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CNBC

Chinese firms jump on trading opportunity in new domain names

Domain traders say more than half of domain names with the new extensions are owned by the Chinese

PUBLISHED : Thursday, 02 June, 2016, 1:33pm
UPDATED : Thursday, 02 June, 2016, 3:13pm

China's quest for internet domination has taken an unusual detour: Exotic domain names.

Chinese entities have hovered up half of all domain names with new popular generic top-level domains (gTLD) extensions such as .online, .luxury and .xyz, according to Christian Voss, chief marketing officer at domain trading marketplace Sedo.

Websites ending with popular gTLDs, such as .com, have historically seen strong demand. For global businesses, not having a .com extension reflected poorly on their brand image, Voss said.

But in recent years, the Internet Corporation for Assigned Names and Numbers (ICANN) shook things up by approving many new extensions. ICANN estimated more than 1,300 new extensions could become available in the next few years.

While these extensions are being introduced gradually, rights to some of the popular ones have already fetched large sums of money from companies that sell domain names to the public, also known as registrars. For example, the rights to offer the .shop extension - mostly to e-commerce players around the world - was snapped up by GMO Registry in Japan for about US$42 million.

Data collected by Sedo showed that currently 54 per cent of all domain names with the new gTLD extensions are owned by the Chinese. As a result of the technology boom in China, due in part from the runaway success of the likes of Alibaba and Tencent, the number of domains purchased from within China rose 400 percent between 2013 and 2015.

"China is a market for everybody now," Voss said at the sidelines of RISE 2016, a technology conference in Hong Kong, adding websites such as 8888.com, for example, was suddenly becoming more valuable. The number 8 is considered to be lucky in Chinese culture.

The average resale value of a domain with older extensions such as .com on Sedo was about US$2,000, while the newer gTLDs fetched anywhere between US$1,500 and US$1,600.

The latest surge in demand for quirky domain names marks the latest stage in a trend that is almost as old as the world wide web itself. Take Insurance.com for example - in 2010, the web address was reportedly sold for US$35.6 million.

"Investors love good domain names," Voss said.

Voss explained domain names were valued based on how easy they were to understand and remember, and their relevance to companies that owned them. Generic words and phrases, particularly the "category killers," tend to fetch a lot of value in the domain trading market, he added. Examples of category killers include books.com or antique.com.

Alibaba Group is the owner of the South China Morning Post.

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