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Domain Leasing ???

Australian Adult

Regular Member
Hi All,
I have enquiries about selling some of my domains..
I have quite a few that i really don't want to part with.
I had a look at the auda website, but couldn't find any rferences to domain leasing .com.au's.
Is it legal ?
Has anyone done this before ?
Any advice would be greatly appreciated.
 

Rhythm

Top Contributor
I think auDA were trying to get feedback in order to create a policy to address this issue.

http://www.auda.org.au/2010npp/2010npp-07102010/

c. Issue 1.3 Leasing

Some Panel members noted that there may be legitimate commercial reasons for sub-licensing domain names (eg. IP protection). It was suggested that leasing be allowed as a purpose under the close and substantial connection rule, however it was noted that this would be inconsistent with the prohibition on registering for the sole purpose of sale.

The Panel agreed that this issue be discussed in conjunction with Issue 3.2 on domain monetisation practices, given that the issues are somewhat inter-dependent.

d. Issue 3.2 domain monetisation practices

Panel members noted the difficulties in enforcing the current policy. Some Panel members also expressed the view that the policy is harsh and unfair, with unintended consequences due to the broad and uncertain definition of “monetisation”. It was noted that domain monetisation is a legitimate commercial endeavour and has been an accepted practice in the gTLDs for some time.

It was suggested that domain monetisation can be dealt with under the general policy rules, and there are other safeguards and protections that can be relied on to address bad faith behaviour.

There was general agreement among Panel members that the policy is currently unworkable and should be significantly changed or abolished completely.
 

DavidL

Top Contributor
To be honest I think you'd struggle to find and willing lessees. I've never heard of it happening despite every domain owner keen to do it (inc me)

It's akin to renting out an empty block of land - any tenant would be loathe to put blood sweat and tears into building and marketing a property for someone else.
 

snoopy

Top Contributor
To be honest I think you'd struggle to find and willing lessees. I've never heard of it happening despite every domain owner keen to do it (inc me)

It's akin to renting out an empty block of land - any tenant would be loathe to put blood sweat and tears into building and marketing a property for someone else.

Needs to have type in traffic to work in my view. As you suggest the problem being that nobody is likely to develop a name that they don't have the option to buy. Needs to work both ways.
 

WG2010

Archived Member
I know someone that just signed a 15 month ($400 per month) lease agreement with the option for the lessee to purchase the domain at the end of the agreement at no more than a specified price.

I can't get into specific details as I don't have permission but the client liaised with the web dev company which struck the deal with the owner of the domain (it's not a parked one, there is a site built which has rankings).
 
My view is that unless there is an express prohibition (which there currently isn't) you can sub-licence your domain name. auDA may take a different view. I have seen this take place first hand in dozens of situations.

auDA is seeking feedback on this point and many others like Monetisation. Sub Licensing domains is critical to SME business, most savvy business people licence all of their IP (domain names, trademarks, business names etc) to trading entities (for IP protection).

I recommend that everyone provide feedback to the current auDA Names Panel, the issues the panel is looking at are of critical importance to domainers and small business. I strongly recommend that everyone review the discussion paper and send in your views by email - details are here
 

ant

Member
I have also heard many instances of people leasing domains to help convince potential buyers. I have also just completed the auDA survey and provided feedback that leasing should be allowed.
 

daddybat

Member
My view is that unless there is an express prohibition (which there currently isn't) you can sub-licence your domain name. auDA may take a different view. I have seen this take place first hand in dozens of situations.

auDA is seeking feedback on this point and many others like Monetisation. Sub Licensing domains is critical to SME business, most savvy business people licence all of their IP (domain names, trademarks, business names etc) to trading entities (for IP protection).

I recommend that everyone provide feedback to the current auDA Names Panel, the issues the panel is looking at are of critical importance to domainers and small business. I strongly recommend that everyone review the discussion paper and send in your views by email - details are here

Just did the survey. I suggest that you all make your voices heard!
 

DavidL

Top Contributor
And make a a submission. As I said elsewhere spending no more than 5 minutes to write a couple of lines on a single issue that you feel is important is enough.
 

lmb

Member
My view is that unless there is an express prohibition (which there currently isn't) you can sub-licence your domain name. auDA may take a different view.

I believe domain leasing is the single policy issue that has the greatest potential to increase the value of a domain portfolio. As with all forms of finance, the price someone is prepared to pay for a domain name now is based on the expectation of a financial yield over time and a view of any increase in asset value.

Policy explicitly allowing leasing will allow domain name owners to lock in the financial yield from a domain, making it easier to value the domain.

So owners would be able to buy a name, then add value to it by seeking a tenant, and then sell that name to another party who wants the security of income. The model is similar to property developers who buy land, build and tenant a building and then either collect the return over time, or sell to another party that does so.

If your skill is in finding the name and tenant (IOW, value adding the domain in question), then you'd want to sell to another party to recycle your capital. Investors seeking a lower risk profile with more reliable returns would readily buy a tenanted domain.
 

snoopy

Top Contributor
I believe domain leasing is the single policy issue that has the greatest potential to increase the value of a domain portfolio. As with all forms of finance, the price someone is prepared to pay for a domain name now is based on the expectation of a financial yield over time and a view of any increase in asset value.

