Invest

Reasons to Invest

  1. Internet advertising is growing at an annual rate of 20 percent to 40 percent.
  2. Traffic is becoming increasingly expensive.
  3. Generic domains are best at generating natural traffic and benefitting from SEO activities.
  4. Domains are the new asset class for private and institutional investors.
  5. The number of internet users is still growing strongly, as is the rate of direct navigations.
  6. The value of direct navigation traffic is rising rapidly, notably contributing to the value of domains.
  7. The still low rate of Internet penetration in many emerging markets will expand substantially in the future.

How Can I Profit?

There are many ways you can profit. Number one: buy domains. This is a reliable strategy — you can use your own knowledge of different markets or industries to find and buy or register interesting domains. Another possibility would be the acquisition of revenue-bearing domains; park them or use them for monetization. This is probably one of the best options, but frankly, if you plan to invest more than 10.000 USD, this way of promoting the growth of your capital will very soon become a full-time job.

Expertise

Buying and trading domains requires a range of analytical skills, tools and research into various fields such as economics, technological development, semantics, etc. It also requires a deep understanding of the mechanics of the market for domains and keywords and of the forces that drive the market on a daily and long-term basis.
The following is a short overview of the considerations and analysis performed by the DDF team.

a) Future Development of Keywords.

The economic as well as semantic development of words and hence keyword combinations does bear a substantial influence on the value of domain names. For example, the word “insurance” is a great single and/or combinational keyword because insurance is usually an expensive service and advertisers pays high fees for every new customer.

All resulting combinations, among them many new ones such as “bankinsurance”, “helicopterinsurance” and “domaininsurance”, will be of equal value. “Laptop” has become an acceptable word; however, the technology may not be around much longer and the word can hardly be used for anything new. There are, on the other hand, many domains that will not reach their full potential for some time. “Herpesvaccinations.com” is of little value today but very likely will turn into a true goldmine once such a product has entered the market.

b) Future Development of Domains

Investing in new TLDs (top level domains) requires a detailed study of the economies of the countries in which the new domains are registered. The .com domain represents by far the largest part of the business and yields the highest prices. There are, however, many other ccTLDs (country code TLDs) constantly increasing in value: .de, .co, .uk and .es are all well-known to the user community and all subject to rising prices, with many other emerging markets yet to follow. Take India for example: it’s the country with the world’s second largest English speaking population, yet it has many TLDs where domains may still be registered at low rates.

c) Evaluation of Domain Names

Before purchase, DDF subjects a portfolio or domain name to careful evaluation. In-depth analysis includes assessing current advertisers to gather information about the value of particular keywords. It also requires calculating the revenues that can be achieved through the corresponding domains and keywords, in order to evaluate the proper buying prices and the potential return on investment. Scores of automated tools for analyzing domains already exist on the market; they evaluate hundreds of factors such as domain age, page rank, search volume, and backlinks.

However, domain appraisals also require an evaluation of many qualitative facts and needs to be performed by breathing humans so that domain values can be properly determined. Additionally, the legal status of each domain, its ccTLD and any possible complications related to its operation (for instance, trademark issues) must be clarified.

d) Monetizing Models

Each Domain requires an individual approach and an individual monetizing solution. Options range from parking at various companies, to affiliate programs, arbitrage, or creating a content website, maybe even a tailored web application. We aim to find the best option for each domain in order to tap its full potential.

Strategy

The fund follows different strategies to produce earnings, gain value, and to obtain a strategic edge in the domain market. Each strategy is linked to a specific type of monetization goal.

PORTFOLIO BUILDING

Apart from top returns to our investors, DDF focuses on building a high quality portfolio that contributes greatly to the total value of our fund. By acquiring several domains in one category (for example, 20 quality domains all dealing with the topic of jewelry),
we build more value than that achieved by acquiring an equal number of unrelated domains. There are different ways to build great portfolios (or “baskets”), for example by basing them on keywords or TLDs, or by creating special baskets holding only domains that combine keywords and TLDS — for example, German keywords with .com endings.

INCOME STREAM:DOMAIN TRANSACTION

PREMIUM SINGLE – WORD DOMAINS

Premium single-word domain names are the gold of the domain business. These are domain names consisting of a single generic word that relates to a service or product. These names are definitely the most valuable and reap the highest earnings, with prices climbing by the day. Acquiring domains of this kind is one of DDF’s major pursuits.

