What the Economic Meltdown Means for Domain Names
Monday, October 6th, 2008
As the Dow drops below 10,000, what is the future for domain names?
Headlines like this one, on CNN.com,
are meant to scare you. You need
a strong stomach.
A few months ago I had lunch with a business acquaintance who is in his forties. The stock market was continuing its slide and he said he would get out if the market dropped below 10,000. “It always seems to drop faster than it goes up,” he commented.
At the time of writing, the DJIA is at 9,962. I just e-mailed him to see if he’s selling.
The market is likely to continue its downward trend. People are starting to unload stocks and closeout accounts because they’re scared.
I’m scared, but I haven’t stopped investing. Hopefully in a few years this will turnaround. I don’t know how low the Dow will go, but when I spoke with my friend a few months ago I thought Dow 10,000 was a silly thought. I was wrong.
So I continue to invest monthly in my daughter’s 529 account. As a self-employed person it’s difficult to make monthly contributions to retirement accounts, but if I could I’d still be doing it. During the Great Depression the stock market fell something like 90%. It was hard to pick the bottom, but if you invested through the entire ordeal you came out well ahead.
So what does this mean for your domain names? It depends on if you have a short term or long term view. And if you have a diversified portfolio.
In the short term, some domains will be winners: credit reports, bankruptcy, foreclosure. And look further to casual gaming and other affordable things to do on the web as alternatives to expensive nights out on the town.
Some domains may see pay-per-click revenue go down. Gadget sites, computers, TVs, and other non-essentials aren’t flying off shelves like they used to. My wife returned a pair of $200 boots this week to the store. She figured if we’re losing $10,000s in the stock market this year, she didn’t want to spend $200 on a pair of boots when the current pair she has “will do”. Believe me, she’s not the only one making this decision.
How about real estate domains? Sales are down significantly, agents are leaving the business, but there are some opportunities in distressed markets.
I’ve heard some people say that online advertising, and thus parked domains, will do better in tough times. Online advertising is accountable whereas TV, print, and other traditional media are not. But online advertising is also the easiest to pull the plug on as it isn’t purchased a year in advance. If a Fortune 500 company needs to cut advertising 20%, it will look at what commitments it can get out of. It can turn off pay-per-click with the click of a button.
In the long run I think the domain market will do just fine. Online advertising will no doubt be a bigger market in 5 or 10 years than it is now. But you need to have a tough stomach, just like if you’re investing in the stock market.
“If a Fortune 500 company needs to cut advertising 20%, it will look at what commitments it can get out of. It can turn off pay-per-click with the click of a button.”
And that would be the exact WRONG thing to do.
Companies who do this will suffer. Those who pull magazine, newspaper and radio ads and allocate that to the Internet will be the new winners in this post financial crisis economy.
The new new economy
People may be staying home more out of choice or lack of work. What do people do when they are home? TV, video games and the Internet.
People will flock to the internet to look for new opportunities and that means they will be looking for domains to build on and/or invest in.
Don’t get out of the domain market. Now is the time to shop around for deals and you will find them like never before.
More Frank Shillings will be created in the next couple years than ever before.
Domains are safe, low cost of maintenance, you can do it from anywhere in the world, you can change the content etc etc.
Drill baby drill… for domains!
Rob, when was the last time a Fortune 500 did something logical?
I agree with you, which is why something like casual games makes sense.
And I’m well aware that people are diversifying into domains…as are you. Cash can’t sit on the sideline forever.
What if we don’t have anyone to buy it from us? Where business trying to survive, and domain is last thing they are thinking. Since buying domains great when you are doing well, but when you are in panic mode and you having hard time paying your employees for this month and tomorrow you got rent to pay, investing in domains might not be on top of big companies minds. Yes internted advertising will go up, without a doubt, but will domain go up in this down market? that remains to see, and as we said main street is not great at learning quickly, so they might put some cash into PCP but same doesnt go for domains.
What better for your business?
1. Physical location with rent or mortgage payments, utilities, office furniture, signs, cleaning expenses, phone networks, business license, liability insurance, property taxes, neighbor and traffic issues, etc. Huge up front investment in declining value assets and costs, open from 9 to 5 with customer reach within driving distance.
2. Internet location working out of your home or cheap warehouse space, minimal utilities, VERY limited expenses $8 reg fee or one up front investment cost in a premium domain leading to a business with world wide reach open 24 hours.
Hmmm, let me think about this.
Here that sound? That’s doors of physical businesses closing. What are these people going to do, go home and cry? Maybe. Then they understand my comparison above and get online… forever.
Here’s a good article about the ad buying market : link
Rob, have you ever run a business? because what you just described is one man operation at best, and not even legit. Most business do need store front, they need do licenses, insurance. There are some business that can get away working from home, thats minority, but even if you are a little bit hybrid, you need office and presentability that comes with it I know i run business thats a hybrid, and when i got office and location and traffic, my income tripled as soon as i opened office, before that i was working from home. So …. think about it.
Also $8 is not how much you will pay for even decent domain name nowadays, but you got it right, people who will start those kind of business from home, wont buy domains from us, they will buy shitty 8$ domains.
Jim Cramer from Mad Money is saying to pull all the money you would need for the next 5 years out of the stock market now. He said no matter how low it is, get out now.
Just saw this on the news..
Tomorrow will probably be a bad day again…
“During the Great Depression the stock market fell something like 90%. It was hard to pick the bottom, but if you invested through the entire ordeal you came out well ahead.”
Not really true, the stock market took 25 years to reach a new highpoint after 1929.
WQ - Cramer also said there was no way Bear Stearns was going under. That was a day or two before it essentially went bust.
Snoopy - long term. Really long term.
@Andrew - “some domains will be winners: credit reports, bankruptcy, foreclosure”
I think JOBS domains can be added to this list too.
Those with cool calm heads will come out winners in the long run.
Panic never got anyone anywhere. last week you could buy wachovia for 15 cents, today it’s $6.50!
Best deals are in stocks right now. Those that buy underpriced stocks and assets today will be laughing in 5 years time. Your plan is a good one.
Good luck to you, and anyone else who shares a winning mindset.
Maxe - I believe you are right. I doubled my 401K contribution in the past week because I feel the same way.
M. Menius - certainly a lot more people looking. Will the companies still be paying a lot for clicks though? Hard to tell. Personally, I don’t think job losses will get out of hand.
Hi, I saw this posted on http://www.SubliminalMessages.Com and think you are missing the boat. The current economic uncertianty is exactly WHY you bought domains to begin with! You wanted an investment that is not subject to property tax, vandals, trespassers, zoning ordinances and/or leaky toilets, didn’t you? As a reminder, you wanted to sleep better knowing that demand is guarantted to go up while supply is guaranteed to go down. You wanted an investment that will continue to make money long after you die.
What does the current economic situation have to do with any of this? All points are still true and your domain is still worth more than the $10 you invest annually.
If so, then what’s the fuss?
I strongly suspect that your sudden feeling of uncomfort is originating elsewhere in your financial portfolio — not from your domain collection.
SamIAm - that would be correct if domain parking hadn’t dropped substantially this year.
OK, I’ll agree that parking has -for now- lost its glitter, but don’t confuse that to mean that domaining has.
Yep, some of us are now going to have to actually publish content on our sites!
I have a couple of generic spanish domain name that deal with student loans, mortgage long domain names, Im holding on to them till the right enduser come along.