A quick investigation of the above question yields the following results.

The Internet Corporation for Assigned Names and Numbers, the nonprofit organization formed in 1998 to take over government control of the Internet, grants licenses to sell domain names. According to this story, it costs $4,000 to get a license. The firm then pays 25 cents for each domain name it sells. So far 359 companies have paid the yearly $4,000 fee.

Obviously, volume is the name of this game. Yahoo! has to sell about 800 domain names at $4.98 each to recoup its accreditation fee. After that, it’s big time gravy. So, if Yahoo! sells 10,000 names, it makes $50,000 (revenue) – $4,000 (fee) – $2,500 (25 cents each) = $43,500. Pretty good return for a $4,000 investment.

Small potatoes for Yahoo! though; maybe they sell 100,000 a year.