Domain Industry News

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.

According to the lead in to a paid subscription article in Boston Business Journal, a Massachusetts domain investor sold 800 three letter .us domain names to NameMedia for an undisclosed sum. The article states that “web experts” value some three letter .us names at between $1,000 to $2,000 per name. The article speculates that “his take from the deal was likely in the range of $500,000 to $1.5 million.”
I am not disputing this because his names may have been exceptional, but it’s interesting to note because according to a three letter .us price guide I found (3Character.com), they say the average value of a three letter .us name is just $45. According to that site, .com names are the only three letter domain extension worth more than $1,000 each on average.
It would be interesting to see which names were sold to NameMedia and if this will have any impact on the value of three letter .us names, of which I do not own any, nor plan to buy any time soon.

Although I don’t always agree with Francois’ industry viewpoints, I think he started a great website with Domaining.com. The site makes it very easy to see when domain blogs/news outlets have updated, and it’s very easy to navigate to those sources. I have a few industry resources in my RSS feeder, but Domaining.com makes it much easier for me to get domain industry news quickly from sources that I don’t necessarily read daily.   Thank you to Francois!

In the financial trading world, there is a term called good news/bad action, which means that good news causes a bad action for the price or market. An example of good news/bad action would be the orange crop report scene in the movie “Trading Places,” starring Eddie Murphy and Dan Ackroyd. With the crop report expected to be bad due to the weather, the price of orange commodity futures rise tremendously. Once the report is released, and the crop damage is less than expected, the good news causes the price of futures to rocket down.
The domain world can also offer a similar phenomenon. Yesterday in Britain’s Guardian, a positive domain article was published, called “Trade in Web Names Worth Millions.” The article cited the story of domain investor Neil Stanley, former banker at Goldman Sachs, and now owner of the domain names bridalfashion.co.uk, onlinecareers.co.uk, schoolguide.co.uk, sendingflowers.co.uk and impotency.co.uk. The crux of the article was the amount of money Stanley and other domain investors earn from parked domain names, and the relatively little work that is needed to profit in this manner.
From my viewpoint, the article’s purpose was to tell people the good news about how easy it is to make money by owning domain names, and it would seem to be good press for domain investors. The idea is that savvy “dotcom entrepreneurs” earn plenty of money because of the clicks of others, and if the dotcom entrepreneurs want to cash out, domain names are like liquid gold and can be sold for hundreds of thousands or millions of dollars.
The bad action from this and other similar articles that make domain investing seem easy, is that domain investors will become even more of a target. People want our domain names and will do what it takes to get them. Scammers will continue to pop-up, attempting to steal or sell stolen domain names. Laws will continue to be proposed in an attempt to take our domain names. Now is the time need to support the Internet Commerce Association more than ever.
Our industry isn’t a get rich quick scheme. The people making good money with pay per click advertising on great generic domain names either spent a considerable amount of money acquiring them, spent countless hours in front of their computer screens researching domain names, or went out on a limb and invested in domain names when few even knew what domain names were. While a domain name may make a mint in PPC advertising, buying these domain names wasn’t and still isn’t a simple task. I love the domain industry, but there isn’t any truth to the stereotype that this is an easy business.
The really good news is that if you do your research, you will be rewarded.

Congratulations to Clark Landry and his team at Hecta Media on their recent portfolio acquisition. According to a news release on Forbes this morning, publicly traded Hecta Media (AIM Exchange) purchased a portfolio consisting of approximately 60,000 domain names for $1,450,000. They also retain the option to purchase two additional portfolios for $1,900,000. According to the release, the company expects revenues of $750,000 annually, which is important because the renewal fees will be over $400,000 per year (assuming they are all .com names). Based on my back of the napkin calculations, this is just over a 4 year revenue multiple.
I had the chance to meet with Clark Landry, CEO of Hecta Media, several months ago in New York, and he is a dynamic person, with an entrepreneurial spirit. When we were initially speaking, I had thought most large portfolios for sale with good names were significantly more expensive than what Hecta was able to pay for it. My advice to Clark would be to get pare down the portfolio of non-producing, poor names to save on the renewal fees. Sometimes you have but a bucket of rocks to find some gems.