Marketplaces cashed in on the Chinese gold rush, but the gravy train has slowed considerably.
Domain name marketplaces were buoyed last year by the market for short domain names.
Marketplaces were winners during the frenzied run-up in prices, playing middle man for a cut of the action.
57% of DomainNameSales.com’s dollar volume of sales last year were to Chinese buyers. China accounted for nearly half of the dollar volume of domain name transactions at Escrow.com. And Sedo’s weekly sales reports were chock-full of short domain names purchased by people in China.
These numbers are staggering. Essentially half of DNS’ and Escrow.com’s domain sales last year were from China.
I don’t know how these companies are doing this year, but I’m sure the volume is down considerably. Sedo’s weekly sales have reverted close to the mean. Domain name brokers have also told me they are seeing less action from China.
And prices of these domain names are dropping.
I don’t know where it will go from here, but I sure hope the companies that benefited from this last year didn’t bake it into their 2016 plans.
Meyer says
I wonder what percentage of DNS and Escrow transactions in 2013 & 2014 were to Chinese buyers/sellers? Obviously, it was lower than 2015.
Andrew Allemann says
Meyer, look at the last chart of this post:
domainnamewire.com/2016/01/14/impressive-domain-name-stats-from-escrow-com/
Mason says
A no name party such as myself cashed out close to 6 figures, and was able to liquidate all these crappy 4 letters from my inventory, and put that capital to use outside of domaining.
You know the top is reached when people start pumping .ws type as investment grade, you have to give props to that Acro fellow, he clearly stated this day of reckoning was upon us.
Anyone of us who understands domains, and how they work, and how slow end users can be to move at times, saw this golden few months as a sell signal.
Lots of the latter buying has been western domainer as trying to catch the last leg, essentially the lemmings. Many Chinese took loans to buy, and they will be called when domains are appreciating the wrong way.
It was fun while it lasted
Acro says
Glad to hear you sold at a reasonable time and made a sizable profit. Many others didn’t, and instead followed the “voices” to “buy!” even at a time that real world financial indicators showed the game was dangerously close to being over.
Those that are left holding the bag, will have a hefty bone to pick with the irresponsible ones that urged everyone to keep buying. Yes, everyone should make an educational decision on their own, but can we blame inexperienced investors for putting faith in those that presented themselves as “experts”?
Dishing out investment advice is a criminal offense in the financial markets, and many newbies perceived the domain market to be an extension of the stock market.
Has the “chips” market bottomed out?
Not yet. It might even rise. But we while we can’t predict the future, we can be cautious about future investments. Domaining is not a fantasy game when it’s played with real money.
Who benefited from the gaming of the market?
First and foremost, those who already owned assets that appreciated almost overnight. Then, those who bought at various levels of increasing value, and flipped their acquisitions, perhaps repeatedly. Lastly, those that sold at the peak of the market, cashing their chips in.
Joseph Peterson says
Hopefully what I’m about to say won’t come across as a gloating “I told you so”. While so many domainers in China and the West are losing money, I see little to celebrate. Predicting their loss has been no triumph for me.
The fact is, this crash was expected. It was predicted. Personally, I began writing about problems in the Chinese sector early in the Fall of 2015, while prices were still climbing rapidly. I did my best to urge caution, scattering pages and pages of explanations across multiple domain-industry blogs explaining why this Chinese domain market was unsound. Andrew Allemann here at DNW asked tough questions before 2016’s decline began. And Theo Develegas (Acro) stood firm with a “negative” outlook.
In private, quite a few investors shared our skepticism. But in public, we were a tiny minority. Cut off 2 fingers, and I’d still be able to count the people who spoke out on 1 hand. Theo and I especially met with hostility from established players who were busy promoting these asset classes. So many domainers had a vested interest in this bubble by that stage that skeptics like us were dismissed as “jealous” or regarded as the enemy and shouted down – sometimes censored altogether. We were jeered and smeared … but sometimes listened to.
My point is NOT that we – the minority – were right. My point is this: Domainers who read broadly had access to the full spectrum of viewpoints. If they read the top 4 or 5 domain blogs, then they stumbled over me making the case for skepticism time and time again. They had an opportunity to hear all arguments, evaluate things, make up their own minds, and invest accordingly. Meanwhile, domainers who didn’t venture out much but who listened mainly to a coterie of celebrity salesmen – they heard almost nothing but relentless optimism.
Domain investors who read broadly knew this decline might be around the corner. And they knew it at least 6 months ago. Nobody’s viewpoint is true. Truth is a product of critical debate. For that reason, we all need diversity of opinion.
John says
So it’s already a “crash” and a “bubble” on the domain heap of history now?
