What is a Domain Auction?

Have you been searching for a domain name? Is the domain name you want taken? Have you considered using a domain auction? What is a domain auction? This article explains what a domain is, what a domain auction is, and offers tips on getting an aftermarket domain through a domain auction site.

To answer this question, let’s begin by looking at the two components: auction and domain.

An auction is a type of sale in which a good or service is offered for sale to the highest bidder. Auctions may have built-in restrictions on sales, which can include time limits and stipulation of a minimum bid, as well as particular rules for determining the winning bid in any questionable case. Bids may be taken in person, by phone, or via the Internet. An auction house or auctioneer is often employed, as well as an escrow service, which acts to ensure the safe transfer of the payment and the purchase.

In this context, domain refers to a domain name, the identifier for a realm of operation within the Internet. Domain names can have multiple levels, but the ones that are auctioned consist of two parts. One part is the top-level domain (TLD) which may be either a generic (gTLD) domain, such as .com, .net, or .org or a country code top-level domain (ccTLD), such as .us for the United States or .uk for the United Kingdom. The other part of auctioned domain names is the second-level, which is used as the main identifier for the website, and—in the case of ecommerce sites and other business propositions—is often linked to the brand of the site. The “owner” of one of these domain names has control of all the possible sub-domains.

A person who no longer has a use for a domain name or (more likely) who has registered a domain name as an investment, can resell it in the domain aftermarket. A perspicacious investor can reap huge rewards from reselling domain names. Among the most costly sales in the domain aftermarket, the majority are simple second level names with a .com gTLD. These include: autos.com, business.com, candy.com, creditcards.com, sex.com (the most lucrative, which sold for $13 million in 2009), and wine.com. An auction is only one approach to reselling domain names: they can also be listed with a set take-it-or-leave-it price, for example.

Domain auctioning services are offered by some web hosts, as well as by specialized domain auction agencies. A buyer who wants one, and only one, particular domain name is limited to the sales approach that the seller chooses, so unless he or she can make an offer that convinces the seller to remove the domain name from the auction, the buyer will have to deal with all of the varied auction tactics, such as last second bids.

Three of the most prominent domain name auction sites are GoDaddy.com Auctions, SEDO, and AfterNIC. If you are considering buying or selling at an auction, following these sites for at least several weeks is valuable in gaining a sense of how the system works. You can also see the types of domains that are on offer. You are likely to find one and two-word .com domains and acronym .com domains are in the majority, so if you are looking for a particular TLD or a non-English domain, you may find that some auction houses are more useful to you than others.