I am a Bit Bearish Right Now

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I read the NamePros article asking people if they are bullish or bearish on domain names. I have to admit, I am a bit bearish on the domain name market right now. I think I’ve been bearish for a few months, but I am still buying domain names when good opportunities arise. I wanted to share some of my thoughts, which are always evolving.

I am not an economist, but it certainly seems like the economy is headed for a recession at some point in the near future. I have no idea if that will happen in a month, 6 months, or a year. Even if I was confident about when the economy will turn, I am not an expert in that field so it doesn’t matter what I think.

What matters is that others seem to feel the same sentiment. It seems that many companies are preparing for a downturn. I presume this could lead to smaller budget for domain acquisitions. If the market turns, people may be less likely to start new businesses and consequently not need good domain names. Startups may be more lean and have less funds to acquire domain names. Even if there is not a recession in the immediate future, it sure feels like people are preparing for one.

At any given time, I can have hundreds of thousands or millions of dollars worth of purchase offers on the table. The vast majority of these offers are rejected, so while the number of open offers may seem quite large, the reality is that most offers I make aren’t accepted. For the past few months, I have been making fewer offers on domain names.

I probably own more domain names than I have at any time in the past. This figure may be slightly misleading because I hand registered quite a few domain names last year following a bit of success selling a couple of other hand registered domain names. I have plenty of inventory right now, and I think my domain portfolio is better than it has been, notwithstanding a  few big sales in Q4 of last year.

The auction market appears inflated to me, and it hasn’t made as much sense to chase names and pay more than I am comfortable paying. I just can’t justify spending $500 – $2,500 on a domain name I hope to resell for $2,500 – $5,000. Sure, a 50% ROI may be fine, but even if I turn over 5% of my inventory each year, it could take time to realize a profit.

When I have been selling domain names these days, I have been trying to hang on to the cash. I am still buying when I see good opportunities, and I participate in many expiry auctions every day. I am buying fewer names lately, but I am building a cash reserve to take advantage of future opportunities. At some point, I think the auction market may soften a bit and I also think more domain names will come on the market as people look to free up cash.

I have never been a good market prognosticator, so don’t look at what I am doing as gospel. I could also go out and spend six figures tomorrow if I see a good opportunity. My overall feeling is a bit bullish on the domain market in the short term, and that is reflective of the general economy.

21 COMMENTS

  1. You and I are in the same circle, Elliot. All economic indicators point to a chaotic 2019 for investors. I’m culling my portfolio. If it doesn’t have a 5 K GD appraisal, adios. Sunk cost fallacy leads many investors down dark paths and road kill as collateral damage.i love bears just not in economics. We could see many big companies like GoDaddy buying distressed companies like (take your pick)

    • A pessimist sees the difficulty in every opportunity; an optimist
      sees the opportunity in every difficulty.”

      Can’t wait to see those 3l domains dropping like flies and those amateurs domainers are starving for cash!!

    • This statement is total bullshit, so a $4K valuation can yield a pretty decent domain, so that goes in the delete folder? Doggy Daycare give me a break. Sorry BullS, I call BS on this guy.

  2. Domains are always “BullS-ish” or Bullish for me.
    Nice to sell domains at 1000% ROI where all the domains I hand reg using 99cent coupons and bought those 4l domains dirt cheap.

    I hand reg these 2 domains

    HawaiianAvocado.com
    HawaiianAvocados.com

    and already getting offers already.
    Everyone is crazy on Avocados and Hawaiian avocado is the best in the world!! I got some yesterday!

    easy peasy and fun sh(*&^it hobby…..$$$$ rolling in.

  3. “The auction market appears inflated to me, and it hasn’t made as much sense to chase names and pay more than I am comfortable paying.”

    Couldn’t agree more. Investors are paying prices in auctions that not even an enduser would offer…

  4. Economics 101 – allocation of resources

    If this monkey puck domaining is the only source of revenue aka livelihood , then you are bound to be doomed!!

  5. Economic downturn can the best time to buy domains – if you have the resources to do so. I bought many great domains in 2009 for next to nothing.

  6. US economy seeing weakness regionally due to demographic shifts. New York, California seeing exodus of residents to Southwest and Mountain west states. Overall housing market in materially stronger hands than last downturn, so are premium domain names.

    In recent history deflationary downturns have outnumbered inflationary shocks. 1970s saw inflationary shock due to US taking dollar off gold standard 1971. Economic downturns since have been deflationary.

    Since last downturn 2009, Fed has expanded balance sheet by $4T monetizing own debt (QE). Global corporate and sovereign debt has also exploded. On surface seems like inflation should trump deflation due to massive money printing over last decade. Japan’s QE ultimately resulted in deflation, but the whole world wasn’t also easing. So not really apples to apples.

    Inverted yield curves clearly saying something isn’t right.

  7. “. New York, California seeing exodus of residents to Southwest and Mountain west states. ”

    –Thanks to Uncle Trump’s new tax law, those states that “pathetically” have high state taxes(NY,New Jersey, California) you cannot itemized anymore, good idea because why are we subsidizing their high state taxes! people are leaving in droves to CO, WA and Texas. Housing are rising like crazy….my house value has gone up to millions $$$$$$
    Love it!!

  8. I am bearish on Europe, stocks especially.
    I am bullish on US economy an stocks… all size companies and verticals.
    I am bullish on .com domains.
    Great end of year and new year sales for me personally.

    You are plugged in on higher value names, so I trust your view. Have cash on hand to get deals.

