Trading .COM during “low season”

low_season

Dear Domain investors and domain lovers,

Trading names these days is not that easy.  Let’s be honest, the market, since December has been pretty quiet.  It has been not so fruitful as in the past especially when compared to the spike at the end of 2015. There are two schools of thought behind why we are seeing the market react the way that it is reacting.  Some believe that we are just experiencing a market correction from the massive spike in price and volume from the 2015 peak, others attribute the slow season to the lack of demand from the Chinese market due to the financial crisis there.

In my opinion, both have had an influence in the decrease of domain transactions and price points.  Many investors are taking this situation as an opportunity to explore new territories in the domain landscape while many others fear that the rapid introduction of new TLD’s may make this situation more permanent.

As a domain trader and broker with over 10 years of experience, your personal point of view is dictated by the information that you receive.  When I first started, there were no reports on actual transactions and volumes and no one had a clear idea of what was actually happening in the marketplace.  For example, no one had a clear understanding of the scope of the downturn in 2008-2009 because worldwide reports of sales were not readily available.

These days we have much more knowledge at our fingertips as there are many companies that reports actual sales, making it easier to keep track of certain market segment trends, especially the 3N.com, 3L.com, 4N.com and 4L.com.

That being said, these reports do not take into account sales that are private.  In this period of “low trading” many transactions are taking place outside of the scope of reporting because there is much fear in the market.  Private domainers don’t want to list their sales if they are making selling names that are priced below the value that we saw at the end of 2015 because they don’t want to devalue the market which is a decision mostly based on fear.

Funnily enough it is exactly in moments of change that real opportunity become available.  Only by looking at real facts and opportunity does it become easy to understand that this period will pass just as the downturns of 2001 and 2008 did.

Consider gold, in the jewellery industry. It is true that it is possible to make many different cheap lines of jewellery using brass or copper or other cheap materials but everyone knows that gold is the precious metal that carries the most value and commands the best price.  If you purchase a great diamond or a beautiful stone, you wouldn’t decide to present it on a copper ring.  You would still choose gold.

Well this is the same when it comes to domain names.  If you have a great business which needs an online presence, you will look for a .COM.  No matter how many other plastic names, dazzling and attractive TLD’s are popping up, the savvy entrepreneur still understands that the best brands use a .COM URL.

As a matter of fact, during this “low season period“ of domain trading, the best sales I have personally made were still .COM’s.  MGP.com sold yesterday through Sedo at $75K and it was bought last year through Sedo at $25K!  That is what I call a good investment.  FSF.com was sold today for $110K via an offer in Afternic. I’m not at liberty to reveal the purchase price but needless to say, there was a huge profit margin.  These are just a couple of sales that I can share as they were purchased by third parties on aftermarket sites but I can share that during this time period I have made many other private sales.

I feel compelled to share this information with you because it is important that you understand that if you own .COM, you own gold.  When you bought your .COM domain asset, you bought it because you understand that it has the most value.  Sometimes during a “low period” you have to hold your investment and look at the long-term prospects of your asset.

No investor makes money by buying high and selling low so to be honest, now is not the time to be selling if you purchased domains during the peak in 2015.  Now is the opportunity to buy and help change the market trends of the last 6 months.

I truly believe that these names will not drop more because many of the investors that did become fearful have sold off their assets while those that understand the long term value of their domains are holding strong and even buying names at great value.

If you are fearful that the new TLD’s are driving the change in the domain market than there are some important facts for you to consider:

  • The new investors that are buying new TLD’s are only bringing more money into the domain market.  Many of them don’t have a lot of experience but when they understand the landscape they will realize that it is still .COM that dominates the domain landscape.  .COM still has over 75% market share of all domains registered so when you compare that to .XYZ for example (at 1.5% market share) it is easy to see which TLD companies are still targeting. (http://www.domainstate.com/registrar-tld-breakup.html)
  • There are still few examples of resellers making money out of the new TLD market as end users that are willing to use a new TLD can easily hand register a name that works for them.

I understand this because I have tried it myself.  When .CO was released, I jumped in on the landrush and registered a great portfolio of over 200 names.  I loved .CO not only because of the extension but also because they had a strong marketing campaign.  There was a big value in typos of course but also I believed that the extension was attractive for businesses (end users anyone?), not just investors.

Among the 200 names that I purchased years ago, I sold a relatively small amount and even made some decent profits.  However, when I started to consider the huge renewal fees (25 USD for each name) and the fact that my buyers rarely managed to resell their names, I started to reconsider my investment strategy.  Today my portfolio holds a very small percentage of TLD’s outside of .COM and is more in line with actual market share of domains registered.

It is true that this market is changing and expanding but .COM is still clearly the gold of the domain world.  Short names will still continue to hold great value for investors and resellers because of their numerous applications.  History has a funny way of repeating itself and in both 2001 and 2008, just like now, many people were saying the sky is falling only to show that in the end .COM was the TLD that held its value and continued as the gold standard of the domain world.

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Andrea Sabatini

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I was always passionate about how people do online search to get what they need. I had the great opportunity to work for two major key players in the online travel business specifically on the affiliate marketing segment. Having to deal very day with many websites owner offered me the opportunity to move into the domain market place 10 years ago. Since then I have started to trade names online and I still love doing it. Only few years later it became very clear to me the incredible value of liquid assets such 3 letters and numbers and I decided to focus my attention specifically on this segment. Based on this consolidated experience on domain trading, by the end of 2014 I have decided to set the brokerage company QLQ.com specialised only on short liquid names, I enjoy dealing with names online and very grateful to be part of a sensational team.

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