“A few events over the last few months, however, provide solid evidence that the domain investment party is officially over.” – Andrew Knibbe of Flippa, December 2011, on JohnChow.com
Almost one year ago, entrepreneur and blogger John Chow posted a guest article entitled, “Why Domain Investing is Dead.” I have quite a bit of respect for John Chow, but over the last year, I think it has become quite clear that domain investing is certainly alive and arguably well.
There are probably a few hundred people who invest in domain names full time. There are most likely several thousand people who invest in domain names as a hobby, and even more people who casually buy domain names they think are cool after seeing a Go Daddy or 1&1 commercial encouraging people to register domain names matching their ideas. Hundreds of millions of dollars continue to be spent on domain names, both at the registrar level and via the aftermarket.
Like just about everything else, domain investing certainly took a financial hit during the last few years. Sedo’s most recent market reports have reflected the aftermarket slump. Thankfully, 2012 was good for me. For whatever reason, companies of varying sizes acquired high value domain names from my company, and I continued to reinvest in other domain assets.
While some areas of domain investing (like domain parking) are down from the “good old days,” market disrupters like Internet Traffic, Voodoo, and Rook Media have helped stabilize that area and there has even been some growth there in the last couple of years. I don’t do much parking, but from what I understand, PPC earnings are up from 2009-10.
Recently, companies have spent tens of millions of dollars to bid on gTLDs. The winners will most likely spend hundreds of millions of dollars marketing and operating these new TLDs. Domain investors and others will pour millions of dollars into domain registrations with the hopes of developing profitable businesses, monetizing, or re-selling these domain names. Yes, there is life in the domain investment space.
I believe making money exclusively from domain names has probably become more difficult, but I can’t really think of many areas where that has become easier over the last few years. If I first learned about domain investing today, I think I would be hard pressed to see significant opportunity if I didn’t have a huge capital reserve to make big investments, although I would probably be excited about the potential with gTLD domain names.
It’s been a year since domain investing was declared dead, but I think it’s clear that this business is alive and well.
I stopped reading JohnChow.com when he started posting articles about what restaurant he ate at and the photos of his food that he took. It was only a year or two after he started his blog and IMO that is when JohnChow.com jumped the shark.
IMO the domain business is a recycling type of business for most involved. Domains are registered mostly as speculative investments, dropped, registered by someone else, dropped again, picked up on auctions and the cycle continues until the domain finds an end user. Looking at the daily drop lists – it is very obvious that most domains are speculative buys and that they were never intended to be a business to begin with.
It would be interesting to see what kind of percentage of registered domains belongs to the so called “domain investors” VS. end users – I bet the scale tips on the first, so we have a long way to go until the recycling stage gets to an end.
I agree with you – With the addition of all the new gTLDs the market will see a new boost – and may I add, a new and much bigger recycling cycle – lot’s of dough will exchange hands, only a few will truly profit and the majority will continue to loose.
The show has just started and if you are not ready to loose a lot of money in this industry before you make a single dime, don’t bother entering the cycle.. Or the recycle. 🙂
There is a lot to learn in this business, and most people who register a bunch of random domain names like lottery tickets are going to lose out. Some may make money, but most will not. Lots of learning to do.
Domain investing certainly isn’t dead, but it has significantly changed at every level. It’s a pretty simple equation at the core of the current market, there are way more sellers than buyers.
You’re even seeing high end investors who are starting to get concerned about the long term ROI potential of their million dollar domains and dropping prices on some of them way down into the lower 6 figures just to keep cash flow coming in.
It’s harder than ever to resell domains for prices investors expect, like the “old days” when there were plenty of buyers and sometimes an eager line of buyers out the door with cash in hand, LOL, but you can still find buyers, even in this market, if you keep realistic expectations and are willing to negotiate reasonable deals for both parties.
You also need to do much stronger, focused and creative marketing now to find buyers. It also helps tremendously to be willing to provide financing for buyers, or other creative deal structures like JV’s with cash and retained equity, since buyers are seeking to preserve their capital base as much as possible.
The best advice is the advice that’s been preached by the most successful domain investors year after year. Buy the highest QUALITY domains you can afford if you want to achieve the best investing returns. Also, there is no doubt that .COM domains will always be the “Kings” of our industry.