  9. Domain sales is such a case by case phenomenon that I don’t think having a good or bad economy as a backdrop means much. Stocks can tank, crypto can tank, but if someone out there has a business plan that requires your domain, it doesn’t really matter. Likewise, the economy can be great but if you don’t have domains that anyone is interested in, you are doomed. And the domains don’t have to be great by domainer standards either.

  10. I agree with Tony. There are many factors that go into domain name values. It certainly is not a good thing for domain if the economy is bad, but other factors also play a big role such as alternate domain extensions, people using social media platforms instead of domains, and people switching from PCs to mobile devices (where domains are less important).

  11. Agree that the auction market looks inflated but very little to suggest a recession is coming. If it does though domains won’t fair well like in the past.

    If there is a recession Bitcoin/Crypto will get hit very hard.

  12. The only market that really matters is the venture capital markets. Nothing drives domain sales more than VC backed startups and businesses.

    VC’s have raised a record amount of funding in 2018 and most of them had record breaking profits in 2018. They also have a mandate that they MUST invest that cash. Some of the most anticipated IPO’s of the last decade will happen in 2019 and even though I suspect valuations will be materially lower than in their latest private fundraising rounds, these IPO’s will create virtually unprecedented liquidity in VC markets.

    I am ULTRA BULLISH on the top 2% of .com domain names. I think we are at a tipping point and valuations for those top .com names which are in strong hands will begin increasing by 100% annually (or more) over the next 3-5 years.

    But forget about the wholesale / investor market. There won’t be one left soon… The disparity between the haves (holding top notch .com names) and the have nots (holding low grade or mediocre names) is going to increase exponentially. No different than in the greater economy. We are in a very dangerous environment that will tremendously benefit those with assets (more than those with cash) and tremendously harm those who have no assets.

    Inflation is here, but it is ONLY correlated to productive assets and its about to increase faster than it did even in 2018. Look for high demand / productive assets to continue to fall into stronger and stronger hands and scarcity to increase thereby driving up values / prices.

    But there will be a lot of casualties by people misreading this strange market and so having cash will be provide great buying opportunities.

    NOTE: Until a few weeks ago I felt like you (Elliot) and was extremely bearish. But the more I have analyzed and the more people I’ve spoken with, I think that although a crisis is imminent, we are likely 18 – 24 months away. Its not coming in the near term in my opinion.

    • Andrew,

      Let me first say that I admire your domain portfolio, and your sales record.

      There’s a point, or should I say, an angle that you probably never considered when it comes to top tier domain names, you often call it the top “2%”, that will be anywhere from single letter, alphabets, NN, to say NNN, and 3-Letter domain names. You never mention your competition in those names; they are not necessarily Domainers, but individuals, and Companies who are using those names now. They have been known to sell those names, and move to lower tier-domains, as soon as it makes sense to them to cash them in.

      I suppose, you as a broker benefit from this activity. So, it’s not your portfolio, or the names you own, that gets you excited about these top tiered names, but your ability to go in there and convince these Companies, and individuals to down-grade, and cash-in. So, once this gets in motion, the domainers with the second tiered names may in fact, benefit as well. The cycle is a natural economic phenom.

      I just wanted to make that point. It’s a small one, but it needs your attention.

      The idea that we are in an industry where only top products work, is an unsustainable one. It’s akin to the auto industry only selling Rolls Royces, and perhaps a Mercedes here and there. We know that in reality, even Volkswagen, the “Bug” maker, purchased Rolls Royce, along with other Luxury manufacturers! Again, if you had been to Las Vegas in the 80’s and 90’s, you must have seen that Harrah’s was opposite a majestic, and intimidating Caesar’s; the latter being the lair for high rollers; who get picked up by limousines from the airport, and treated like Caesar himself! Whereas, Harrah’s was for the common folk, and locals; however, Harrah’s ended up buying Caesar’s along with 10 other luxury resorts there!

      So, what am I getting at? Sedo and Godaddy publish daily sales of domain names that they sold; hardly do you see any of these “2%” domains in the list. There’s no doubt, both venues are head and shoulders above any domainer, or company in this industry. My point is that, it has not been proven that this industry only thrives on million dollar names. Those who make large sales, should pick-up names from lower tier, and make this thing a real market.

      I once berated Mr. Berkens for selling SuperCars.Co for $30,000, and then neglecting to buy Cars.co from me for a fraction of that! Does that make sense? It’s not logical. The record should be at DomainSherpa.com, which you own now. Look in the comment section from a few years ago.

      So, the high end sellers cannot stay aloof, they need to link up the chain. Domainers should try to buy names from other domainers, instead of the fat cat auction houses, where they create a circular firing squad.

  13. Postives for .COM domains only in 2019:

    Trump not impeached yet
    New gTLD’s game is over
    Social Media not trusted
    App use is lower
    Startups still strong

    .Com domains are probably safe from an economic recession until 2020.

  14. Elliot,

    Nice topic.

    I take a somewhat different view.

    Domainers are like reporters. Reporters don’t create the news. They report it. If it’s good news, some people would like it, if it’s sad news, it generates more rating.

    Domainers, unfortunately, are not part of the establishment food chain, and that’s by design. We were used, and pushed out from ICANN, to all the way down, search companies, parking ones, and so on …

    There are many types of domainers obviously; if you are the type that is supported by the elites, who are tied to the economy, then you may be slightly effected.

    Now, let’s take it again, to a logical conclusion, if the recession is as severe as the president Hoover years, the person with CannedBeans.com could do just as good as someone with Meat.com. Or better!

    Domaining has been in perpetual recession since 2010, if you like I can explain that here, or by email to you, as it could change the top.

    But no, any thing is good for domainers, and reporters. We are not orthodox…

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