INCOME STREAM:DOMAIN TRANSACTION AND MONETIZATION

KEYWORD RELATED DOMAINS

Keyword- related domains contain advertised keywords — for example, “cheapcars.com” and “contactlenses.com”. They usually are not too expensive but generate great earnings in the parking or affiliate business. DDF buys profitable domains in technologies and industries that promise superior performance on a long-term basis.

INCOME STREAM:DOMAIN TRANSACTION AND MONETIZATION

GREAT DOMAIN NAMES

A great name could be a catchy word or a very short name such as “biest.com”, “gjv.com”, “inovate.com” and “input.org” (all owned by the DDF). These names are not particularly suited to attract direct navigation traffic, but they are excellent for online projects since they are easy to remember and might be used for future Web projects. Great names are purchased by the fund and immediately offered on various platforms at higher prices. Though it might take some time (perhaps years in some cases) until a particular name is resold, the profit gained through such transactions can reach a 1,000 percent or more

INCOME STREAM:DOMAIN TRANSACTION

EMERGING MARKETS

Many emerging markets have a large English-speaking population: India (90 million), Nigeria (40 million) and China (20 million) are key examples. In these countries, the Internet is at an early stage of development — especially when compared to the USA or Europe — and prices of top domains are relatively low. But these markets are in transition: the European market is probably 24 months behind the U.S. market; India, China and Russia may be four or five years behind the U.S. Recent transaction prices illustrate the situation quite nicely: “Jobs.at” sold for 408K EUR in 2008, “Kredit.de” for 1.17 million USD in 2008 and “Motor.es” for 113K USD in 2009. Even Indian domain prices have moved to new levels in 2009, with the first domains changing hands for prices well above 10K USD.

INCOME STREAM:DOMAIN TRANSACTION AND MONETIZATION

FUTURE SEMANTICS

New technologies: our team is closely following the newest developments on the technological front. Particular technological innovations might not be relevant until five, ten, or even 20 years from now. The registration of names related to future technologies hardly costs anything when undertaken today, but once the respective technologies have been established, these domains could be worth a fortune. “Flushots” was registered for 990 USD only six years ago and is now worth 120 K USD. We are closely watching developments in the fields of physics, chemistry, metallurgy, pharmacy, and many other areas of interest such as semantics, street language, and jargon.

INCOME STREAM:DOMAIN TRANSACTION AND MONETIZATION

Income & Value

DOMAIN MONETIZING

Once a domain is purchased, say “vehiclerepair.com.”, we use SEO in order to raise the domain’s Web popularity, so that each time a user searches for the topic or item, our domain will be highly listed in the search results of Google, Yahoo, Bing, Ask etc. A domain will furthermore be listed in various directories by means of proprietary strategies; this renders the domain more popular and draws more traffic to the site. We will then develop the site, either through parking or deploying an advertising or affiliate project; in any case, the site is to contain mainly advertising designed in a way that every second or third visitor to the site clicks on one of the ads. DDF receives money for each click, yielding between five and 100 percent of the domain’s purchase price each year. It is also possible to use particular domains for advertising purposes in networks, and through arbitrage — profiting from the price difference that occurs when returns from advertising are higher than the initial costs — we are able to actively generate income, yielding annual gains of up to 1,000 percent based on the capital invested in advertising.

DOMAIN TRANSACTIONS

Another of the fund’s income sources is investment in the domains themselves. Domain prices climb up to 200 percent a year depending on the particular industries, keywords and countries involved. For these domains, we follow a buy and hold strategy, selling domains only to refinance new domain purchases that promise even higher returns in advertising or price boosts.

EVALUATION

Our domains’ values are continuously being evaluated. Having opted for the most conservative model available, we are using some of the most renowned appraisal companies in the world today — SEDO, Monikker, Estibot and Godaddy, all of which are accepted by the IRS and the Canadian tax authorities — to guarantee quality evaluation of our domain portfolio.

DOMAIN FINANCING

The fund offers financing of domains to companies and individuals that are planning to use them for business or personal purposes. The fund will then rent the domain for a monthly fee, usually with an option for the renter to buy the domain from the fund at a predefined price. The revenues from rentals vary from case to case, depending on the quality of the domain and the terms of the agreement.