As a footnote, the one market change that worries me more than anything now, that could and will impact the values of domains and the income streams from them, is the ever increasing displacement of traditional Internet browsing habits being changed by mobile apps on smartphones and tablets. Smartphones and tablets are taking out desktop and laptop useage dramatically and with that people aren’t typing in nor surfing the web as much to new websites like they used to. The apps provide what they are looking for and deliver it directly to them.
It’d be great if you had to go to keyword domains to get keyword apps, but Google and Apple already thought ahead on that angle, and cut us out of the picture by having all the apps tightly controlled and placed on their proprietary app stores housing every category of useage imagineable. Who needs to surf the web as much when the apps do exactly what you want? Although I don’t have the exact stat in hand, I’d venture to say people now spend the vast majority of their online time on smartphone and tablet apps and of course still a tiny handful of the very biggest sites (i.e. Facebook, Twitter, Instagram, Pinterest, etc.) With Windows 8 caving in to the trend via it’s touch style “app” instead of “software” interface, the desktops and laptop surfing style of old is heading in the same direction as phones and tablets. Cloud software computing is another secondary game changer happening in a big wave now and going forward. When was the last time you went to a computer store to “buy” software?
What this means for domain investors is the best strategy to counter the mobile app trend is to have domains that can be powerful branding vehicles for apps to do marketing and advertising with and backend destinations for users to go to for extra features, information, and entertainment via the front door apps.
In a way this could have one very positive impact for us since apps are also diminishing Google’s powerful search monopoly. Seeing the first ever drop in search volume on Google recently was an incredible game changer. The door is wide open now for genius Silicon Valley wiz kids to develop innovative ways to do targeted information and entertainment searching on the web via keyword related apps.
So figure out powerful ways to connect and marry great domains to great mobile apps and the future is yours.
@Kevin, not to ignore Elliot’s post, but that was a great post and well thought-out.
Here is something that surprised the darn heck out of me:
I have been watching surfing trends since the 90’s on my domains. I have stats going back to about 1996 on some domains. Ever since about 2000 “direct navigation” to domains has been decreasing. I had one domain that was doing 1,500 uniques a day and now is doing about 80, for example.
Every single year now for 12 years the traffic has been dropping, but it really started to level off the last couple of years or so.
Well, I did my yearly analysis of my own traffic and found that mid-tier domains are holding up very well on traffic, but high-tier domains are actually increasing in traffic.
Much of this analysis was done on InternetTraffic.com where domains had not moved at all for well over a year.
This is shocker to me, and unless Frank changed the way they report traffic, I’m seeing a very nice clip of traffic increases on premium domains. Even still, if they did change the way they report, my CTR has not dropped one bit comared to last year’s CTR numbers, so that tells me the traffic is real.
Is it just me? Anyone else seeing this? It’s a very big surprise for an old domainer like me.
@Kevin, regarding phones, tablets, etc… yes, I don’t see how that won’t have an effect now or eventually.
I think I read that cell phones make up about 13% of the Net’s traffic and increasing.
Strange thing about all this is that everyone seems to be doomed, if you listen to the companies and experts, if most Internet access is done by phone. On Google, Facebook, everywhere cell phone users won’t click the ads or view them much. Providing a free service is not in the cards long-term on cell phones, not sure how it all ends, if they develop better tech, or what, but something will have to give on this cell phone issue b/c so far cell surfers are not worth much to most companies.
The problem Domimio has been – domainers rarely – in fact never has access to propery analytics from the parking companies.
This led many people to believe they were getting direct nav traffic – when in fact they weren’t, it was probable google traffic. Add to this bots and you actually have a nightmare for domainers trying to figure out what is getting real type-ins and what is not, esp in the noughties.
I have one of these myself and bring a tear to my eye *sob*
Also with this recession – demand is down, leading to less typeins.
But direct nav is definitely still there, in fact equalising for google changes and recession my hunch (or is it hope?) is that is doing not too bad.
@Alan…I hear what you are saying, but bots were really not a huge problem yet in the 90’s. It really kicked in later 99′ and beyond. We did in fact comb to the best of our ability each and every IP from the servers to verify numbers (not every day mind you, not until later). Now, that by no means is scientific, but it was as close as we could do. We also later wrote a program that scrubbed bots from the IP reports so we could process them and see the real traffic. That sped up the counting speed by about 85%
The thing is, I know that less than 2% of my traffic is from search engines or of any referrals of any kind becuase I have checked many times. It’s also because of how I have bought domains over the years, specifically looking for domains that had never once has a site on them. I had a really good system down for years but it has gotten harder to find these kinds of domains anymore. Many of my domains have not had a developed site or anything on them in over ten years so there is no referral traffic worth even mentioning.
