Domain name speculation refers to buying domains with the intent of selling them later for a higher price. The speculative element can be linked to news and current events, though the period during which such domains can be sold or flipped is limited. The main target of domain name speculation is generic words which can be valuable for type-in traffic and for the dominant position they would have in any field due to their descriptive nature. Hence generic words such as poker, insurance, travel, creditcards, sex and others are highly valuable targets of domain speculation in any Top Level Domain.
Sometimes, domain name speculation involves finding domain names early in a market (typically when a new top-level domain is launched), registering them and waiting until the market grows to sell them. Domains such as business.com have sold for millions of US dollars.
The .comTop-Level Domain is the focus of most domain speculation activity as it is the largest TLD. There is domain speculation in other TLDs such as .net and to a lesser extent in .org. The gTLDs have also been the subject of much domain speculation and .info is perhaps the most active in this respect due to the low registration fees.
Domain name speculation also occurs in the ccTLDs such as .uk, .de and .us. The German .de has over 10 Million domains registered. The UK's .uk has over 5 Million domains registered, mainly in its commercial sub-domain.co.uk. The .de and .ukccTLDs are mature markets where good domain names can command high prices. The .euccTLD is a good example of what happens when speculative activity overtakes ordinary domain registrations. A combination of an inept registry (Eurid) and excessive speculation by businesses exploiting a poorly structured regulatory framework meant that, according to EURid's own statistics, over 50% of the registrations could be considered to be at best speculative and at worst Domain name warehousing.
Specialist and repurposedccTLDs have also seen elements of domain name speculation. One of the best examples is that of the .tvccTLD which has found the fact that TV is an abbreviation for the word television to be rather lucrative. The .mobiTLD is a good example of a specialist TLD in that it is specifically targeted at mobile phones and similar mobile technology. The operators of .mobi, mTLD, have reserved some of the premium generic words which will be auctioned off. The intent is to create a more level playing field for those interesting in developing websites. The .mobi premium generic words and phrases list is a good example of the domain names that are at the heart of most early-market domain name speculation.
Domain name speculators also register domain names based on seemingly generic phrases such as propertyforsale in the hope that these domain names could be sold later to businesses. Typically, domain name speculators will try to stay away from domain names containing trademarks as this could be considered cybersquatting.
Primary market speculation
The primary market for domain name speculation covers newly registered domain names that have not been registered before. Such domain names are often linked to news and current events and have not been registered before. They are in reality new domain names. These would be domain name registrations in new TLDs.
Secondary market speculation
The secondary market for domain names covers previously registered domain names that have not been renewed by their registrants. Sometimes these dropped domain names can be more valuable due to their having had high-profile websites associated with them. Others can be valuable because of the generic nature of the domain name or the length of the domain name with two character and three character domain names being the most sought after.
The business of registering the domain names as they are deleted by the registries is known as drop catching. It is a highly competitive business. The main operators in this business typically set up a number of front companies as registrars. VeriSign, in the case of gTLDs .com and .net, allows each registrar, real or artificial, a slice of the resources that may be used to register dropped domains. VeriSign drops domains in a random order, giving registrars only a vague idea of the particular drop time of a particular domain. Registrars often work in confederation to increase their possibility of registering a dropped domain immediately after it is deleted by the registry. If the domain is caught by a confederation of registrars attempting to fulfill a domain backorder, then whichever domain registrar caught the domain will register it to the entity who backordered the domain. If the newly reregistered domain is captured by a company that has no customers who backordered it, the domain may be auctioned to the highest bidder by the registrar who captured it or an auction intermediary. The time between a drop and a capture is often measured in seconds or fractions thereof.
Some registrars do not allow domains to drop in the normal fashion, instead introducing an intermediary (e.g. Snapnames) who auctions the domain prior to their deletion. If no one buys the auction during the auction, it will pass through the normal deletion process.
