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Current Domain Market

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Subscribe to Elliot's BlogDomain values aren’t plummeting, but the domain market is pretty slushy (as opposed to frozen credit markets). It’s getting more difficult for domain investors to resell domain names, and many people could be technically underwater with recent purchases. The good news is that it only costs $8+/- to maintain a domain name per year, but the bad news is that domain names aren’t nearly as liquid as they have been – even solid domain names.

For several years, many of the largest domain companies spent hundreds of thousands of dollars on domain auctions and private purchases each year. Much of this money was reinvested by the domain investors who sold their names. This buying literally fueled much of the increase in domain values we’ve seen recently, especially with more speculative investments. End user sales continued to be made (and are also fueling the domain industry), but a majority of the money that was spent was courtesy of the biggest domain investors.

Due to the economic downturn, lower PPC payouts, stronger click fraud protection, less access to liquidity, many of the biggest buyers have been spending less, and some have a complete buying freeze right now. Consequently, there has been less money available for the investors below this high level. This has caused a drop in value for some domain names (sold at auction to other domainers) and a rapid drop in price for highly speculative “investments” like 3 and 4 letter .com names and alternative extensions like .mobi.

IMO, the smart domain investors are sitting on their cash, investing in their own businesses via development and/or in new technology, buying domain names only at great prices, and trying to develop other revenue streams. Now is a good time to evaluate your domain holdings and determine how you are going to weather the financial storm. If you follow the masses (like I did when I bought LVS a few couple of weeks ago in the $7/share range), chances are good that you won’t survive the current conditions.

IMO, here are some types of domains I personally would avoid right now if you don’t have a development plan or if they don’t generate enough revenue to justify the purchase (aka just looking to flip):

Numerics – Sure, the WSJ just had an article about them, but much of the growth in value has been fueled by TJ’s buying, which is for a specific project.  I don’t think it’s easy to monetize them and the only buyers seem to be people with a specific project or a domain investor who wants to flip it to someone else.  I have owned these in the past, and I would buy them – but only as a domain investor if I can get a great price.  The advantage of these names is the rarity and it’s unlikely a company can TM a number.

Alternative Extensions – People aren’t speculating nearly as much as they did months ago. You know it’s bad news when one of the strongest keyword that can be used in a domain – “lawyer” had a sale for under $2k with Lawyer.mobi. Thankfully, I haven’t seen many people hyping .asia or .whatever anymore.

Acronym Domains (3 & 4 letter names) – Some have strong value if the end user decides to buy it from you rather than file a UDRP or send you a C&D.  You might be able to make PPC revenue, but those domains can be expensive, and they are only making money because people are probably looking for a trademark owner who uses that acronym, so it’s risky.  There are some good acronymn names for sure, but those are probably more expensive than many people can afford.  BTW, I do own several of these, but I don’t have them parked nor do I have them for sale right now.

Honestly, the only thing I am really buying these days are geodomains and category killer domains at great prices that I can develop.  I am actually debating whether to buy a few category killer niche domains that would have sold for at least 5x the current asking price last year, but cash is king right now.

Personally, I can’t complain because I am in a fairly strong position right now.  My sales are down, but I’ve done well enough this year to not worry about selling for a while, and my alternative revenue streams are beginning to gain strength. All is not bleak, but times are tough and you will need to figure out how to adapt. Listening to other people who tell you “what’s hot” is not a smart idea. Develop a gut instinct and go with it. Prospects are great – especially if you have the cash.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (16)

    Daniel Sanchez

    Great post, I feel the same way about the points you made. Although I am going to disagree with investors not buying domains right now and having a “freeze”. There are amazing bargains right now, simply because people need money.

    For example, I just paid $xx,xxx for a domain that is worth ten times the price for the amount of type in traffic it gets. Not to mention the revenue I will be getting once I develop the domain name. I can honestly say the domain will pay itself in the first month of business.

    If you are an investor, and believe domain names are a good vehicle or you like one specifically, you would be a fool not to negotiate the price down to half it’s listing price. This is a perfect opportunity because everyone is “cash poor” and they are all holding on to their cash.

    Consider this: people who purchased companies and land during the Great Depression were the people who profited the most in the up swing! So apply it to this industry and go find one or two amazing domains that will profit you the most in the next five years.

    Daniel Sanchez

    ***UPDATED BY ELLIOT***

    Did you buy to develop or to flip? If you bought to develop, do you have a project plan?

    December 6th, 2008 at 12:39 pm

    Troy

    Where do you find your cat. killer domains? Forums, personal contacts, or some other way?

    Troy

    ***UPDATED BY ELLIOT***

    Personal contacts

    December 6th, 2008 at 1:16 pm

    Randall Brown

    The market is at a lower point then it has been with domain sales. But, I feel that near the summer and tax income time we will see a jump in sales and hopefully the sales will stay up and strengthen the market again.

    Whats the best ext. besides .com I am looking to branch out in to other tlds?

    ***UPDATED BY ELLIOT***

    I don’t know if I agree with that. I think there will be lots of job losses in the coming months and less incremental income to spend on domains for non-fulltimers. Regarding tax income… I have to save now to pay taxes in April (overage from estimated taxes that didn’t cover it)… After that, my estimated taxes are going to be even higher next year, so there won’t be any tax income for me.

