With the help of Berlin-based economist and internet entrepreneur Thies Lindenthal, Sedo has announced an interesting new Domain Name Price Index (IDNX) website. The company says its “the industry’s first constant quality domain price index for the secondary domain marketplace. The index offers domain name managers and investors unique insight into fluctuations in the domain name market.”
When you visit the site, you can see the index performance compared to that of the NASDAQ 100 performance for the same time period. Interestingly to me, and likely one of the main points of this index, is that domain sales seem to track closely with the NASDAQ chart, indicating that there are economic conditions contributing to each performance.
Explaining this further is Tim Schumacher, CEO of Sedo. “Lindenthal’s extensive research on domain pricing validates the domain name market and shows that domain markets are not a fantasy land where dreamers trade esoteric goods at imaginary prices. Domainers who use the insights IDNX offers and ancillary domain pricing tools to set fair and fixed prices on their domain names, ultimately help make our industry more valued and respected. In turn, this will continue to positively impact domain name sales.”
The index is calculated based on over 200,000 domain sales consummated on Sedo’s platform since 2005. You can get more in depth information about the methodology and data used in the IDNX in Thies Lindenthal’s working paper (pdf).
Of course you can’t price your domain names based on this Index, but it is good to show how domain values have been performing. It’s also good to show people that there is an economic foundation for domain sales, as some seem mystified about how domain names are valued and priced.
Ironically, the domain name on which the Index is operated, was acquired by its owner for $5,500 earlier this year using Sedo’s brokerage services.
Press Release below:
Sedo, the leading online domain marketplace, today announced the launch of the Internet Domain Name Index (IDNX), the industry’s first constant quality domain price index for the secondary domain marketplace. The index offers domain name managers and investors unique insight into fluctuations in the domain name market.
Connection between online and offline economy
Developed by Berlin-based economist and internet entrepreneur, Thies Lindenthal, IDNX uses Sedo’s current and historical sales figures data, going back over the last six years. From this data, IDNX can provide domain investors with critical insight into the current market value of domains, as well as highlighting domain industry trends to help determine the true value of their domains.
By indexing more than 200,000 domain transactions over a six-year period, IDNX highlights the connections between the online and offline economy, showing that domain prices have a clear economic foundation. The index exhibits a strong correlation between the domain name market and standard economic indicators, including changes in the NASDAQ 100 index and the stock prices of internet giant Google.
The Value of Domains
Initial findings from IDNX shows that domain names saw a rapid increase in value from 2006 through to 2007, with prices peaking in November 2007 having seen a 76 per cent rise since the start of 2006. Prices then saw a continued decline of 34 per cent over the next 5 quarters, through 2007.
However, since this decline into 2008 domain names have bounced back and seen continued strengthening and climbed to an all-time high in May 2011. This rise has also featured high-profile domain sales such as gambling.com ($2.5 million), vodka.com ($3 million) and the record breaking sex.com ($13 million).
Thies Lindenthal comments: “IDNX shows that internet domain name prices have a clear economic foundation and are not detached from the general economy. On the contrary, domain price changes are very similar to changes in the NASDAQ 100 stock price index, for example. Therefore, domain prices reveal how investors evaluate current and future business opportunities on the web, making IDNX the fever curve of the internet economy.”
Tim Schumacher, CEO for Sedo, said: “Lindenthal’s extensive research on domain pricing validates the domain name market and shows that domain markets are not a fantasy land where dreamers trade esoteric goods at imaginary prices. Domainers who use the insights IDNX offers and ancillary domain pricing tools to set fair and fixed prices on their domain names, ultimately help make our industry more valued and respected. In turn, this will continue to positively impact domain name sales.”
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Two general methodologies are commonly used to price non-standardized assets like real estate or art. The first one, the so-called hedonic regression analysis, explains the price of an asset by a set of quality variables that describe the characteristics (hedonics) of that asset. Alternatively, the repeat sales methodology traces individual domains in time, comparing each transaction to previous transactions of the very same asset. While this is generally regarded as the most direct form of making an “apples to apples” comparison, it disregards all information on transactions that are sold only once. IDNX combines the advantages of both methodologies and relies on a so-called Hedonic Repeat Sales methodology, using a hedonic classification of the TLD and otherwise a repeat sales approach.
IDNX will be updated on a monthly basis to include:
- Calculations of the latest trends in domain prices
- Accurately assesses and track the value of domains in real time
Sedo’s CEO Tim Schumacher and Thies Lindenthal will be hosting a webinar on 23rd August 2011 to provide a broad overview of the IDNX tool, and best practices on how domain investors can use the tool to make the best domain buying decisions. Please visit https://www3.gotomeeting.com/register/379034878 to register for this event.
For more information, please visit: www.sedo.co.uk/idnx
Sedo, an acronym for “Search Engine for Domain Offers,” is the leading domain marketplace and monetization provider. Headquartered in Cologne, Germany and offices in London, England and Cambridge, Mass., Sedo has assembled the world’s largest database of domain names for sale, with more than 18 million listings. The success of Sedo’s model has attracted a global membership base of more than 1 million domain professionals.
About Thies Lindenthal
Thies Lindenthal is a seasoned internet entrepreneur and researcher, holding a Ph.D. in Real Estate Finance from Maastricht University. IDNX is his newest project, linking two of his most important intellectual playgrounds, traditional real estate research and the economics of the internet.