People and companies use domain names for many different things:
1. Domain names establish a unique identity in cyberspace.
Companies often choose a domain name that corresponds to their company name. For instance, IBM’s website is ibm.com and Microsoft’s is microsoft.com.
People who purposefully register domain names that contain trademarks belonging to other companies are known ascybersquatters. Knowingly registering another entity’s trademark in bad faith is illegal, and if a trademark holder decides to take a case to court the cybersquatter can face very hefty fines (US law currently provides for up to $100,000 in damages if a cybersquatter is found liable of deliberately infringing upon a trademark.)
What’s more, registering domains that can easily be confused with trademarks, which is known as typo-squatting, is quickly becoming a controversial practice. It is becoming more common for large companies to take such cases to court on the same basis of infringement as outright cybersquatting.
2. Domain names can be resold, leased and bartered.
Aside from being used to identify a website, domain names can be resold to other companies or people, leased, or even bartered for other names or for goods or services. An entire industry has sprung up around the resale of domain names, with domain brokers acting as middlemen in the sales process. The profits from a successful sale can be enormous compared to the original value of the name. In fact, some domains have sold for over $1 million and cost under $10 to register!
However, there are many more sellers than buyers, making it difficult to locate a potential purchaser for a given domain name. There are also too few quality names, so the more valuable names often get buried in a mass of low-quality listings on domain brokerage sites. If you want to dabble with making money from buying and selling domain names, check out our domain investment guide for more information. You should always keep in mind that the vast majority of registered domain names have little to no resale value .
3. Domain names can be used to provide a unique, permanent email address.
Many companies will set you up with email forwarding, where messages sent to name @ yourdomain.com will be redirected to your existing email address as provided by your ISP. This lets you choose a truly unique email address to give out to others. This will also allow you to keep the same email address if you change ISPs down the road.
4. Domain names can be used to improve a site’s ranking in search engines.
Even though the rules by which search engines “rank” sites change often, search engines generally favor sites with their own domain names over sites that do not have a domain name of their own (for instance, a MySpace page or WordPress blog hosted on the service’s site). Most search engines also give increased relevancy to domain names that contain “keywords” that people search for. For example, a search engine might rate a site with the domain name “FreeStuffGuide.com” higher than a site with the domain name “FreeBuyGuide.com” for the search “free stuff” since the first domain name contains the actual search terms. In addition, Google provides an exact match bonus used for determining search results if the search terms and the domain name’s SLD are an exact match. This provides a huge benefit over domains who’s Websites have many more favorable SEO characteristics such as Page Rank and Back Links.