    I don’t really own anything other than .com (aside from protective investments). I believe that it costs the same amount to develop any extension, but if you don’t have the .com it’s much more difficult to get SE ranking, traffic, and trust from visitors. It’s not worth the effort, IMO. As for investing, there is far less margin that can be made with other extensions.

    December 6th, 2008 at 2:18 pm

    Big Mack

    I agree I am just buying Geo domains and just .Coms

    December 6th, 2008 at 2:25 pm

    Ms Domainer

    *

    I know that alternative TLDs should (for the most part) be avoided, but sometimes it’s worth the risk if the keyword is common and completely generic.

    I don’t normally pop for .info domains, especially on the aftermarket (I have a very few at reg fee), but I did pay low xxx for please.info. I thought that the financial risk was low enough for a keyword with 2,400,000,000 searches, even with a hinky TLD.

    Right now it’s redirected to a blog without ads because I want to put more content on it so that it doesn’t seem quite so spammy.

    Would I have paid x,xxx or even mid-to high xxx?

    No way.

    I got lucky (maybe).

    But the key here will be development and more than just a blog; this domain will do nothing as a parked page (although it did come with an Alexa rating, even though I have seen no evidence of a site, parked or otherwise, since 2003).

    This is what I call a calculated low-risk endeavor, which may or may not pan out.

    😉

    *

    December 6th, 2008 at 3:13 pm

    Kevin

    You can sell domains just fine but you have to price them fairly to the current market.

    I sold 13 domains so far this month, so the sales are there.

    You also have to have strong marketing skills and know where and how to advertise.

    I usually focus on the higher end premium domains, but have been getting a lot of domainers contacting me for bulk portfolio sales so I’m now offering sellers to list their domains on my site in bulk for just a small listing fee and they can field propspective buyers directly and not have to pay a broker fee. So this gives sellers a way to reach a 60,000 page view a month domain buyer audience inexpensively.

    I’ve also setup a real bargain priced “Featured Sites” section on BTD for anyone who wants to promote their domain services, domains for sale, domain sites, etc. to all my clients.

    http://www.BigTicketDomains.com/ads/

    So bottom line in times like this there is plenty of money out there to buy domains, but you just have to notch up your advertising and marketing and promote much more than usual.

    Kevin
    BigTicketDomains.com
    DomainsNewsletter.com

    December 6th, 2008 at 5:08 pm

    chris

    check this out:
    http://www.networkworld.com/community/node/35218

    State of Washington sues Web/SEO firm

    December 6th, 2008 at 5:24 pm

    owen frager

    Great points, Elliot. Something else one can do is to pick a few of their names and take an hour a day to actively market them outside of usual channels. You’ve brought up before strategies to find who is paying for Google keywords ads around your domain’s terms and emailing them. Also emailing the .net, .org or .uk owners of the same name. Or as David Carter suggested in a lunch N learn on domain success last week you can use xsite pro to put up a simple for sale page accentuating the value proposition of your domain to an end user and benefit from seo traffic. At Grand Names we have seen great demand for our “dressed for domain success” services which basically accomplishes what David does on his own for people who don’t know how to do it.

    December 6th, 2008 at 5:58 pm

    David J Castello

    Great points all, Elliot.

    Lawyer.mobi at 2K doesn’t surprise me because economic times like these pull everything down to the bone. Last year it was, “DotMobi may do well, maybe I’ll give it a shot” and now it is, “Do you really want to invest whatever liquid you have in DotMobi?”

    Big difference.

    Then again, it’s during times like these that people don’t speculate. If you build a solid Geo or strong dotCom it will make you a profit. By now, even the greenest domainer knows this.

    The hard part for us is that we’re still on a heavy development curve. And it’s much harder to leave the revenue derived from parking a strong dotCom to begin the gradual upward curve from zero by selling ads.

    Regardless, we have no choice. Michael and I have already printed a thousand “Give Me Development or Give Me A Slow Death By Parking” tshirts for DOMAINfest.

    December 6th, 2008 at 7:10 pm

    Chief Naming Officer

    With uncertain economic times, businesses are becoming more focused on gaining and keeping customers. TV and print media are expensive so web exposure and web advertising that makes sense to their brand and relevant to their industry is gaining more traction.

    If we are developing domains and creating customized exposure for each business’s (ie. advertiser’s) objectives they will pay attention and buy in.

    Previously, when times were good business owners were often “too busy” and “too comfortable” with their current situation to try web advertising if they were unfamiliar with it.

    If you can create substantial value for on party for those looking for exposure and then monetize in a different way then you have an asset to build on.

    Good analysis Elliot on this post, you have an excellent commitment to sharing your thoughts and insight with your readers.

    December 7th, 2008 at 2:32 am

    WannaDevelop.com

    Development is what makes sense in this times when everything seems to decline… Sales… Parking…Confidence as a whole… It all sucks. Being tied up to just one niche with domain investments such as GEO however isn’t smart imo. Every investor knows the importance of diversification… I recommend expanding to multiple verticals if possible no matter how solid you believe your businesses are — better safe than sorry.

