The domain name market can be both compared to the the stock exchange and to the real estate market. Advertising revenues are equivalent to the dividends and to the rents. The valuation of the primary asset, whether it is a domain name, a stock or a land is functionning according to the same mechanism, the law of demand and supply.

For an ovherwelming majority of domain names, the market value equals at most the registration fee because the supply is structurally higher than the demand. Even though the demand is growing, combinations of 63 characters (maximum number of characters allowed for a domain name) are almost illimited and new extensions are created each year. But there is a limited number of domains, called premium domains, for which the supply has become lower than the demand. And this trend can only go further, until there is no more premium domain name to offer. The supply of premium domain names is inexorably decreasing because as soon as a domain name becomes a website, it comes out of the market of the domain names. And this permanent decrease in the quantity of premium domain names is not compensated by new entrants, as the mode of valuation of domain names makes it more & more difficult to create new premium domain names.

 

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