Policy explicitly allowing leasing will allow domain name owners to lock in the financial yield from a domain, making it easier to value the domain.

So owners would be able to buy a name, then add value to it by seeking a tenant, and then sell that name to another party who wants the security of income. The model is similar to property developers who buy land, build and tenant a building and then either collect the return over time, or sell to another party that does so.

If your skill is in finding the name and tenant (IOW, value adding the domain in question), then you'd want to sell to another party to recycle your capital. Investors seeking a lower risk profile with more reliable returns would readily buy a tenanted domain.

I think it is very different to property, for one very few .com.au domains have a "yield" because they have no or minimal traffic, even the higher quality names rarely have anything worth writing home about. The price that a high quality .com.au is worth would rarely make sense from any financial calculation based on "yield" from the domain. The typical $2000 name on the drops would be lucky to make reg fee on its own from what I can see of it.

For the names that do have traffic there is a market there, and it already exists in the form of parking, of course a private lease could produce more revenue, but I wouldn't say that is easily done in terms of the the traffic volume usually not justifying it. If you look at .com where leasing is easily done and lots of people are trying to lease names it is still very uncommon because selling the traffic on a per click basis from a search engine is a lot similar, more reliable, and results in "market rates" because multiple advertisers are competing for traffic.

When you say "Investors seeking a lower risk profile with more reliable returns would readily buy a tenanted domain.". To me that is fairly risk proposition, because you've got one "tenant" that you are relying on for income. A major problem with stuff like Sendori for example is that the advertiser generally don't last longer than about 6 months so I don't think it is revenue people will pay a huge multiple for.
 

lmb

Member
snoopy,

I'm talking about leasing a name such as electricity.com.au to - say - Energex for a fixed price, or for a variable price.

So it could be $200 per month (which would then allow you to calculate a Net Present Value of the income stream) or based on some traffic metric (so they pay a monthly fee based on how much traffic they receive via that name) which would also allow a NPV calculation but with more risk as the return is not as secure - but could be greater.

So you could buy a valuable domain in the expired or aftermarket auctions, and then proceed to find the highest yielding tenant - you could auction use of the domain to all the Energy companies for electricity.com.au.

Auda policy allowing leasing of domain names to a third party would enable entrepreneurial domain owners to unlock higher value faster by securing an income stream - thereby enabling higher asset value appreciation and quicker capital recycling - you'd make more money, with more manageable risk faster.
 

snoopy

Top Contributor
snoopy,

I'm talking about leasing a name such as electricity.com.au to - say - Energex for a fixed price, or for a variable price.

So it could be $200 per month (which would then allow you to calculate a Net Present Value of the income stream) or based on some traffic metric (so they pay a monthly fee based on how much traffic they receive via that name) which would also allow a NPV calculation but with more risk as the return is not as secure - but could be greater.
'

Why would they pay $200/mo to lease it? Do you think that name produces type in traffic worth $200/mo? Personally I doubt it would produce traffic of that value in a year. It is a name that needs to be developed in my view.

So you could buy a valuable domain in the expired or aftermarket auctions, and then proceed to find the highest yielding tenant - you could auction use of the domain to all the Energy companies for electricity.com.au.

You can do something similar already, by parking it. I don't think dramatically higher revenue would be obtained by sending it to one advertiser as opposed to a PPC page in most cases.

Personally I've tried leasing through all sorts of methods (leasing marketplaces like sendori & elephant-traffic, private leasing, having messages in the whois about availability for leasing) and only on one name has it produced any lasting revenue stream. Trying to get someone to lease a name is a a lot harder than trying to sell a name and there is all sorts of related issues like chasing up payments, advertisers dropping out because they can't get a decant ROI, and the biggest one of most not having the slightest interest in it, especially without a purchase option.

Then you've got the issue of trying to get large advertisers interest in a small traffic name (with leasing), when the hear the high quality .com.au name has 7 visitors a week how interested will they be in that auction?

Auda policy allowing leasing of domain names to a third party would enable entrepreneurial domain owners to unlock higher value faster by securing an income stream - thereby enabling higher asset value appreciation and quicker capital recycling - you'd make more money, with more manageable risk faster.

I think they'll eventually allow it, but I don't think it will do anything much for domain values. It is something that appeals from the domainer side of things but without strong appeal to advertisers, unless the name has a lot of high value traffic.
 

lmb

Member
'

Why would they pay $200/mo to lease it? Do you think that name produces type in traffic worth $200/mo? Personally I doubt it would produce traffic of that value in a year. It is a name that needs to be developed in my view.
A buyer who is prepared to pay $ 30,000 for a domain name for their own use for whatever reason they have, should be happy to pay $200 a month if that is the only way they can access the domain and use it. If it's a business that believes they can gain SEO or type in traffic to value it at $30k but its not for sale, only for lease, they will lease it if the leasing conditions are sufficient. The economics are exactly the same as applies to lease vs. buy cars, commercial property, etc. Cash flow, capex, tax, risk etc.

