According to Domain Name Wire, the following bidders participated in the auction:

• 1-800-Diapers
• Toys ‘R’ Us via Eagle, LLC
• National A-1
• Schilling Aviation Corp (Frank Schilling)
• Socha APA David William Socha
• Faculty Lounge Partners

Fly.com leads the list with an amazing $1,760,000 sale. The domain was brokered by Sedo and bought by TravelZoo, a publicly listed company. TravelZoo plans to use the domain to launch a travel search engine later this month.

Brian Clark, senior vice president and general manager at Travelzoo, said:

"We are delighted to acquire fly.com for our new offering. The name is a perfect match for Travelzoo's renowned approach: simple, fun, and world class. Where others see doom and gloom we see opportunities to serve travelers and advertisers with innovative approaches to finding the best values in travel."

This sale, in combination with YP.com selling for $3,850,000, as well as several other high ticket sales that remained unreported, will serve as a timely reminder to owners of premium domains not to sell their domains too low. (December's $300,000 sale of SC.com to Standard Chartered Bank comes to mind.)

Other noteworthy sales include:

• Roulette.it for $30,000 (the domain is still in escrow, but it was probably bought by a casino or casino affiliate)
• Fired.com for $20,600 (seems a bit much; it's a catchy term but what are they going to use it for?)
• Miami.us for $15,000 (looks like a steal, even for a .us domain)
• Ergo-Direct.com for $12,000 (this domain was bought by German company ERGO Versicherungsgruppe AG, which already owns and uses Ergo.com, but not ErgoDirect.com)
• WirelessHeadphones.com for $9,000 (the domain was sold to a domainer and the price seems just right)

Looking at DNJournal's List of Top 100 Reported Sales of 2006, 2007 and 2008, the top 100 median sales price changed from $124,000 in 2006, to $197,500 in 2007, to $175,752.50 in 2008. After 2007's massive upsurge of 59.27%, 2008 brought with it a 11% drop. However, 2008's median price is still 41.74% higher than that of 2006.

A New Age of End User Sales

As we pointed out last year, with domain values shooting up so rapidly, very few domain owners were devoting any of their resources to actually developing their domains. There was simply no point in developing a domain you just bought if you could flip it a few months later at a significant profit. Broadly declining PPC (pay per click) revenues did not affect this situation at the time, but they have now contributed to the rapidly falling liquidity among domainers.

None of these developments appeared to have any effect on end user sales, which remained very strong in 2008. This is understandable as end users do not care about PPC revenues and the small isolated world of the domainer-to-domainer marketplace.

Let's look at the 2008 numbers and compare them with those of 2007:

At the end of 2007, of the 105 highest priced domains sold in 2007, only 33 domains (31.43%) had been developed or redirected to a developed site, 3 (2.86%) were affiliate sites, and 10 (9.52%) were either abandoned or appeared to be under development. 4 (3.81%) domains didn't resolve at all and a massive 55 domains (52.58%) displayed PPC ads.

At the end of 2008, of the 101 highest priced domains sold in 2008, 56 domains (55.45%) had been developed or redirected to a developed site, 2 (1.98%) were affiliate sites, and 15 (14.85%) were either abandoned or appeared to be under development. 2 domains (1.98%) didn't resolve at all and 26 domains (26.74%) displayed PPC ads.

The most notable change is that the percentage of developed domains increased from 31.43% in 2007 to 55.45% in 2008.

Accordingly, the percentage of domains displaying PPC ads decreased from 52.58% in 2007 to 26.74% in 2008.

Much of the increase of developed domains can be accounted for by existing businesses (end users) purchasing these domains and using them for their websites. This is a very good sign for owners of premium domain names.

At the same time, actual development on part of domainers has remained virtually non-existent. Combined with shrinking PPC revenues, the future seems bleak for domainers who do not own premium domains and are unwilling to adapt themselves from an environment conducive to PPC parking and domain flipping, to one where the wholesale market has dried up, development is king, and opportunities abound for the small number of domainers who are, by accident or design, still flush with cash.

