State of the Domain Industry
Domain Industry News April 3rd, 2008
DNJournal is reporting that Q1 2008 sales blew away Q1 2007 sales in terms of average sale price and dollar amount of domain sales. This is good news for the domain industry and would indicate that the domain economy is in good shape. A few weeks ago, I was one of the people who stated that the domain industry was in the midst of a slowdown. I still feel that way today, despite the positive news.
I believe that it is more difficult to sell second tier domain names than it was just a few months ago. I am not talking about names like NewHampshireCheapInsuranceQuotes.com or something crazy like that. I am talking about very good names that aren’t top tier names like Funding.com or Widgets.com. From my experience, people aren’t spending as much on the second tier names than they were previously. If the name doesn’t fit into someone’s development plans or doesn’t make strong PPC, many buyers are reluctant to spend the money on these names.
I have also found that there are less buyers now than there were a few months ago. Unless a domain name is on the market at a great price, it is likely to not sell without a strong price drop. Many people (myself included) are focusing on developing their domain names rather than acquiring domain names. Sure people are buying names if the prices are great, but I see less people spending large sums on good domain names, focusing on what they have rather than new acquisitions.
One source of high value sales is on the drop auctions. As great as the value of these auctions seem, there aren’t a ton of people spending big bucks on these auctions. If 2 or 3 of the high value bidders decided to buy less dropped domain names, we would see a huge drop in sale prices. As they say, all it takes is two people to make an auction. If one bidder drops out, the result will be a significantly lower sales price.
Although I still believe we are in the midst of a market slowdown, I am bullish on the longterm prospects of the domain industry. I continue to buy domain names for development, but I think it’s important to maintain a strong cash position.
April 3rd, 2008 at 4:00 pm
Its worth noting on the Sedo / Great domains auction that finished on 3rd April, saw a lot of activity especially for LLL.com; even the lower premium letters vyi.com attracted a winning bid of $8,000. The new investors entering the market seem to be takening up the slack caused by the general downturn.
Graham
April 3rd, 2008 at 5:29 pm
Elliot is right on about the number of buyers affecting the drop auctions. I believe, and could be very wrong, that there are less than 10 guys hyperactive in the drop market. Hyperactive defined just in this case as willing to bid aggressively on many names. We are a well capitalized company that bids on many names, but often we cut chase at $350 and focus back on names starting lower again - and yes, often these auctions end at the next bid. Why? Because virtually all names coming off the drop lists are quality, but second tier. Premium, on a loose sense.
I also believe that group of 10 is growing and adding new members, but that is a slow process. IsraelVacations.com is a prime example of a premium, but second tier domain. Until someone wants to develop a site on this, the PPC revenue and resale time most likely look less than optimal to most. BUT if you were developing a site on this market, it is a steal and worth much more to that user.
I believe the 2nd tier domain market is slower as there is so much availability/alternatives at various prices for the domainer willing to work. Even so, we are becoming tighter sellers. I just look at this as a long term winning play for anyone willing to play the game with patience and an foresight.
April 3rd, 2008 at 5:31 pm
Rebuttal. Actually most names coming off the drops list STINK. Are Terrible. I was just referencing the short list we have after screening through the thousands that are terrible. Our daily short list is about 20 names.
April 3rd, 2008 at 5:51 pm
Elliot, why do you think some people have such loose definition of “premium”? I was just checking a list of “premium” names that people were irritated that they were not accepted for an auction (multiple people’s lists) and they included hyphens, numbers, names like shopnbuy.com or barterntrade.com or dealstomorrow.com - anyone can find these.
At least we can agree on what 2nd-tier means. Solid names, but not the monsters. Best suited for development by a user interested in the market. Not developed by just anyone “because it will make good money” from type in and SEO.
It only ever takes 1 buyer, but a good domainer needs to recognize if that one buyer is here today and act or may not be back for years. Premium domains get inquiries often, can be liquidated fast - no need to sell especially fast. 2-nd tier you can never determine time. 3-rd tier, just rely on luck. I know we have been lucky on some sales. Some guys portfolio of millions appear worth even less than reg-fees.
April 4th, 2008 at 12:07 pm
I agree with Elliot and Greg.
I have slowed down tremendously buying domains. I WAS a big buyer for a long time but stopped buying big for two reasons. The overprinting of U.S. currency and b/c the drop lists are weak now.
I have actually noticed a big dump of domains by domainers at TDNAM. Many of the good-looking domains you see there are not good. When you research them you find they are owned by domainers that got fooled buying them in the first place and are now dumping them. About 50% of the domains at TDNAM on my short list gets nixed daily b/c they are owned by domainers. The domains look good, but are really trash.
Greg says his short list is about 20 domains a day now. The same is true for me now. It used to be about 150 a day.
April 4th, 2008 at 3:30 pm
CCC - great insight. I get my 20 from guy and research, but did not research previous owner. Definitely a solid way to do a final check on the ones I am teetering back and forth on. I like this idea.
I do think the coolest thing about domains though is that there is just 1 and if you buy a name you can see yourself using as a business name if you were in that industry, time is most likely your biggest challenge to making money off it - is it time or patience? Oh well.
Very nice idea though CCC. I would estimate 65% of the 20 we actually attempt to acquire (bid, buy at end), your idea may shave it to 50%.