In a tweet a little over a week ago, Christopher Hofman Laursen of the European Domain Centre said, “Domainers don’t understand new gTLDs. Demand for .com relies on scarcity. No one can control the supply of #newgtlds.” He linked to an article he published on LinkedIn, and I think it’s worth a read when you have a moment.
— Christopher Hofman (@HofmanLaursen) July 4, 2014
For me, I haven’t bought many new gTLD domain names, but it’s not because I don’t understand them. My primary issue is that I don’t see how I can invest in them adequately to get a large enough expected return on my investment. At this point in time, I believe I am better off spending $1,000 or $10,000 on a .com domain name than I would be hand registering the equivalent amount of new gTLD domain names.
With the new gTLD domain names, there is plenty of supply, and there likely will always be adequate supply. I believe that this tremendous supply of domain names tempers the potential value, and it limits my potential return. I do think that there is some money to be made from the domain investor side, but I am still not convinced that I can operate a business that relies on the resale of these new domain names.
I think Andrew Allemann summed up the issue I see in his blog post yesterday. In his article, he discussed a scenario in which the new TLDs are a “home run.” I also discussed the success scenario in November of 2013. Here’s what Andrew had to say yesterday:
“In this scenario, early investors don’t do as well as under the mediocre scenario. There’s simply too much supply of new TLDs. Yes, some of the better TLDs came out in the first round, but there are so many “synonym” domains applied for later (not to mention singulars/plurals) that it’s impossible to command much of a premium for a domain.”
My opinion is that if the new gTLDs fail, I don’t want them. If the new gTLDs are accepted modestly, I will still have success with my .com investments. If the new gTLDs are a huge success, I would need to change my business plan completely and accept that lower returns are inevitable.