Am I the only one who watched this video:
“Video Interview: 190.com on its $20 million domain name investments in 2015”
https://domainnamewire.com/2016/04/05/190-daniel-chen/
Joseph Peterson says
@John,
Markets crash, yes; but that doesn’t mean they stop. We’re talking about a price correction and a retrenchment in spending.
Some asset categories of dubious, borderline quality will evaporate and cease to be traded altogether. 6N domains in nTLDs registered under $1 apiece, for instance, may be hit hard. Assets of longstanding value will be traded at some price point, even if they settle at a lower level and move more slowly.
Underneath the speculative bubble, there is a real Chinese domain market, after all – tied to usage like everywhere else. Trading for the sake of trading is ultimately a losing game. Hollow and unsustainable, in my view. Of course, traders will try to prolong appreciation by recruiting more traders.
Nothing ongoing can be thrown to the “heap of history”.
Snoopy says
According to those charts prices are back to November 2015 levels, so I don’t think this could be seen as a bubble bursting right now.
John says
That’s more like it, Snoopy.
thelegendaryjp says
No doubt many segments have started to burst or are leaking…take LLL for example, I couldn’t sell any of my ” Chinese Premium ” LLL now for what I could 5 months ago. In fact todays prices were my near buy price 5+ months ago. Always exceptions to the rule and maybe NN++++_ have faired better but segments def. hurting.
John J says
Escrow.com’s Q1 cash receipts grew at exactly the same rate in 2015 (18% per annum in 2015 and in Q1 2016). These are disclosed in the latest quarterly for the parent company (Freelancer Limited FLN.ASX). See slide 3 here http://www.asx.com.au/asxpdf/20160418/pdf/436l2vf7l5t7xg.pdf
Andrew Allemann says
That compares Q1 2016 to Q1 2015. It could have been down sequentially over Q4 2015.
David says
Thanks to a high degree on the Chinese market declining it seems the long-term bear market for multi-keyword domain names sales is finally over! And it’s about time too after keywords names have been on a strong down-trend for the last several years and in an even steeper drop over the past 12-months or so.
IMO, this sudden reawakining of long-tail keyword domains activity is tied closely to the strong decline on the Chinese market (which results in buyers looking elsewhere and also frees up significant domain investment capital) resulting from CHIPS inquiries and prices declining steadily since the end of 2015 and the even more devastating China sales drop commencing in February 2016 or early March.
I believe I was an early pioneer in openly calling it on the Chinese market and CHIPS domain sales based exclusively on early warning signs from my own knowledge about China preferred for-sale inquiries declining quickly and severely.
The sudden and ongoing increased interest in multi-keyword names may also be due to non-Chinese domainers leaving the Chinese type of names resale market in droves after suffering recent losses in value on their Chinese preferred domains (or at least not making anticipated high profits and easy sales).
About 6-weeks ago I wrote on my blog about Calling It on China domain sales. Are you wondering why I think the long keyword market sales trend is now looking good? My prediction is based on my domain sale inquiries on these keyword domains suddenly skyrocketing, which seems to have started about Mid-March, or more exactly March 22, 2016 according to my sale inquiries (not based on sales).
That is the same methodology I used in early March when I called it on Chinese sales. Of course, I realize predictions based solely on this method are far from being scientific or based on detailed data analysis. Nevertheless I believe it is valid.
Domainer Extraordinaire says
Just like real estate domain names can’t maintain exponential growth. After this correction, I expect a more manageable growth rate.
Andrea Paladini says
Interestingly, those who now suddenly are talking about a slowdown and a market crash are the very same who in the recent past contributed with their statements and actions to inflate the bubble.
An additional confirmation that hypocrisy is widespread, especially among those with vested interests …
And at that time, many months ago, when some people, including myself, were warning about speculative excesses, those (shameless) guys were calling us names.
That said, I think there will be a fly-to-quality, where top names (high quality category-defining, LL.com, LLL.com, great and fitting keyword .net and .org) with end users will still be kings.
On the other hand, all the remaining inflated names, including poor or meaningless gTlds, will burst and many people caught in the frenzy will get burned.
I’ve been in the financial industry for nearly 20 years and, as in the stock market, I still see too many would-be “experts”, who are just “snake oil salesmen” and turncoats … 🙂
Ryan says
Do you know how many guys said NO, to $30-40 5L.com chip sales when they registered hundreds to thousands for reg fee only a few months back, those investments are now worth $2-10 going into a renewal, they will be underwater if they renew, and a loser if they drop.
Millions of 5L.com are set to renew in a few months, they hold little value now.
Van der Heck says
The history of Tulipmania
https://en.wikipedia.org/wiki/Tulip_mania
should be requisite reading for all domain name investors.