Forgive my bluntness, but my impression of domain sitting is essentially the same as patent trolling. It's not contributing anything to the economy or society, it just seems like legalized extortion of companies who just want to do business.

Is there something I'm missing about this?

This couldn't be further from the truth. Have you read Edward Bernay's book called "Propaganda"? Do check it out. Your impression of things is no doubt a result of a good spin job.

Domain investments are a proper alternative asset class and many people (some of whom have gone to the best schools in the world) are active players.

It seems like a bit of deflection to point me to a book written in 1928. My impression of domain sitting might be the result of spin, but domains didn't exist in 1928, so that book is not going to explain why what I said "couldn't be further from the truth."

I didn't say that domains aren't an asset; that has little to do with what I was talking about. I'm not saying they're not a good investment, I'm just saying my impression is that they're a kind of investment which does nothing to further society, like other sorts of investments do.

I'm a bit flabbergasted by your comments, but a quick look at your comment history doesn't indicate that you're trollish, so I'll try to answer under the assumption you comment in good faith.

I started by stating that my opinion was an "impression". Obviously by using the word "impression," which by definition means "an opinion (esp.) formed on the basis of little evidence," I was allowing that my opinion was influenced by external and implicit sources. I then asked for more informed input on the possibility that I was lacking an understanding of the issue.

Your response started with "this couldn't be further from the truth," from which I assumed you would go on to challenge the content of what I had said. Instead of countering what I said, or even providing input (which I would value, since you present that you know about this subject) you resorted to challenging the source of my opinion...the very opinion I'm trying to become more informed about. This is a red herring, and I tried to say as much. If you considered my response "emotional" then I'm sorry, but you misread my tone.

But all that said, I have given this independent thought and have come to the same conclusion: that by all I've come to understand about domain sitting, the act of buying domains that you don't wish to develop in order to sell them at outrageous markup later does not provide value to society, and in fact has negative value as it raises the cost of doing business without compensating by contributing value elsewhere.

Perhaps you misunderstand what I mean by domain-name sitting, which would seem to be true given the completely irrelevant link you provided above. The Fairwinds Partners' FAQ talks about having a cohesive domain-name strategy as part of a greater branding and trademark initiative. I fail to see its relevance to domain-name sitting.

"the act of buying domains that you don't wish to develop in order to sell them at outrageous markup later does not provide value to society".

First of all friend (may I call you that?), please chilax. No need to be flabbergasted.

A couple of points I'd like to make. To begin with, in my belief system, as the owner of an asset, you (me or WHOMEVER), has the right to do with that asset whatever you wish.

If you buy something - for whatever intention - I have no right to project my beliefs about what is or isn't appropriate use for YOUR PRIVATE PROPERTY.

As an example, if you were to buy a plot of land (whatever your intention), does someone have the right to say, "you're not adding value to society" because you don't develop it?

I'm a firm believer that if a person doesn't know or appreciate the value of something, they are not the best owner of it.

But that's another issue.

Imagine this. You and I both have an equal amount of free time per week - say 20 extra hours to do what we so desire.

I decide to play online scrabble, write random HN posts and yell at the screen when people get answers wrong on Jeopardy.

You on the other hand, decide to use your time doing other things. You spend hours: -reading through scientific journals (a good source of emerging technologies and future generic domain names that will be popular) -analyzing data from keyword research tools -charting data you found on DNSalesPrice.com

etc etc After putting in the work, you find and invest in a small portfolio of domain names.

Now, one day I read The Lean Startup and decide I want to have a go at this thing called a "start up".

Doing whatever research I so decide, I think up a domain name.

Now, it turns out that the domain name has been registered.

By whom?

By none other than you.

So, I send an email and ask you to quote me a price.

When I get an email from you quoting a price that's in my mind at an "outrageous markup" - I start blasting you on forums.

Forget the fact that: a) neither of us had some kind of unfair advantage. You decided to put in the work it takes to find and acquire these assets - I on the other hand decided to enjoy my leisure time

b) Another party comes along who sees the value in your "outrageous markup" and happily pays you. Not only that, they turn the investment they made into the asset they bought from you into a 25+% ROI (or more....far better than the stock market, wouldn't you agree?)

c) They also substantially lower their customer acquisition costs via their media buys with the right strategic domain investment (content on this relationship here - http://www.ozdomainer.com/domain-names-podcast-episode-19-wi... 15:30 difference between good domain and a bad one is [approx] 4 to 1)

One could go on, but I'll stop here.

I find it shocking when people blame other people for "extortion" for making smart business decisions that, had they had either the foresight or the work ethic, they could also have done.

It's one thing if one fraudulently stole someone's domain then demanded they pay you for its return. Bu when one party takes on the inherent risk involved in ANY kind of investment - then have others lambast them for doing so?

That I can't understand. Having said that, I'll end with a favorite quote of mine (paraphrased Emerson) - "I may not agree with what you say, but I shall defend to the death your right to say it".

Er, nothing you said contradicts what he said, and everything you said could be applied to NPE patent portfolios as well.

Try again?

Shhhh - you're breaking the code (of silence)!

Renting quality generics is a good way to go these days as well. Frank Schilling's portfolio collectively pulls more traffic per month than Twitter but he's still managed to largely stay under the radar screen....

How does domain renting work? My first thought would be as soon as the party paying the rent achieved some measure of success, the party receiving the rent could essentially extort them.

Not extortion, usually just a lease to own contract. Say you have a $150,000 domain and a startup wants it, they can lease for $4k/month and pay off the rest when they've raised their next round.

Interesting!

How often do you make a sale?

What kind of process do you use for the exchange? Do you have some kind of escrow, and if so who do you use for that?

Sales - depends on how many domains you own and how good they are. I make 5-10x returns on every sale though. For the exchange, I usually transfer within registry and only after receiving payment. I've used escrow.com twice for high value domains.

Can you elaborate more on how you make money from them? I have some interesting domains I've had for years -- selling or otherwise trying to monetize them seems interesting.

I sell through domain marketplaces like sedo/afternic/flippa/dnforum. I also reach out to startups directly that correlate to domains I own, it's a very effective way to sell domains. You can also develop them into SEO/amazon referral sites for product-related domains. I know a lot of people that make thousands per month off of pure referral sites, mostly auto-generated.

While interesting, actively buying/selling does not sound like "passive" income, though.

It's not my primary income, it's something I do on the side. Once you've bought a domain, you don't need to do much work after the initial parking setup, which takes about 5 minutes.