Our investors

All of DDF’s investors are well-qualified private parties with at least a basic understanding of the domain and investment business. Many of the investors are domainers themselves, active in the online industry. Instead of seeking large investments from funds and institutions, DDF has chosen to grow at reasonable pace and at a rate that allows for new investments to be turned immediately into revenue-generating assets. We believe that those investors who understand the nature of our business are the best ones to participate in our venture, and we invite those who wish to profit from our great portfolio to invest and promote its growth. Please understand that because of our policy to ensure our investors’ understanding of our business, we cannot accept all investors that apply.

Alternative investment

Clearly, an investment in domains is an alternative investment; but is it all that exotic? This is a question we have been confronted with many times. Let’s consider the following: almost 20 percent of all Internet users own at least one domain, as many as five percent of them hold more than five and register, buy and/or sell domains occasionally. Almost every Internet user understands what a domain is and how it can be used. Compare this to commodity futures, options, short selling or credit swaps — how many investors understand these financial concepts?

Vision

DDF is planning to become the best-yielding and best-valued domain portfolio in the market. It is our designated aim to become one of the key players in the field of domain marketing and to acquire many of the world’s best available domain names in the months and years to come.

The risks

Like any other business, investing in domains bears certain risks. At present, we can’t see how any of them would seriously affect our business; we however do not intend to keep our clients uninformed on the issue.

One risk to consider is the possibility of a total restructuring of the Internet. Although there are no signs indicating such a development at present, one must keep in mind that, in time, changes can happen that might have an impact on our industry. This has been so in the past, when Yahoo and Google downgraded all domains containing “-”, numbers, or any name made up of more than nine letters, which was not a big loss since the names concerned were not too valuable anyway. Nonetheless, ten or 20 USD in each case was lost without recourse. Another risk is browser technology: browsers have a huge impact on the way we surf and navigate to a site. If a browser diverts traffic to sites other than the ones we intend, direct navigation traffic revenues would seriously be affected, and along with it, the value of certain domains. Another technology that could affect the way we surf is speech recognition, a technology that never really took off but might become relevant in the future.

Facts

The Domain Developers Fund is an administered fund in the Cayman Islands. This means that the fund is under the strict control of an administrator appointed by the government of the Cayman Islands. No funds can be accepted or withdrawn without the permission of the administrator.

THE CAYMANS

The Cayman Islands are among the safest and most sophisticated places for a fund. Almost 80 percent of all Funds are located on the Caymans, among them some of the largest Investment portfolios in the world. In a recent initiative, the Cayman Islands has agreed to the IOSCO multilateral memorandum of understanding on consultation, co-operation and exchange of information (MMOU). This is a benchmark among security regulators. CIMA now has 15 bi-lateral memoranda of understanding with a number of major regulators, including the US Securities and Exchange Commission and the UK Financial Services Authority Membership of IOSCO should remove remaining barriers in some jurisdictions to the use of Cayman Islands entities where the regulatory regime permits only investors and/or counterparties to engage with vehicles that are regulated in an IOSCO member jurisdiction. The Cayman Islands’ maintains 12 bilateral Tax Information arrangements with the following countries: Denmark, Faroe Islands, Finland, Greenland, Iceland, Ireland, Netherlands, New Zealand, Norway, Sweden, United Kingdom and the United States. The Organization for Economic Cooperation and Development (OECD) added the Cayman Islands to its ‘white list’ of jurisdictions that substantially implement international tax standards. The Cayman Islands recognition came about after the country signed its 12th TIEA with New Zealand, on 13 August 2009.

THE FEES

The fund charges only two kinds of fees: management and incentive. The management fee is two and a half percent per year for class “A” shares and two percent for class “B” shares. The incentive (or performance) fee for all earnings above a five percent hurdle is 25 percent for class “A” shares and 20 percent for class “B” shares.

KEEPING TRACK

You can follow the fund’s performance via Reuters, Bloomberg, SIX and Telekurs, on the website of the fund at www.ddf.lu and in many international newspapers and online media. Besides the current price of certificates we will release news and ad hoc reports to keep you informed about the fund’s activities.

REDEMPTIONS

When you buy into the fund there is a minimum holding period of six months. After this, you need to advise any sales of share six months in advance.

How to invest

There are different ways to become an investor in the fund. One is to order DDF investment certificates through your bank or broker using the ISIN numbers. The other way is to fill out an investor subscription form and send it to us. The first step is to contact us by email or fax; we then will need to check if you are allowed to buy into the fund. After approval, we will give you details on where, when and how to make your payment.