(Now the only thing that's missing is for those geniuses who brought us the 2007 bubble to start talking down premium domains and tell us that the sky is falling so they can scoop up our assets for pennies on the dollar. Then the cycle will be complete and we'll be back in 2001, as predicted here.)

Domain Registration Growth Continues

Despite all economic troubles, the number of registered domains kept growing during 2008. However, growth has slowed down quite a bit. Over the course of 2008, the growth rate of registered domains dropped from a 30% growth rate to a 15% growth rate. gTLD domains (like .com, .net, .org) went from over a 30% growth rate in 2006 to under a 10% growth rate in 2008. ccTLDs (country code domains) noticed a similar decline as their growth rate fell from 37% to a 26% growth rate. The majority of the newly registered ccTLDs can be attributed to specific TLDs like those for Russia and China.

Of course, it's important to emphasize that even a lower growth rate means that the number of registered domains is still on the rise! And much of the drop in gTLDs can probably be attributed to the introduction of new rules affecting the domain tasting industry.

The End of Domain Parking

Domain parking in the traditional sense is dying a slow but certain death. Earnings from parking revenue dropped significantly over the course of 2008; as both search engines and parking companies tried to maintain their profits during the economic downturn, domain owners found themselves at the short end of the stick. Alternative monetization solutions like mini-development or auto-development have sprung up for those who own dozens, hundreds or even thousands of domains and don't want to concern themselves with actual development.

The LLLL Craze Is Over

On November 2nd, 2007 the last available four letter dot com domain was registered. This was the start of what was going to be an unbelievable reseller bubble; many people argued whether this bubble would ever pop or not. In early 2008, some domainers started selling their lower quality LLLL .coms for $15 to $20 each. There were quite a few larger investors as well and they were hanging on to their domains in the hope of further price increases.

In the spring of 2008, things really picked up and at one point, the lowest quality LLLL .coms were fetching $35 to $45 per domain. Higher quality domains were regularly seeing end user sales.

Over the subsequent months, things slowed down. Lower quality LLLL .coms became very difficult to sell for more than $10 and we're almost back where we started. Still, it's only a question of time until things pick up again; it is possible that by 2010 or 2011 we'll see a second, more mature and sustainable price increase for LLLL domains.

LLL Domains Cool Down

At the start of 2008, low quality LLL .com domains regularly sold at $6,400 per domain. Within a few months, this minimum had increased to around $7,000 per domain. Then everything started to quiet down and the value of most LLL domains slowly decreased. At the end of 2008, low quality LLL .com domains were selling in the range of $4,500. That's still pretty good, but nothing like the predictions we heard from top domain experts in early 2008 that even the worst LLL domains would sell for more than $10,000 by the end of the year.

End User Sales Remain Strong

When the market was at its strongest in 2008, Fund.com sold for about ten million dollars in the most expensive reported domain sale of the year. DataRecovery.com also sold for a fair amount (over $1.6 million) in March, when the industry was at its peak. As if to demonstrate that the domain industry will tough out the hard economy, Kredit.de and Invest.com both sold for over a million dollars later on in the year when the economic crisis was already in full swing.

More recent transactions like FinancialAid.com selling for $480,000, SC.com for $300,000 and YP.com for a very nice $3,850,000 demonstrate that the domaining game will continue on even through harsh times.

2008 – A Year To Remember

It is likely that 2008 will go down in history as the year that the wholesale sector of the domaining industry hit an all time high and went on to drop very rapidly in the same year. At the same time, retail sales remained strong.

It is unknown what the future holds, but it seems that the worst is over and that the domainer-to-domainer market will slowly start to rebuild itself. The primary lesson for all domainers is that we should depend neither on other domainers, nor on parking companies for our monthly income.

Kredit.de (German for "credit" or "loan") leads the list with an amazing $1,169,175 sale. The domain was bought by Unister GmbH of Leipzig, Germany, a company which also owns Geld.de ("money") and Auto.de.

