Domain values aren’t plummeting, but the domain market is pretty slushy (as opposed to frozen credit markets). It’s getting more difficult for domain investors to resell domain names, and many people could be technically underwater with recent purchases. The good news is that it only costs $8+/- to maintain a domain name per year, but the bad news is that domain names aren’t nearly as liquid as they have been – even solid domain names.
For several years, many of the largest domain companies spent hundreds of thousands of dollars on domain auctions and private purchases each year. Much of this money was reinvested by the domain investors who sold their names. This buying literally fueled much of the increase in domain values we’ve seen recently, especially with more speculative investments. End user sales continued to be made (and are also fueling the domain industry), but a majority of the money that was spent was courtesy of the biggest domain investors.
Due to the economic downturn, lower PPC payouts, stronger click fraud protection, less access to liquidity, many of the biggest buyers have been spending less, and some have a complete buying freeze right now. Consequently, there has been less money available for the investors below this high level. This has caused a drop in value for some domain names (sold at auction to other domainers) and a rapid drop in price for highly speculative “investments” like 3 and 4 letter .com names and alternative extensions like .mobi.
IMO, the smart domain investors are sitting on their cash, investing in their own businesses via development and/or in new technology, buying domain names only at great prices, and trying to develop other revenue streams. Now is a good time to evaluate your domain holdings and determine how you are going to weather the financial storm. If you follow the masses (like I did when I bought LVS a few couple of weeks ago in the $7/share range), chances are good that you won’t survive the current conditions.
IMO, here are some types of domains I personally would avoid right now if you don’t have a development plan or if they don’t generate enough revenue to justify the purchase (aka just looking to flip):
Numerics – Sure, the WSJ just had an article about them, but much of the growth in value has been fueled by TJ’s buying, which is for a specific project. I don’t think it’s easy to monetize them and the only buyers seem to be people with a specific project or a domain investor who wants to flip it to someone else. I have owned these in the past, and I would buy them – but only as a domain investor if I can get a great price. The advantage of these names is the rarity and it’s unlikely a company can TM a number.
Alternative Extensions – People aren’t speculating nearly as much as they did months ago. You know it’s bad news when one of the strongest keyword that can be used in a domain – “lawyer” had a sale for under $2k with Lawyer.mobi. Thankfully, I haven’t seen many people hyping .asia or .whatever anymore.
Acronym Domains (3 & 4 letter names) – Some have strong value if the end user decides to buy it from you rather than file a UDRP or send you a C&D. You might be able to make PPC revenue, but those domains can be expensive, and they are only making money because people are probably looking for a trademark owner who uses that acronym, so it’s risky. There are some good acronymn names for sure, but those are probably more expensive than many people can afford. BTW, I do own several of these, but I don’t have them parked nor do I have them for sale right now.
Honestly, the only thing I am really buying these days are geodomains and category killer domains at great prices that I can develop. I am actually debating whether to buy a few category killer niche domains that would have sold for at least 5x the current asking price last year, but cash is king right now.
Personally, I can’t complain because I am in a fairly strong position right now. My sales are down, but I’ve done well enough this year to not worry about selling for a while, and my alternative revenue streams are beginning to gain strength. All is not bleak, but times are tough and you will need to figure out how to adapt. Listening to other people who tell you “what’s hot” is not a smart idea. Develop a gut instinct and go with it. Prospects are great – especially if you have the cash.