Basically what I am saying is I am not your average domainer who historically bought expired traffic (which I do sometimes anyhow, but is separated).
Anyways, the CTR and the revenue proves what I am saying from my end. Also, my rev payout is usually always bumped up from what I earned at the end of the month.
Like I said, I’ve been watching stats since 1996. I’ve also been counting stats, and I actually do see a rise for the first time in 12 years. I don’t have a good explanation for it, but I see it. It might be partly that the economy is getting better, but who knows.
I’m still waiting for a couple of friends with some great generic domain traffic to look at their IP numbers and get back to me on this.
Good post and great comments by Dominio.
Domains are not going anywhere and I am having a record year in both sales, profits and the missing puzzle was direct navigation. Increased my income stream by a nice margin since Jan. That traffic is only get more of a value in time. Now that I got a group of say 50 top domains, I am continuing to add to my portfolio. Singles are as important and still rewarding. As Rick said, are you a 50 dollar waiter or a 500 dollar waiter. Perfectly said and you work as hard for a 50 dollar sale as you do on a 500 dollar sale. Rinse and repeat.
While its been a bit crazy this year overall I am very pleased and happy with my progress.
As I say, fuck the noise. Bootstrap. Rinse and repeat.
Its going get ugly for some people. Be very careful what you read soon bloggers are going have to please there advertisers as well in this very risky gtld space.
Let the games, egos, agendas begin! Pick and choose your “assets” carefully.
domain investing is looking pretty healthy from where I sit, but that’s just me…
I guess it’s all relative.
I see audioplayer.com being sold at just over 2,000usd (last DNJournal report). Is that a great price befitting a robust market or a “better take it now” price reflecting the reality of market trends?
Domain investing is dead. You should immediately sell (me) all your domains before we reach the domain cliff where all new TLDs crush the .com
@adrian Every week there’s names that slip through the cracks we can perceive as undervalued and names that you see on DNJ and say “why the hell would someone pay that much for that name”. Personally I think $2k was a good price on that name for the seller but truth be told, I’m surprised the previous owner sold anything that cheap. Who says audio player anyway ?
“Who says audio player anyway ?” That’s a good point but Google suggests it’s a very popular compound.
I love it when domain investors keep trumpeting that keyword domains still get so much type-in traffic.
People who hold quality keyword domain names know otherwise.
My top domains registered from 1996 have been getting less and less direct navigation every year since 2000.
Very few people use direct navigation to unknown domain names anymore. Why? because all the non destination, parked PPC pages, soured their experience.
So domainers themselves killed the direct navigation experience for users, short term gain for long term pain. History just keeps repeating itself.
The only solution I see is to either build out the domains with websites or lease/joint venture the domains as Rick is doing.
DogWalker.com is built out, but 20% of its traffic is type-in still.
That said, I agree that type in traffic is down over the last several years. Personally, I don’t care aside from the fact that other domain investors have less money from PPC earnings to spend on my domain names.
The business of selling domain names in the aftermarket is still solid.
Hi Elliot – I wrote that post expecting it would get some attention so obviously need to respond to a post looking to get mine 😉
Hopefully I can add to an otherwise great comment thread.
Don’t get me wrong, there are some great domains out there and there were some great domain sales in 2012 – I know this because Flippa has facilitated a number of these sales.
However, my post over a year ago was not to say these would not happen but that they’d happen less which has turned out to be true. Sedo’s latest report indicating a 20% drop in domain sales volume seems to support this and I’d suggest off-market sales would tell a similar story.
My original point is that there are a stack of people buying or renewing an armada of incredibly speculative (ie rubbish) domains expecting they’re worth a fortune because it is somehow a great PPC earner, a compelling brand, or an emerging long-tail keyword match.
There are exceptions but those days are unfortunately otherwise over for the most part. For those guys I’d strongly suggest picking their favorite domain, turning it into a website and experimenting with more contemporary monetization methods – the results can be pleasantly surprising and they’ll be worth much more when you go to sell …