Joseph Peterson reviews the past month of expired domain name sales.
Within the domain market, China has been a big hit; but recently China – meaning the Chinese stock market – took a big hit. Between June 15 and July 3, the Shanghai Composite Index plummeted from 5178 to 3630, losing 30% of its value in 2 weeks. Some investors who purchased domains linked to China are wondering what this means for the value of their assets. Buyers and sellers can speculate to their heart’s content. Those interested in facts will look closely at recent and upcoming sales data.
NameJet has been a major player where China-focused domains are concerned, selling them at high prices and in high volume. Therefore NameJet is a natural place to look for knock-on effects of the Chinese economic downturn. And?
Overall, NameJet’s performance for June remains strong – 100 sales above $2,000, which is slightly higher than May (97) or March (94). At $723k, those 100 transactions totaled more than any month since January, making June NameJet’s 7th best month ever. Only in comparison to that all-time record month, with its 148 sales > $2k, might we detect any shortfall.
Yet such totals mix together Chinese and non-Chinese categories, which ought to be separated for analysis. Looking at 3-letter .COMs, we find 23 of them in January, 10 in March, and only 5 in June. This decline isn’t a symptom of declining value, however. Auctions are scheduled over a month in advance, and inventory isn’t always on offer. If we look back at January, what’s really significant is that all 23 LLL.com’s finished between $7.8k and $23.1k … with a median price of just $10.1k. Contrast that with June’s 5 LLL.com’s, which spanned $17.1k to $55.3k, and it’s difficult to find any evidence of market retreat!
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As LLL.com auctions become less frequent at NameJet, pent-up buyer demand has caused more 4-letter .COMs to climb above the $2k reporting threshold: 10 in January from $2.0k – $10.0k (median $3.0k), 15 in March from $2.1k – $7.8k (median $2.5k), and 21 last month from $2.0k – $9.0k (median $2.6k). Unlike 3-letter .COMs, which never sell below $2000, 4-letter .COMs usually do sell well below $2k. For example, 177 LLLL.com domains that I happened to be watching during June fell between $69 and $1.9k at NameJet; and their median price was $379. But here’s the point: LLL.com outcomes are highly dependent on market supply. Meanwhile, LLLLs are so abundant that NameJet has a fairly consistent number of them in stock. Supply fluctuates less and cannot be so easily squeezed by sellers looking to create artificial scarcity. Consequently, if we see 4-letter domains reaching higher prices more frequently, then that’s meaningful.
The Chinese stock market didn’t take a nose dive until the 15th; so it’s conceivable that strong domain sales during the first half of June are masking weak performance during the latter half. Bingo! NameJet’s second highest sale, Baotou.com, sold for a staggering $61.8k during that first week while the market was still climbing. Today it might not rise so high. Not so fast! 4 out of 5 LLL.com auctions occurred on or after the 24th; only SDU.com closed before the crash. Moreover, the top LLLL.com auction for June, PUKA.com, took place on the 28th. Not only was it the highest of 21 within that category; it was also the week’s most expensive expired domain.
So far, NameJet sales show no evidence of Chinese market collapse. China accounted for 5 of the top 6 sales … 7 out of the top 10 … 12 out of the top 25 … arguably 40 out of the top 100. Those 40 totaled $289.3k, which represents 40.0% of the sales volume > $2k. And guess what? $147.9k of that spending (51.1%) went toward 11 auctions (out of 40) that took place on or after June 21. In other words, June’s spending on Chinese-style domains is heavily weighted toward the final 1/3 of the month!
Yet there is a story here … buried in everything I haven’t discussed. At least 60% of spending in the chart above belongs to the non-Chinese domain market. Back in March, 65.6% of spending went toward CCC (47.7% /$306.1k) and CCCC (17.9% / 115.1k) domains alone! During June, those categories were less significant: CCC (22.0% / $159.2k) and CCCC (11.4% / $82.2k). In other words, whereas more than 2/3 of high-end spending could be ascribed to China during March, only about 1/3 of top-auction dollars were for Chinese-style domains last month. The West reclaimed half of China’s share, doubling its own.
This situation may be more drastic than just a relative tug-of-war between 2 partially coupled domain markets. March also saw sales for Pinyin, numerics, and Chinese typos (5.0% / $31.8k), meaning that 70.6% or $453.0k of high-end spending could be attributed to the Chinese market. Measured in absolute figures, China dropped from $453.0k to $289.3k or less. And that’s a retraction of 36.1% in the space of 3 months.
In some ways, Spring may have represented a high water mark for Chinese-domain-market optimism; and the retrenchment since might be a necessary correction – a transition toward a more stable status quo. Importantly, this trend precedes the Chinese market downturn. Signs of decline related to that economic event are not apparent within the domain market – not from this data. Once I examine the larger volume of NameJet sales below $2k and tease out trends at other venues such as GoDaddy, then I’ll have enough evidence to draw conclusions.
As stated elsewhere, I wouldn’t expect a downturn in the market for Chinese-focused domains to be immediate. News about the Chinese stock market propagates slowly from mainstream investor circles to domain blogs until it finally finds its place as gossip within domainer forums. Wholesale buyers won’t encounter retail consequences for some time. Right now, domainers are still busily buying from one another; and prices seem stable. If retail prices were to drop today, then wholesale traders wouldn’t begin to discover the change for several weeks. By that time the Chinese stock market may have rebounded or at least pulled up out of its nose dive, finding a new stable level.
Panic is unlikely when domainers in Morocco buy Chinese-style domains … sell them to Indian resellers … who flip them to Germans … who trade them to Canadians … etc. Distance from China and inertia within wholesale buyer behavior will mask sudden volatility in the retail market. Potentially that “cluelessness” is a very good thing for price stability. Now that the Chinese domain market has involved consumers in foreign economies, their optimism can offset domestic pessimism.
After several months of high observed sales, domainers outside China have at last absorbed some lessons (right or wrong or self-fulfilling) about the value and liquidity of short domains. As buyers, they will not turn on a dime. Domainers who have been seeing sales are charged brimful like capacitors. If prices begin to drop slightly, these domainers will begin discharging dollars, buying up the Chinese inventory they’ve seen sell. Whether it’s a capacitor in an electrical circuit or an amateur domainer half a planet away from any Shanghai Composite Index, lag time smooths out zigzags.
Usually, I discuss particular domains as brands or as investments. Not this time. You can read about individual domains in my weekly articles. Puka.com and Sanad.com are discussed here, along with Sillas.com and OceanEnergy.com (which sold above $2k as well). Baotou.com, ShowerHead.com, and PensionCalculator.com were covered a month ago. Chemicon.com and Juje.com show up along with DataTrack.com ($8.9k) in this article. Earlier I wrote about Insurance1.com, Hakia.com, AllergySolutions.com, and Hushe.com ($4.2k). And it was a good week that saw the sales of Embrace.com, BabyDresses.com, and CapitalCity.com.
Interestingly, PJ.org ($10k) sold at NameJet back in April, 2013, for $3.5k. While that domain tripled its value, RingTones.com – NameJet’s highest June sale at $105k – took a nose dive. Sedo had sold previously it for $750k in January of 2010. Market value doesn’t always go up.