Other noteworthy sales include:

• LOTO.com for $91,331 (LOTO is both a typo of, and the French word for, Lotto)
• VIDA.com for $50,100 ("life" in Spanish)
• ABL.com for $50,000 (an amazing three letter combination with dozens of meanings and many different companies using ABL as initials.)
• Internet.eu for $26,250 (one of the first larger .eu sales that caught our attention)
• Dangerous.com for $15,188 (more or less what one would expect for a .com domain consisting of one popular word; it would have probably sold for more a year ago)

LowFare.com leads the list with an amazing $365,000 sale, closely followed by Banners.com, which sold for $360,000. Both domains sold on Sedo. Alice.com was acquired by Brian Wiegand and Mark McGuire in a private transaction. They will use the domain for their coming online retail service.

Other noteworthy sales include:

• AED.nl for $31,875 (AED stands for "automated external defibrillator", or "automatische externe defibrillator" in Dutch)
• Rencontre.org for $31,250 ("meeting" in French)
• CMDX.com for $30,350 (among other meanings, CMDX stands for Combimatrix Molecular Diagnostics, which is a wholly owned subsidiary of CombiMatrix Corporation (Nasdaq:CBMX), a biotechnology company headquartered near Seattle, Washington, USA. It is currently not known whether they are the buyer.)
• Telefonbuch-Deutschland.de for $24,375 ("Phonebook Germany" in German)
• Sonnerie.fr for $23,125 ("ringtone" in French)
• SBSP.com for $7,700 – a pretty strong LLLL sale
• WUH.com for $5,877 – another weak LLL sale, a year ago this domain would have sold for five figures
• HQDirect.com for $4,188 – a very nice domain which sold at a fair price
• re-cover.com for $3,188 – considering the hyphen, quite a good deal for the seller
• posibilidades.com for $2,250 – within the current range for a one word Spanish domain
• ibic.net for $1,450 – a strong LLLL.net sale

That's a very common complaint heard among today's domainers. Who wouldn't want to reach back through time and join the forefathers of domaining when they were just laying the foundation for their future domain empires?

In 1995, the Internet was just beginning to attract mainstream attention. In 2001, the dot com crash liberated tens of thousands of top domains. And as recently as late 2005, you could have registered tons of LLLL.com domains and sold them early this year for big bucks.

So, is it really too late?

Not at all. Just ask Michael B., a Bangkok-based Danish journalist, who snapped up the following LLL.com domains on Afternic last week:

ZLI.com – $500
PQT.com – $571
LLJ.com – $603
WJA.com – $735
RLU.com – $900

Michael paid a total of $3,309 for these domains. But their actual market value is in the mid five figures!

Who sold these domains at such a low price? iREIT, a "next-generation Internet media company that acquires, develops and monetizes high-quality domain names and web properties".

Last week, iREIT listed a small part (10,000+) of its portfolio on Afternic. NameBio reported on the fact this Monday, but by then most bargains were already gone.

Was iREIT aware of these LLL.com domains' market value? Probably not. Someone at iREIT for whatever reason made a decision to sell these domains (and quite a few others, such as say.org and gut.org) at a very low price.

That's not a one-time event. In fact, it happens all the time. Not everyone values their domains as much as domainers and potential end-users do. Many individuals, companies and even large corporations let valuable domains expire (or sell them for peanuts) simply because they no longer have any use for them.

As a domainer, you just have to be at the right place at the right time. That might be called "luck" by some, but in reality it boils down to hard work, actively working your market, keeping an eye on prices and trends, and having sufficient liquidity to make sure you can grab a bargain before someone else does.

It takes just a couple of deals like this to be able to retire. Michael could sell these five domains for $50,000 any day of the week. If he finds a few comparable deals in the future and keeps reinvesting his profits he'll be a domain millionaire in no time.

Of course, if you really go for it, the sky is the limit and you could become the next domain millionaire with his own blog, after just a few years of hard work. (Just kidding about the blog. )

All things put together, achieving success in domaining might be even easier today than it used to be thanks to the massive growth, increased liquidity and widespread recognition the market is experiencing.

