I Don’t Fully Understand the Chinese Domain Market
When I bought SHS.com, I did so under the assumption that I could profitably sell the domain name to a company or startup that uses that acronym. I figured that if I fail to draw interest from an end user buyer, I could find another investor who would be interested in buying the domain name for a longer hold. In the meantime, my brother used the domain name for his website.
I understand why short numeric and letter domain names have value.
Short numeric (2, 3, 4, and even 5 number) domain names are easy to remember, and they are especially popular for websites in China. Numeric domain names are generally legally “safe” to own. I don’t recall seeing a numeric domain name lost in a UDRP, and I can’t recall any cybersquatting lawsuits related to numeric domain names (correct me if I am wrong, please). They are in limited supply, and there has been demand for 4 numbers and under .com domain names for as long as I can recall.
Short letter .com domain names also make sense, although there can be more legal risk associated with owning them. The legal risk aside, I see many companies and organizations using 2, 3, and 4 letter .com domain names for their businesses. Short letter domain names are easy to remember, can be good for marketing, and are great for shortening what could be a longer domain name if the full company name was used.
For these short numeric and letter domain names, I understand why they have tremendous value. There is a very limited supply of short (2, 3, and 4) letter or number .com domain names, and there is considerable demand. Simple economics help me understand why these domain names are coveted and continue to grow in value.
What I don’t really understand is why some sectors of the market are taking off, particularly related to the Chinese domain market. I don’t know why longer numeric domain names, that seemingly aren’t all that rare, are being registered en masse and growing in value. Mike Berkens reported that there were just 8,000 6 number .com domain names available to register out of 1 million, and he wrote that “We would expect all of these domain name to be registered by the end of the weekend.” There are also many 7 and 8 number .com domain names being registered and sold.
I have seen auctions for many short and/or numeric domain names going for way more than I would have expected, even just several months ago. I understand that domain name buyers in China are participating heavily, and that seems to be driving up the prices. Domain names that have generally not been highly coveted in the US and other Western markets (such as short names with Q, Z, X) seem to set new highs on a regular basis.
The point I am trying to make is that I don’t understand why certain segments of the domain name market are seeing a surge in demand. I do understand that prices are increasing because there is a demand for these domain names, but I just don’t understand why there is a demand for a significant portion of these types of domain names.
As I mentioned in the opening paragraph, I buy domain names that I think others will want to develop in the future. You can see the types of domain names I buy and sell on my corporate website. Whether I sell my domain names to those startups and companies directly or I sell them to someone else who will do that eventually, the domain names I buy have commercial usage from my perspective. I don’t see the commercial usage for some of the domain names that have grown in demand and value, and that is what confuses me.
I am not going to speculate on how the market will perform in the short or long term. Truth be told, I have no idea. If I knew what was going to happen, I would have sold the entirety of my stock portfolio, leveraged everything I own, and I would have bought short numeric domain names 3-5 years ago. I would be retired (or at least be able to retire comfortably) had I done that. I would imagine I could have done this even 1-2 years ago and been able to retire.
There are many people who are making money directly from this market. There are also many people making money secondarily by selling domain names to those who directly benefitted. Despite being active in the domain name business, I don’t really understand the dynamics (ie why a 8 number .com domain name with four 8s at the front is registered) of the Chinese domain name market.
Reach out to Elliot: Twitter | Google + | Facebook | Email