I want to share an interesting (public) Facebook exchange between Sahar Sarid and Andrew Rosener, two experts on the domain investment market. Sahar was commenting on the Chinese stock market drop and its potential impact on domain investments, and Andrew Rosener of Media Options disagreed with his assessment.
“I know some domainers who walked away on fabulous offers from Chinese buyers recently. Those offers are likely gone by now and who knows when and if they’ll be back anytime soon. â€ª#â€ŽBlackMondayâ€¬”
“I disagree with you. At least on the mid term. Right the small fish have gone but big fish are hungry to get their cash into assets which are more “flexible”. At the higher end of the Chinese Domain Market you will likely see new highs emerge as desperate wealthy Chinese investors try to outrun a falling Yuan and crashing stock market. The smart money was already out of this market which is why it’s falling anyhow.”
There aren’t many people with more domain investment experience than Sahar and Andrew. Both have sold millions of dollars worth of domain names, and I think both are quite in tune with the domain marketplace. It’s interesting to read their thoughts as we enter these tumultuous times.
If world markets continue to drop, people will be looking to experts for clues on how to proceed with their domain investments and sales. I think it’s great to read different perspectives from experts.
As always, you are welcome to share your insights here or in the comment area of Sahar’s Facebook post.
IMO, Andrew’s opinion carries more weight here.
Sahar publicly states that he is not involved in his sales – brokers handle all of his transactions. Andrew is directly involved with buyers on a daily basis.
That doesn’t necessarily mean that Andrew will be correct, but I think he is more in tune with the market.
I presume he is well informed when it comes to receiving offers and inquiries for his portfolio.
Historically speaking, stock investment return and domain investment return are not directly related.
The ShangHai stock composite index is relative flat between Jan 1st 2010 and Jan 1st 2015. While the short domains (2 letter, 2-4 number .com domains) went up in value probably at least 10-20 times over the 5 year span.
However, when a stock market is soaring or dipping, the stock market pull money away from the domain market. The instability of stock market might have a short term negative impact on the domain market. For the long run, I wouldn’t be concerned.
Once the market stabilized, smart investors will learn that investing in premium domains will yield much better and stabler return than investing in stock market. It could potential push up the price of premium domains.
There are many smart investors who only invest on domain names but not stocks. Those investors are making good money this year. The stock market drop will encourage them to invest more into domain names.
Drew is a very informed guy as concerns the domain market trends, but IMHO he’s wrong when he says “Right the small fish have gone but big fish are hungry to get their cash into assets which are more “flexible”. At the higher end of the Chinese Domain Market you will likely see new highs emerge as desperate wealthy Chinese investors try to outrun a falling Yuan and crashing stock market.”
I’ve been working for many years as equity analyst, and let me tell you that domains are typically a different, less liquid (and less “flexible”) asset class than stocks (and bonds, gold, etc), so the burst of the current asset bubble, which I wrote about many months ago, is not a good news for the domain market.
What I mean is that I don’t see “desperate Chinese investors” (and also non-Chinese) flying from stocks to domains, but more on safer asset classes.
Plus you have to consider the negative impact on “wealth effect” previously generated by booming markets, not only in China but also in US, etc.
Plus, personally I also see coming a significant weakening of the USD, due to, among other factors, structural unresolved debt issues and the asset bubble burst.
That said, we always suggest a fly to quality strategy, at the right prices, with a value approach, and that’s valid both for stocks and domains.
Just my 2 cents: This morning we had not the usual 3-4 but over 10 emails from Chinese buyers asking for prices of our LL and NNN Domains. That after what the press is calling a Black Monday and a 9% down day in China. Liquidity has to go somewhere and Domains are still considered a flight to safety trade. If you can lose 15-20% of your money in one month on the Chinese stock market (that is only if you are not leveraged, which most guys are) then why not instead park your money in a highly liquid domain name that keeps it value. Only if Chinese domainers are FORCED to liquidate assets at any costs is when we will see a decline in demand in this LL / NN/ NNN names.
The Chinese involvement in the domain market as a whole is very limited. They only acquire a contain type of domain names which are the rarest. LL.com, LLL.com, NN.com, NNN.com, NNNN.com, and lately 3 character.com domain names. All of those domain names collectively are comprise around 60,000 domain names, and most of those domain names are already owned by Chinese,
I can see both side. But I really don’t know.
I had some great domain sales in 2008 and 2009, post great recession.
My guess — Chinese domain investors will put a hold on “domain buys”, unless they just wish to move cash into investments, without all the extensive paperwork involving real estate investments, angel investing, etc
Still getting solid offers over here. The buyers all want you to think that the stock market problems are the reason you should take those lower offers. 🙂 There’s still a limited supply so if you are selling ask around before taking a stupid offer.
Interesting. I have noticed a flurry of offers on my 3 letter dictionary .com from China in the last week. Assumed it was related to investors looking for different asset classes.
I am going to go with Andrew.
“Don’t put all your eggs in one basket” is way of life for many wealthy individuals.
In light of the current market trends, premium domain names will be seen as a safe haven and a way to protect and diversify assets from volatile stock markets.
Therefore, I believe ‘Liquid Domains’ still have a lot of potential to increase in value.
Maybe a silly comparison, but consider the prices of Picasso paintings, Giacometti sculptures, Square meter price in St. Moritz and vintage Ferraris. Why not buy several super domains at fraction of the price?
And let’s not forget that great domains will always be sought after by start ups looking to make a strong impression regardless of investor interest…
Andrew may well be right, but it’s fair to ask whether his statements are disinterested. Wouldn’t we expect a broker and investor who makes a not insignificant amount of money from sales within this asset class to have some bias?
Now please don’t misunderstand those remarks. I’m definitely not implying that what Andrew says is in any way disingenuous nor that it ought to be disregarded. He’s knowledgeable about this sector in large part because he is tied to it financially enough to stay very involved.
What I am suggesting is that Andrew’s argument ought to be evaluated as an argument … and that his identity – pro or con, as an expert or a salesman – ought to be set aside. Based on number crunching a month or two ago, I’m inclined to agree with Andrew.
But it may be like asking a real estate agent and property investor with large holdings in a particular neighborhood whether housing values in that neighborhood will go down. Andrew may disagree and tell me that he’s impartial and just as likely to answer Up or Down. But I don’t think he’ll object if I invite people to listen to his argument as such and form their own conclusion.
I appreciate the Chinese drive to own limited lettered domains, numerics and letters being such a large part of their culture even before domains existed, but being an internal issue.
I am interested in knowing how the business market, the end user market, is actually performing since manufacturing is being replaced by the need to operate outside of China and therefore the need for premium worded, phrased domains, becomes more valuable.
Most articles seem to portray Chinese domain ownership akin to art collections, very few even cover the possible practical business use beyond collections??
Is there a real market to sell western domains, WhitehouseTours.*** & MortgageLA.*** (not real), to Chinese businesses that recognise the long term branding and overseas business use of domains.??