Growth? Liquidity? Recognition? Aren't some domain bloggers musing about a perceived slowdown or even plateau the domain market is supposed to have reached after two recent domain auctions (at DomainFest and T.R.A.F.F.I.C.) produced "only" $10 million in sales?

Well, it's obviously true that some domain sellers are asking for way too much money to readily find a buyer. That's what happens when we're told over and over again by our industry leaders how valuable our domains are and that we shouldn't sell them for less than their real value.

However, look at how far we have come. Prices for the most premium domains have increased ten-fold over the past few years. And while there are natural consolidation periods, many new domainers have been entering the market. Some are already well-funded while others work their way up from LLLL domains to LLL domains to traffic domains and generics.

Actually, there seems to be something about February. Last year, there was talk of the domain market being due for an "asset repricing". Many domainers believed that the sky was falling. It never happened, even though PPC revenues have continued to slowly decline.

What did happen was an increase in sales volume as well as average prices. According to Ron Jackson of DNJournal, reported domain sales grew from $71 million in 2006 to $121 million in 2007 (a 70.42% increase). Q1/2008 is expected to finish at around $25 million – a jump of almost 20% over Q1/2007. Additionally, the Daily Domainer's analysis of 2007 sales data showed that the top 100 median sales price increased from $124,000 in 2006 to $197,500 in 2007, an upsurge of 59.27%.

Finally, last month the domain market as entered a new era of mainstream recognition with CNN's $750,000 purchase of iReport.com from Rick Schwartz.

So does the domaining industry of early 2008 experience growth, liquidity and recognition? Yes, it does. Is there a temporary stalemate between some buyers and some sellers? Absolutely. But if it costs you only $7 a year to hold an asset, many sellers figure that they can wait until they really do achieve the highest possible price for their domains.

Eventually, sellers will give in and lower their prices, or buyers will offer more. It almost always happens that way, so let's enjoy the ride and allow the free market to work things out.

Some domainers say that LLLL domains are a wonderful opportunity to make money, while others claim they are merely a fad that won't last.

What are LLLL domains?

LLLL stands for any four-letter combination, such as LOVE, HWII or XQZV.

There are 456,976 possible four letter combinations (26*26*26*26) and in the .com extension, all LLLL domains are taken. The last available LLLL .com domain was registered on November 2, 2007.

Are they worth anything?

The prices of LLLL .com domains have increased very quickly, but obviously, some LLLL domains are more valuable than others.

4letternoob reports in the latest LLLL.com price guide that even the "worst" LLLL .com domains are now selling for at least $52 on the wholesale market. If you registered any below-average LLLL .com domain for $7 in October 2007, you could now sell it for at least $52… that's a nice 643% return in less than four months.

Just a year ago, at the beginning of 2007, more than 60,000 LLLL.com domains were still available. Domainers with sufficient capital and foresight were certainly able to make a lot of money.

What determines the value of a LLLL.com domain?

Obviously, LLLL domains that constitute a real word, such as LOVE, RARE or BLUE are most valuable. For all the other domains, general consensus among domainers as well as letter frequency statistics indicate that there are premium letters, average letters and bad letters.

• Premium letters: a b c d e f g h i l m n o p r s t
• Average letters: j k u v w
• Bad letters: q x y z

An LLLL domain that contains only premium letters (e.g. defi.com) will be considered more valuable than a domain that contains one average letter (anwe.com), two average letters (ivew.com) or even a bad letter (qefu.com).

Another aspect considered by domainers is the distribution of vowels and consonants, which is expressed by the most valuable CVCV (consonant-vowel-consonant-vowel, e.g. baka.com), followed by VCVC (vowel-consonant-vowel-consonant, e.g. ofam.com), CVVC (consonant-vowel-vowel-consonant, e.g. geat.com) and VCCV (vowel-consonant-consonant-vowel, e.g. opke.com).