'
You can do something similar already, by parking it. I don't think dramatically higher revenue would be obtained by sending it to one advertiser as opposed to a PPC page in most cases.

Personally I've tried leasing through all sorts of methods (leasing marketplaces like sendori & elephant-traffic, private leasing, having messages in the whois about availability for leasing) and only on one name has it produced any lasting revenue stream. Trying to get someone to lease a name is a a lot harder than trying to sell a name and there is all sorts of related issues like chasing up payments, advertisers dropping out because they can't get a decant ROI, and the biggest one of most not having the slightest interest in it, especially without a purchase option.

Then you've got the issue of trying to get large advertisers interest in a small traffic name (with leasing), when the hear the high quality .com.au name has 7 visitors a week how interested will they be in that auction?



I think they'll eventually allow it, but I don't think it will do anything much for domain values. It is something that appeals from the domainer side of things but without strong appeal to advertisers, unless the name has a lot of high value traffic.


In the end, it is a matter of demand. If you have a name that someone else wants to use, and the only way they can use it is to lease it, then leasing becomes a market in its own right - just as property rentals are. It may not be accepted practice now, but that doesn't mean it never will be.

The higher the purchase price, the more attractive leasing becomes. How many people would buy a new car if they had to pay cash upfront with no finance option? Leasing can protect a domain user from the high capital cost of buying a name in the absence of a clear understanding of their return on investment. It thereby creates an alternative way to extract value from a name with a (potentially) lower risk profile.

A lessee may have an option to buy and a right to terminate the lease under certain conditions (say by buying out a portion of the remaining value of the lease agreement). There are many ways to structure such a thing, but leasing is a very well accepted financial structure that exists in all sorts of asset markets for very good reasons.

I'm not saying that leasing is a floodgate waiting to rain cash on you, just that it is a policy change that will help smart entrepreneurs develop new models to make money from domains - and that stimulates demand.
 

snoopy

Top Contributor
A buyer who is prepared to pay $ 30,000 for a domain name for their own use for whatever reason they have, should be happy to pay $200 a month if that is the only way they can access the domain and use it. If it's a business that believes they can gain SEO or type in traffic to value it at $30k but its not for sale, only for lease, they will lease it if the leasing conditions are sufficient. The economics are exactly the same as applies to lease vs. buy cars, commercial property, etc. Cash flow, capex, tax, risk etc.

It is very different to leasing a car or renting property because with a domain the business is generally based on it.

For the type buyer who is willing to pay $30,000 to buy the domain I think a very small % would see leasing for $200/mo as a good option. Domainers have been trying this for a long time in the .com space (and the attraction for domainers is obvious) but domain leasing has never really caught on. The issue is that anything that is done with the domain is not owned by the person leasing the name.

If you want a property comparison I'd compare it to renting a block of land then deciding to build a house on that land you don't own.

If it is leased for type in traffic that is different, but the average 30k .com.au won't produce any real ROI from type in traffic in my view. SEO, the question again is will people bother for a name they don't own, some might, but I think it is limited.

In the end, it is a matter of demand. If you have a name that someone else wants to use, and the only way they can use it is to lease it, then leasing becomes a market in its own right - just as property rentals are. It may not be accepted practice now, but that doesn't mean it never will be.

So if there was a house for sale that you really liked but the owner wouldn't sell, would you say "ok can I rent it?".

I think most people would just buy something else. electricity.com.au -> power.com.au -> utilities.com.au......There is always reasonable alternatives.

The higher the purchase price, the more attractive leasing becomes.

In my view the higher the price, the more likely they will buy something else.

A lessee may have an option to buy and a right to terminate the lease under certain conditions (say by buying out a portion of the remaining value of the lease agreement). There are many ways to structure such a thing, but leasing is a very well accepted financial structure that exists in all sorts of asset markets for very good reasons.

They'll want that option most of the time, but the average domainer sees the attraction of leasing in terms of not having to sell.

I'm not saying that leasing is a floodgate waiting to rain cash on you, just that it is a policy change that will help smart entrepreneurs develop new models to make money from domains - and that stimulates demand.

Well you said,

"I believe domain leasing is the single policy issue that has the greatest potential to increase the value of a domain portfolio."

I don't agree with that at all. In my view the policy change that would have the greatest effect on prices would be to take off all the ownership restrictions and forget about formulating ideas on how people should/shouldn't be able to use a name which creates uncertainty for domain owners.
 
while leasing is important to the domainer community (whether or not there is a huge demand for it from end users - I won't enter the debate on that!), the biggest issue about domain leasing/licensing faced by Australian business, is that there is no express right for a business to lease domains to trading companies or other related entities for legitimate asset protection / commercialistion.

This shows how out of touch existing auDA policy is, business lives with the uncertainty of whether they can engage in legitimate business structuring and asset protection.
 

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