    If you have been involved with domains and development for 1 – 2 years you better already be diversified… If not — think about it and think about it real good…otherwise one day you may just wake up and won’t know what hit you… counting on just google or yahoo search engine traffic or type ins is silly.

    The guys that are focused on just one or two things are all “big dogs” that have been around for years and they do not need to adapt to anything as they are set in their ways and the cutbacks will have minimal effects on them and their business operations.

    The guys who are currently suffering and hurting most from the circumstances are the ones still learning all the tricks of the trade and domain game.. the “up and comers” who might of been involved with domains for 6 – 12 months upto this point.

    I wrote an “observation” on my site about Frank Schilling and how he is pushing forward for change into 2009 and beyond

    Mike
    http://www.wannadevelop.com

    December 7th, 2008 at 3:31 am

    Helder

    Excellent points and advice Elliot. I believe there’s a non speculation opportunity with ccTLD’s, they’re the only ones with a big future, the only ones that will stand with the .com, because over 90% of businesses worldwide are local or national, and it makes more sense to have a ccTLD. After .COM i think it’s the best choice, tough .net and .org are gaining their space too, in europe i also see .tv being adopted by some big brands.

    December 7th, 2008 at 8:50 am

    Kevin

    Here’s another example of how you can make money right now. I just made this post on my blog and reposting it here for this thread.

    “Nuggets Can Still Be Found”

    This is why I keep news programs running all the time on my TV. So CNN starts a piece about the top words and phrases for this year and I start searching right away to see if any were overlooked by the throngs of domain hunters.

    And sure enough found one of the top 20 buzz phrases for 2008 that hadn’t been reg’d.

    http://www.WorkingClassWhites.com

    OK, I know a bit offbeat, and not the kind I usually would go for, but when I checked the SERP’s for the phrase it was quite large at over 750,000.

    http://www.google.com/search?num=20&hl=en&newwindow=1&safe=off&q=working+class+whites&btnG=Search

    So just another bit of proof that you can still find keyword trend domains unregistered out there.

    Now of course it’s not a million dollar domain. Not even a thousand dollar domain at this point, but I’m sure it’ll get traffic, make a few bucks, and I’ll be able to flip it in a few months for a nice profit of some kind, if I decide to sell it.

    December 7th, 2008 at 9:18 am

    Rob Sequin

    This economic downturn does two things:

    1. Forces people to the Internet
    a. by choice looking for more customers or alternate source of revenue
    b. more people are home more due to unemployment or not going out to eat or shopping as much

    2. Boils down what is really important to domain investors so they buy, hold, invest and develop what is most interesting to them.

    1 + 2 = bright future for domains and website.

    December 7th, 2008 at 1:25 pm

    Daniel Sanchez

    @ Elliot: Yes, I have never sold a domain name without adding more value to the it with development. I honestly believe a domain can double or triple it’s equity with development and steady traffic.

    The aforementioned domain name targets more than 13 million+ users directly. It receives 100-300 type ins per day and makes roughly $1,000 per month on PPC. It is truly a 100% generic domain, and although it is still being transfered to my registrar, the website is being built as I type this.

    I don’t plan on selling the name at all as it will put my development company on the map for sure. I’m tired of seeing all these companies popping up when they have no generic names to their belt, meaning they can’t cater to the people who need it the most. Once I get the earnings to about $20,000 p/m I am going to re-launch dDevelop and go from there.

    Daniel Sanchez

    P.s. You guys are forgetting an important piece of the puzzle here when you argue there are no good domains left, or that it is saturated. It’s called…. wait for it…. expired domains! I just bought 5 dot coms for specific products at reg fee. Great for development and I already made my money back in parking!

    December 7th, 2008 at 1:39 pm

    Cash Domaineering

    Domaineering is the web-based marketing business of acquiring and monetizing Internet domain names for their use primarily as an advertising medium rather than speculating on domains as intellectual property investments for resale as in domaining. In essence, the domain names function as virtual Internet billboards with generic domain names being highly valued for their revenue generating potential derived from attracting Internet traffic hits. As with traditional advertising, domaineering is part art and part science. Often to be the most effective as advertising tools, the domain names and their corresponding landing pages must be engineered or optimized to produce maximum revenue which may require considerable skill and good knowledge of search engine optimization ( SEO ) practices, marketing psychology and an understanding of the target market audience. Domaineering generally utilizes a firm offering domain parking services to provide the sponsored “feed” of a word or phrase searched for thus creating a mini-directory populated largely by advertisers paying to promote their products and services under a relevant generic keyword domain. Occasionally content is added to develop a functional mini-website. Domaineers and some of those who advertise online using keywords believe domaineering provides a useful, legal and legitimate Internet marketing service while opponents of domaineering decry the practice as increasing the ubiquitous commercialization of the world wide web. Domaineering is practiced by both large companies who may have registered hundreds or even thousands of domains to individual entrepreneurial minded domaineers who may only own one or a few domains

    December 8th, 2008 at 8:58 pm

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