Interestingly, several of the so-called average and bad letters are popular in other languages. For example, j, k, q, x and z are frequently used in Pinyin Chinese, while v, w and z are relatively common (more so than j or p) in German.

Demonstrating the English-language bias in the mainstream LLLL domain valuation model, Adam Dicker, the owner of DNForum, reports that he sold zwas.com and zzzq.com for more than 5 figures each.

Do LLLL domains have a future?

Are the recent price developments sustainable and can LLLL .com domains still be considered a good investment at this stage? After all, there are as many as 456,976 LLLL .com domains and if only a relatively small percentage of owners were to put their portfolios on the market, prices would undoubtedly go down. Another potential roadblock is the fact that many LLLL domains will never sell to an end user because out of more than 450,000 possible combinations, there will be some that simply aren't used as an acronym anywhere in the world.

I personally missed out on the LLLL craze, so take my opinion with a grain of salt: If the history of LLL (three letter) .com prices (up, up and up), the incredible enthusiasm on domain forums, and the rapidly growing number of active domainers are any indication, LLLL domains will indeed have an impressive future. In a very short time, they have become collectibles that do not necessarily need an end user to be considered a valuable asset.

Just like numismatic gold coins, which have collectible value and trade for much more than their gold content would suggest, or rare used stamps, which are worth a lot more than the paper they're printed on, but do not have any "real" usability value, LLLL domains meet all the requirements of being valuable collectibles:

• They're rare (all 456,976 domains have been registered and they're not making any new ones).
• Their owners are very enthusiastic about them.
• There's a large and constantly growing number of speculators and wholesalers that bring liquidity to the market.
• There is increasing demand among end users, particularly among companies that use four-letter acronyms.
• Last not least, many LLLL domains even have natural traffic and generate income through pay-per-click advertising.

As you can tell, I'm cautiously bullish on LLLL domains and I'll be buying more on the inevitable price dips we'll see over the coming months and years.

Finally, there's always .net…

Out of 456,976 LLLL .net domains, all all-premium domains are taken, but more than 215,000 domains are still available as of today, Feb. 23, 2008. Each of these available domains contains at least one average or bad letter. Before you whip out your credit card, consider that you probably won't see any profits until all LLLL .net domains have been registered (which could take more than a year), and that .net domains typically sell for only 10% to 20% of their .com counterpart.

Looking at DNJournal's List of Top 100 Reported Sales this year (2007) and last year (2006), the top 100 median sales price has increased from $124,000 in 2006 to $197,500 in 2007.

That's an upsurge of 59.27%, which is a pretty good representation of this year's bull market in premium domains.

Owners of LLL (three letter) domains have seen the values of their domains increase by at least this percentage over the course of 2007, and the same applies to many top generic domains whose sales either remained private or simply did not meet the $100,000 threshold to be included in this year's top 100 list.

Is there a drawback to this continuing boom?

Fears of the domain market overheating have shown to be been unfounded so far. The real concern may be that with domain values shooting up so rapidly, very few domain owners are devoting any of their resources to actually developing their domains.

After all, there is simply no point in developing a domain you just bought if you can resell it a few months later at a significant profit. Broadly declining PPC (pay per click) revenues do not seem to affect this situation at all, at least for the time being.

How severe is the situation?

Let's look at the numbers:

Of the 105 highest priced domains sold in 2007, only 33 domains (31%) have been developed or redirect to a developed site, 3 are affiliate sites, and 10 are either abandoned or appear to be under development. 4 domains don't resolve at all and a massive 55 domains (52.58%) display PPC ads.

While we can safely assume that many retail sales (from domainer to end users, or among end users) go unreported and therefore do not show up in domain sales charts, I'd love to see some examples of premium domains being developed into a profitable business not just by large companies but above all by domainers and up-start companies.

Such domains could serve as shining examples to truly reinforce the monetary value and marketing power of generic domains to potential mainstream buyers, who are – for the most part – still sitting on the sidelines.