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Plasseraud IP Three Ways to Earn Money from Domain Names
Internet & Data

Three Ways to Earn Money from Domain Names

Newsletter July 2019

Managing a domain name portfolio is often incorrectly perceived as a major expenditure for the beneficiaries. But what’s not generally known is that with a little imagination and organization, it is possible for your portfolio to become a significant source of revenue. How to go about it? 

1. Streamline your domain name portfolio 

This may seem obvious but to economize, it is best to start by… not spending! It is pointless to register everything: it would be better to carefully choose your domains than to register everything or renew your entire portfolio. 
Over time, one can make isolated registrations that can be routinely maintained in force without necessarily knowing why. 
First order of business: housekeeping! 
Audits are an excellent way to deconstruct your domain name portfolio. This not only allows you to sort out the domain names that have become worthless, but also to only register the necessary domain names.
Audits also allow you to think of a realistic registration strategy (or naming policy) that:

  • Ensures that the trademarks in force benefit from domain name protection: it’s an exercise that must be done for all products, services and current and future areas of interest concerning the trademarks, in order to limit incidents of cybersquatting; 
  • Takes into account ‘at risk’ extensions : .CN or .RU are particularly attractive to cybersquatters; 
  • Gathers domain name portfolios divided between various registrars (except technical obstacles): to optimize the management of your domain name portfolio, make it a priority to center your management with one single provider to achieve global visibility for your portfolio and avoid anarchical registrations;
  • Identifies the domain names that are no longer relevant: if the domain names are no longer considered necessary, it is of course possible to not renew them at their expiration date. However, be careful to not hastily abandon domain names that could be valuable for third parties. As described below, there are solutions to generate revenue from these domain names. 
  • Formalizes good practices regarding domain name registration: put in place a strict registration procedure for successful management of your domain name portfolio. For example, this will require you to: 

o Create a short list of people authorized to request domain names registration;

o Register the domain names right before filing the trademark application when a new project requires both the filing of a trademark application and the registration of domains names. The recent phenomena of cybersquatting on .COM domain names that are identical to recently filed trademark applications, notably in the European Union, underlines the importance of anticipating registration of relevant domain names; 

o Manage the rights holder, in order to avoid situations where the domain name is registered under the name of an employee, a group company that no longer exists, or under the name of an external contractor;

  • Consolidates the  domain names use policy: with the exception of certain specific situations, registered domain names have to be exploited. Establish the rules of exploitation that will be applied at all levels for a new domain name that is being added in your portfolio (e.g.: systematic redirection towards the principal site)..

The long-term rationalization behind your domain name portfolio is based on a clear, solid and coherent registration strategy with current or intended activities. This strategy will have to be largely communicated internally and used methodically in a systematic way.  

2.  Rent your domain names

Licensing a domain name requires a license agreement and can be grouped into two distinct categories, based on the importance of the domain names and the manner in which the trademarks are exploited.

The strategic domain names corresponding to trademarks actually used

As we have underlined above, domain name and trademark portfolios are assets that should be jointly valuated.

Once a trademark license is granted, or when it is expected to grant such a license, , it is paramount to wonder whether the  license should also encompass the domain names associated with this trademark.

Depending on the naming policy implemented by the licensor – for example as a conclusion of an audit – it will be possible to know if domain names must be renewed and maintained in force by the licensor himself, or if only their use by the licensee is authorized under the license. In this second circumstance, the domain name license would authorize the licensor to increase the royalties, or to create renewal fees to be charged to the licensee. 

The license agreement defines the amount and frequency of the royalty payments, which could be lump-sum or proportional. Proportional royalties generally correspond to a percentage of the revenue of the website associated with the licensed domain name.

The license agreement will also have to take into account the rules of liability specific to domain names. The domain name registrant is indeed the one liable before the ICANN and the registers.  The burden of the liability could therefore be borne by either the licensor or the licensee, depending on who will be designated as the registrant of the domain name in the agreement.  

The license may even cover other assets, such as social media accounts, and define the rights and obligations of the parties regarding the use of these digital assets. It also acts as a precaution to avoid difficulties later on, especially upon the expiration date or termination of a license contract.

Domain names that do not correspond to trademarks actually used 

The audit may reveal certain domain names that have become useless. This is notably the case with generically termed domain names. 

If domain names are not used to increase the referencing to the holder’s website and respect the rights of third-parties (e.g.: they do not contain identical or similar terms to third-parties prior trademarks), these domain names may also be the subject of a license contract. 

The option of a license agreement could be particularly appealing if the licensee does not meet the eligibility conditions for domain name registration or if they hope to use a domain name that is already registered.  

And the possibilities are numerous. Some registrants even use domain names that are last names to create personalized email addresses such as “firstname@lastname.com” and make them available to rent. 

3. Resell your domain names 

If your portfolio is made up of generic domain names, or if they are no longer relevant in consideration of your current trademark strategy, you also have the option to resell them on the secondary market of domain names.

This market’s name was chosen to distinguish it from the first market where registrations are carried out with registration offices and registers. 

In practice, this secondary market is made up of online platforms that specialize in connecting buyers and sellers and providing secure transactions: they take a sum of the domain name sale and deliver the domain name to the buyer only once it has been confirmed that the seller has the information necessary to transfer the domain name. 

In this second market, a domain name’s resale price is left to the discretion of the seller. However, there are some objective criteria that make it possible to approximate the value of a domain name: 

  • The number of characters: the less there are, the greater the domain name value;
  • The accompanying extension: the extension .COM is more coveted, and domain names with this extension are of greater value;  
  • The comprehensibility of terms for the broad public: the most prestigious domain names are those written in comprehensible terms in English; 
  •  The lifespan of the domain name: the longer the lifespan of a domain name, the greater the value. 

The fact of the matter is that despite these criteria, the owner of a domain name is free to set the resale price at whatever they want. The deal can be more lucrative if you put generic domain names up for sale, as the transactions can increase by thousands, even tens of thousands of euros.

Of course, the resale of a domain name portfolio may be placed within the greater context of the global sale of intangible assets, which should be the subject of an assets valuation and an assignment agreement. 

The team Internet & Data of Plasseraud IP is at your disposal to conduct audits of domain name portfolios, establish domain name strategies, draft or review your contracts, assess the value of domain names and come up with the most suitable solutions for generating revenue from your domain names: webplass@plass.com.