Sex.com fetches $12 million as domain name

So you want to buy sex.com?

Too late. What is arguably the most valuable piece of real estate on the Internet has been sold for a reported $12 million U.S. in cash and stock by San Diego website developer Gary Kremen.

Boston-based Escom LLC said in a news release this week it bought the catchy Web address and planned to turn it into "the market-leading adult-entertainment destination."

Internet industry websites are abuzz about the transaction, which ranks as one of the priciest domain name sales in history, eclipsing the $7.5-million U.S. eCompanies dished out for business.com at the height of the dot-com boom in November 1999.

Some say it's only the latest sign the domain name market is really taking off again, fuelled by a massive migration of advertising spending to the Web.

"No matter how you slice it, it is obviously a landmark deal," domain industry news magazine DN Journal wrote this week.

"An eight-figure sale has a way of overshadowing everything in its path, but that doesn't diminish the good health the market exhibited with a bevy of additional big-ticket domain deals."

Corporate buyers and venture capitalists moved onto the domain name game in a big way for the first time in 2005, DN Journal stated, taking competition for top-quality domains to a new level.

Experts say there are also simply very few generic domain names left. That's creating more demand and pushing investors to snap up entire domain portfolios like Seattle search marketer Marchex Inc. did in its $164-million (U.S.) acquisition of UltimateSearch/Name Development last February.

Many deals are being struck well out of the public glare and are not being reported.

Sex.com fetched its princely sum for its traffic potential and because the adult-entertainment industry in general is booming, said Rick Broadhead, a Toronto-based author and technology consultant. Something like Donut.com would not go for nearly that much.

"The (sex) industry is flush with cash," Broadhead said.

"For the right company, it would be a very strategic move."

There were 85.6 million domain names worldwide at the end of September 2005, according to the latest figures available from VeriSign, the global registry operator for dot-com and dot-net addresses. That's a record number.

People are renewing domain names at a steady rate. And new registrations are growing. More than 8.5 million new domain names were registered between July and September last year, VeriSign says.

That's a five-per-cent increase over the previous three-month period and a 33-per-cent hike year-over-year.

Verisign says the largest growth is being generated by product bundling, by which domain name registrars and resellers sell bundles combining domain names with other internet services like website hosting and email.

In all, there are more than 10,000 domain name resellers worldwide, VeriSign estimates. They're trying to unload everything from Miss.com (selling for $350,000 U.S.) to Firmbutt.net (selling for $5,000 U.S.).

Some, like domain brokerage site Afternic.com, let people buy and sell web addresses and determine their values using an appraisal service. Yesterday, the asking price on Afternic for HolyGrail.com was $250,000 U.S. TeenGirl.org was going for $560.

Many people have made money from reselling domain names.

Many others never will.

Edwin Hayward, who runs the domain name information website Internet Goldrush, estimates fewer than 20,000 domain names have a potential value of more than $10,000. Of those 20,000 domains, 80 to 90 per cent will not sell for lack of buyers, he warns.

"There is this dark territory of millions of domain names snapped up by speculators caught up in the Internet Gold Rush," Hayward writes at igoldrush.com.

"The vast majority of these names have no commercial value whatsoever, in that no self-respecting company will spend money on them."