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Why invest in domain names
We live in the age of brands. The era of selling is over: it has been succeeded by the era of buying. Buying by a sovereign consumer, guided by brands. In the era of the Internet the role of brand and of its underlying vehicle -
A domain name – as part of a brand name – is also an important investment vehicle. According to Hector Laing, a former president of United Biscuits “Buildings fall apart. Machines deteriorate. Cars rust. Brands stay” (and with brands stay also domain names).
Therefore companies nowadays keep a portfolio of several domain names suitable for the company, its subsidiary companies and above all for its products and services for now and for the future. This is done both for actual or potential own use as well as for stopping the competition from grabbing an attractive domain.
Purchase of a domain is an investment also in the financial and accounting terms. The purchase of our domains, at our high quality and high price level does not fall into consumables that go into the profit and loss account (P&L). Hence it does not reduce the net profit. It becomes a capital expenditure that goes into the balance sheet and is depreciated over time. (It goes into P&L but only through the annual depreciation)
It becomes an (intangible) asset: on the assets side of the balance sheet the intangible asset item increases while the cash item correspondingly diminishes. It is to be noted that despite applying the depreciation charges on the domain, the market value of the domain does not diminish (as is the case with machines and vehicles), in fact its value tends to increase.