3Character.com - 3 Letter Domains: The History and the Future

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3-Letter Domains: The History and the Future
Written by Andrew Miller of ZestyDomains.com

Many have speculated as to why 3 letter domains have risen in value so greatly over the recent years, and especially over the recent last few months. For what it's worth, I thought it might be fun to uncover some of the reasoning for this growth and to quantify just what characteristics make these domains so valuable.

Brief History:
Around the beginning of the year 2000, all 17,576 of the possible 3 letter (LLL) .com domains were registered. Ironically this is also widely considered the same time period of the so-called "dot Com bust," which marked the end of an awkward and outrageous time of irresponsible internet spending (without regard for real value or growth). Many argue that this bust had much to do with the creation of a more rational domain name marketplace; a marketplace where consistent performers, such as 3 letter domains, have thrived.

By 2001, all the possible 3 letter .net domains were registered and 3 letter .com domains were selling into the very low 3 figure ($xxx) range. By 2003, all the possible 3 letter .org domains were registered and values across the board for 3 letter .com, Net and .org combos started to rise sharply.

In early 2004, a major event took place within the 3 letter domainspace. Thunayan K. AL-Ghanim (well known as "Elequa") bought all the remaining unregistered 3 letter .info and .biz domains within a period of 48 hours in February, 2004. Shortly after this buyout, the values of 3 letter domains in all the gTLD categories of .com, Net, .org, Info and Biz took off.

Finally, during the summer of 2004, an effort was launched by several domainers to inspire the registration of all remaining 3 letter .us domains. This effort worked temporarily, but many original 3 letter Us domain holders let their domains drop over the summer of 2005, creating again a collection of available 3 letter Us domains. By the fall of 2005, once again all 3 letter Us domains were registered, and judging by the backorder history for 3 letter .us domains, it looks like this buyout is going to hold! (Click Here for a 3 Letter Domain Name Valuation Chart for the last 5 Years)

So what makes 3 letter domains special?
3 letter domains have several characteristics that make them inherently valuable, including:

Their global reach: 3 letter domains are not language specific. The 26 alphabet letters are used within many languages and thus these domains can be used across the globe.
Their composition: Much of the world operates using acronyms. Throughout the worldwide business and consumer climate, acronyms are widely used and preferred to represent innumerable word combinations.
Their rarity: There are only 17,576 possible 3 letter combinations for each extension. This may seem like a large number, but consider that with millions of companies and billions of people on the web, only a select few own any of these combos within the major domain extensions.
Their availability: Building on their rarity, fewer and fewer of the 3 letter domains are not in "end-user" hands, and are thus available for resale. (Note: "End-user" is defined as a company (or even an individual) who is not in the market to sell their domain. For example, computer company IBM is not in the market to sell their domain name of IBM.com, and is thus the end-user of IBM.com) As more and more 3 letter domains fall into end-user hands, the remaining supply of "available for resale" 3 letter domains dwindles. As supply decreases and demand increases (demand for 3 letter domains continues to grow), prices continue to increase.

Where will 3 letter domains go from here?
For those who currently own 3 letter domains, the future looks strong for continued growth. The Internet is continuing to grow at a strong rate and the demand for acronym domains within the business world is expanding greatly. Over the last few months, very few 3 letter .com domains have been listed for sale (far fewer than ever before). Those that are selling are going for prices well above anything seen previously.

Further, as is true of much of the web, .com prices are driving the rest of the domain name extensions within the domain name marketplace. 3 letter domains within the other major extensions tend to follow the growth of their .com counterparts, though at various fraction multiples of the .com price. For example, 3 letter Net domains are currently selling at about 1/8th to 1/20th the price of their .com counterparts. Similar multiple variances can be observed across the board for the major extensions within the 3 letter namespace. For an updated look at 3 letter domain valuations, please visit the 3character.com price guide.

Conclusion:
3 letter domains are among the most valuable and consistently growing groups of domains and investments. Annual returns of 30% to 100% have not been uncommon over the last 5 years and the current growth over the last few months has steadily upticked at a rate of 5% to 8% a month. These strong figures have blown away any of the major stock market indices and are gaining the attention of major investors and venture capitalists. Don't be surprised if prices continue to climb as new money enters the 3 letter domain namespace and the continued growth in the world-wide business climate expand further the demand for these 3 letter domains.

Andrew Miller is the owner of Zestydomains.com. Please feel free to email the author with any comments!