over last year, and its primarily being driven by these higher-priced names," Kupietzky says.
The Growth of the Generics
What's driving this growth? For one thing, Kupietzky is seeing more buyers who actually want to build sites. These buyers are making strategic investments into domains, rather than simply buying the names -- and letting them languish as largely vacant Internet real estate with ads -- on the speculation that they will later be able to flip them for a profit.
In addition, the domain-name investors who, like real-estate speculators, are betting that the value will go up after purchase are seeing more value in generic names, which benefit from accidental search traffic.
For example, a domain name like dog.com would likely generate a ton of traffic on its own, even without any content on the site. If millions of users stumble onto the site, the owner will likely be able to strike an advertising deal directly with folks like Google, who will pay a higher amount every time a prospective customer clicks on an online ad.
But domain names that keyword searches may not as easily pick up, like dogpawpointer.com, are unlikely to generate as much accidental search-traffic volume. Domain names that pull in little traffic are left to rely on "parking" companies, which aggregate many disparate web sites and sell the bulk traffic volume to Google.
As a result, those domain owners have a middle man to contend with, and it's much harder to figure out how much revenue they should get and to make sure they're getting what they're owed, Jackson says.
"Domain owners are retaking control of their domain name as an asset," Jackson says. "The problem is zero transparency with the parking companies. They never get to see the revenue figures from the parking company and are only told this is how much you are getting. But they wonder how come Google can have a record quarter for advertising and see a surge in [industry] traffic in reports, but ... they're losing 50% of their revenues and I've even heard 80%."
The Hottest Names in Domains
Sex.com isn't the first generic site to attract big money, of course. Here's a list of the top 10 publicly announced domain-name sales that involved all-cash transactions and resulted in the domain names passing onto the buyers, according to DN Journal:
- *Sex.com - $13 million (2010)
- Porn.com - $9.5 million (2007)
- Diamond.com - $7.5 million (2006)
- Slots.com - $5.5 million (2010)
- Toys.com - $5.1 million (2009)
- Clothes.com - $4.9 million (2009)
- Vodka.com - $3 million (2006)
- Candy.com - $3 million (2008)
- Shopping.de - $2.8 million (2008)
- Creditcards.com - $2.7 million (2004)