Why are non-.com three letter domain names a bad investment?

Non-.com three-letter domain names may seem enticing in the domain name investment market, but they are often not a wise choice from an actual return on investment standpoint. This is mainly attributed to the following reasons:

1. Huge number of portfolios leads to market fragmentation

Assuming we choose only the first 500 keywords to combine for a three-word domain name, the number of possible combinations would be 500³ = 125 million. This is a huge number. The more domain names available on the market, the less likely it is that an individual domain name will be selected. This dilution effect directly affects the investor's probability of success.

In contrast, if two phrases are selected for combination, the first 1,000 keywords can yield 1,000² = 1 million combinations, compared to only 10,000 combinations for the first 100 keywords. Such a reduction means a more focused and targeted selection of domain names, thus increasing the likelihood of a sale.

2. Limitations of non-.com extensions

The value of three-letter domain names drops even further when non-.com extensions are considered. Businesses and individual buyers usually prefer .com as their primary domain name because .com has higher brand trust and user habits. Three-word domain names with non-.com extensions, on the other hand, have little to no real market demand.

In fact, even two-word domain names with non-.com extensions should be avoided unless investors are experienced enough to clearly target their markets and buyers. This further suggests that the investment value of three-word domain names in a non-.com environment is minimal.

3. High Risk Investment with Low Success Rate

While there have been historical “unicorn” cases where three-letter domain names have sold for high prices, these sales are usually a very small portion of the market and are not universal. If you are not an industry veteran, trying to profit from 3-letter domains is almost a gamble, as the odds of winning such domains are not on the side of the average investor.

Conclusion

For domain investors, three-letter domains are not a good choice. They are too fragmented in terms of market size, have low actual demand, and have little to no investment value especially in non-.com extensions. In contrast, focusing on two-word domain names made up of popular keyword combinations or choosing .com domain names with more potential demand is a safer and more rewarding investment strategy.

Investing is a science, and choosing your target market and type of domain name carefully is what will set you apart from the competition.