Is there a way to make domain names a more efficient market?
Domain name investing is an incredibly inefficient and illiquid business compared to many markets.
There have been times and certain segments when domains were liquid, such as traffic domains sold at multiples and the current three letter .com craze. But for the most part and for most domains, there’s a complete lack of liquidity.
Inefficient markets create opportunity, but they also make it difficult for market participants. A more liquid market could bring lots more money into domain names, boosting overall fortunes.
Is there a way to bring liquidity to the market?
Let’s start with a thought exercise. Take a look at the ten domains below from my portfolio, and think about how much you’d pay for them each at this moment:
I purposely chose domain names of varying value. Could you assign at least a $1 value to each of these domains?
There are a couple you might not want at all, but someone out there does. I know because when I’ve let domains of lesser quality expire, someone picks them up in the drop. So they’re worth at least $8 to someone.
What if 10 people assigned a price they would pay for each domain? Even if it’s less than what I’d want for the domains, I’d at least have a liquidation value. It would be huge to have a liquidation value for your entire portfolio.
In practice, there are a number of challenges to getting people to assign a price they’d pay for each of your domains. It would be a lot of work if they aren’t sure you’ll agree to sell the domains at the highest assigned priced. And for the seller, if you do guarantee a sale, you’d basically be putting all of your domains in a no reserve auction.
There’s something here, though. There’s some way to make this business much more efficient…