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Why Do I Have to Pay for a Domain Name?

written by: Carrieanne Larmore•edited by: Amy Carson•updated: 2/1/2011

While the Internet is free to browse, if you want to hold a spot on the web to promote yourself or your business you will need to pay for a domain name. You must pay for a domain name for a few simple reasons.

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    Purchasing a Domain Name

    While the Internet is touted as a free gathering place for people around the world, it makes you wonder, "Why do I have to pay for a domain name?"

    When you purchase a domain name, you are technically only renting space on the web. Once you stop making yearly payments the name is thrown back into the pool for others to use. You must pay for a domain name in order to fund the management of available names and keep registrar websites in business to allow you to view and rent domain names.

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    Engine Behind Domain Names

    The database holding all domain names registered under a top-level domain, such as .com and .net, is called a domain name registry. New domain name registries are being added online as the Internet grows. The operator of each domain name registry is called a Network Information Center (NIC) and is a part of the Domain Name System (DNS).

    There is a separate NIC for each top-level domain. Responsibilities of the NIC include controlling the policies of domain name allocation and managing the registration for their domains. The NIC is accountable for setting the base price for individuals or businesses to register an available domain in their domain name registry.

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    Where Your Money Goes

    When you purchase a domain name online, you are funding the management of the domain name registry and the websites that allow you to register for open domain names. The cost of domain name registration varies depending on individual registry. The NIC first determines the base price for registering one of its domains, then the website you use to register tacks on fees for their services.

    Your final price depends on the website you registered on and which premium services you added. For instance, premium services generally offered are to make your personal information private or add hosting through their company.

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    Premium Domain Names

    As the Internet began to gain in popularity, businesses developed to purchase valuable domain names to sell at a premium. Valuable domain names include short, easy to spell, and potential company names. For example, domains such as business.com, art.com and att.com are considered valuable names.

    Normally, you can purchase a .com domain name for under $15. A premium name can go from about $50 to thousands of dollars. The more the name is in demand, the higher the purchase price will be. While businesses wait for someone to purchase the name, they usually host ads on the page in hopes of generating pay-per-click (PPC) or pay-per-view (PPV) revenue.

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    So Why Do I Have to Pay for a Domain Name?

    You have to pay for a domain name in order to fund the ability for domain names to be created and placed back into the system. Websites that provide registering services receive a cut of the money for allowing you to conveniently pay and rent your spot on the web. Businesses selling premium domain names charge you for the risk they took in holding, marketing and hosting the name. While the Internet is free for individual to browse, getting an official spot on the web and requires a yearly investment in reserving a name.

    Image by Sujin Jetkasettakorn