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.