How come domain name leasing isn't more popular?

I was reading about LeaseThis.com and Sendori on Domain Name Wire. It made me wonder why GoDaddy and other registrars aren't selling similar services.

LeaseThis offers 500K+ domains for lease for up to two years. I glanced through their list and found rates ranging from $20 to $2000 per month. The main drawback is, an "owner section" (complete with LeaseThis logo) appears at the top of each leased domain. This pretty much precludes you from using a leased name as a new site's primary domain.

Sendori redirects unused domains' traffic to advertisers. CEO Ofer Ronen calls his service "zero click" advertising. Domain owners receive guaranteed compensation for 100% of their traffic, which is sold at lower per-visitor rates than search engines and ad networks. The average redirect price is $0.15 per click (not sure if he means for buyers or sellers?).

The main challenge both services face is limited access to prospective renters/traffic buyers. If I were interested in AtlantaBagel.com, I might search for it on Register.com or eNom and see that it's (a) taken, and (b) owned by Fabulous.com. Or I might do the lookup at GoDaddy (which recently launched a premium domains program - presumably in partnership with large scale domain portfolio owners such as Fabulous) and find that it can be purchased for $600. At no point would I learn that it's available through LeaseThis for $20/month.

Unfortunately for LeaseThis/Sendori, no amount of marketing spend will enable them to reach every and every consumer who searches for an unavailable domain. On the other hand, registrars like GoDaddy/eNom/Register.com already have this market cornered!! Why aren't they offering customers the ability to lease domains or purchase an unused domain's type-in/residual traffic?

Let's take AtlantaBagel.com for example: within 2.5 years, GoDaddy could collect more than its $600 present value by leasing it to me for $20/month. After that point, GoDaddy and Fabulous would be able to split $240 in annual rental income at no expense besides the domain renewal fee. That would be an out of this world ROI if it were a brick and mortar real estate deal.

Or let's consider the "fire sale" section on GoDaddy's domains after market. DragonHole.com supposedly receives 96 visitors/month. Instead of selling this domain for $5 + registration fee (total profit of $8 or so), why not offer customers the option to purchase its traffic for $0.15/click and earn $14.40 per month?

Comments

[Kristine]

Hello,

My name is Kristine from LeaseThis.com. I am responding to this blog to clarify a couple of things.

“The main drawback is, an "owner section" (complete with LeaseThis logo) appears at the top of each leased domain. This pretty much precludes you from using a leased name as a new site's primary domain.”

We have four different types of leases:

Billboard: This type of lease has the aforementioned owner section which is a banner of the leased domain. We work with the advertiser regarding the graphics for this section.
Ex: HollywoodRealEstate.com

Redirect: We use 307 Redirect (temporary). There is no owner section.

Mask: Uses a regular frame that takes up 100% of the page and keeps the leased domain in the address bar. There is no owner section.

Mask (Option B): Re-writes the URLs to include the leased domain by going through a proxy server. This is good for when the advertiser wants to track their own stats and it makes all the pages appear like it is part of that domain name.

The domain owner initially decides how they would like to lease their domains out, but if an advertiser prefers to lease it another way, we can negotiate to make sure that both sides agree.

“Unfortunately for LeaseThis/Sendori, no amount of marketing spend will enable them to reach every and every consumer who searches for an unavailable domain. On the other hand, registrars like GoDaddy/eNom/Register.com already have this market cornered!! Why aren't they offering customers the ability to lease domains or purchase an unused domain's type-in/residual traffic?”

You raised a very valid point, one that LeaseThis management has been taking a serious look at. The company is currently exploring various partnerships and you may see this type of business model in the near future.

[Isabel Wang]

Hi Kristine,

Thank you so much for your clarification! I wasn't aware that you offer different types of leasing arrangements. Now everything makes a lot more sense :)

[Ian Kree]

Thanks Kristine,

I was a bit worried when I read Isabel's article. She raised a true concern. Anyway you manage to answer that concern in proper way.

Thanks to Isabel too.

[Melanie Phung]

"This pretty much precludes you from using a leased name as a new site's primary domain."

From my perspective as an online marketer, and specifically as a search engine optimizer, you'd never want to do that anyway. To put marketing effort and expense into a "brand" that you don't own, you ultimately have no control over, and will likely be even more expensive for you to buy outright in the future doesn't make sense.

Trying to brand a domain that you're only leasing is a little like building an addition to a house you rent. You can enjoy it while you live there, but your landlord will be thrilled because he can then turn around and make a profit on equity you built for him.

[Isabel Wang]

Hi Melanie,

Great point! I think I would only lease a domain name if it offers instant recognition and lots of type-in traffic.

Imagine if you're opening a restaurant in Times Square. Since it's a new venture, you probably wouldn't be willing/able to invest the zillions it'd cost to buy a storefront outright. Instead, you try to negotiate a lease for some high visibility space.

Yes, the building owner would benefit from your presence. At the same time, you'd benefit as well from being on a super busy street. And while you might be able to buy space elsewhere with the rent payments you're making, you'd get fewer walk-in customers.

[Alan Boxer]

Perhaps there could be room for flexibility? If someone wanted a 'good' name that was already taken, but didn't want to pay asking price, then a rental arrangement might be attractive if there were an option to buy later. If the venture doesn't work out, then not much capital is lost.