Company heads to Dubai to tell financial investors about domain names.
If there’s one company in the domain name space that makes an effort to pitch domain names to various industries and people outside the domain business, it’s Sedo. The company attends lots of vertical conferences throughout the year to talk about domain names.
A conference next week stretches even further.
Sedo will be exhibiting at Annual Investor Meeting in Dubai.
Much of the official agenda at the conference appears to be about foreign and government investment, but Sedo says its goal is to “attract investors, who are looking for lucrative assets, to the topic of domain trading.”
With 15,000 attendees expected, it will be introducing a lot of people to domain names as an investment.
Gene says
This is wonderful news, Andrew: But the very obvious question is why haven’t they (or GD) made this sort of pitch, at a major investor’s conference, A VERY LONG TIME AGO?!
I’ve come to the conclusion that, as far as marketing is concerned, these marketplaces/registrars are both lazy and non-innovative. There’s never any sense of urgency with them when it comes to educating the money crowd (funds, corporations, family offices) on the value of domain names as an asset class.
I’m sure they’d disagree with my assessment, but the proof is in the results – or lack thereof. By 2017, immigrant-grandmothers should be as aware of the value of domain names as they are of stocks. But they’re not…and that fault lies with the GD’s and Sedo’s of the world.
Logan says
Domain names are not investments — they do not pay cash periodically that can be put into the owner’s pockets as true investments do. They USED to do so when landing page PPC was lucrative; but that is no more.
Domain names are merely speculative assets — typically, one must buy the domain name for market price and hope to sell it for a higher market price later, much as a homeowner hopes to do with wishful thinking about his private residence (reality set in for homeowners in 2008/2009).
The market for domain names, however, has much larger inefficiencies than the residential housing market. Liquidity is the biggest challenge. A surplus of sellers and a lack of sufficient buyers is another. Even when there are buyers, there is a huge gap between the bid and the ask, leading to lots of non-transactions. In short, most buyers simply do not value domain names as highly as the sellers value the domain names. So, domain names are very different than other, more efficient investment assets for which buyers see and expect more value, such as stocks, bonds, and to a lesser degree, real estate. The fine art market may be the best analogous market for domain names, although there is no annual holding cost imposed by a governing authority like ICANN, registries, and registrars for fine art.
Gene says
I can see that you’re really not familiar with the category known as ‘alternative assets.’ That category includes everything from artwork, to wines, to seed investments, to classic cars. And for many decades now, the rich have allocated a portion of their portfolios into such esoteric investments.
So WHY wouldn’t internet real estate – that in some cases has sold for $30mm (https://goo.gl/wqLCu3 ) not qualify as ‘an investment’???
If you really believe that, this is the wrong forum for you to be expounding your ignorant views on.
Logan says
Gene,
I know a thing or two about which we are discussing. I am a CFA charterholder. I have been rigorously tested on alternative assets and have plenty of experience with them and other assets, derivatives, etc.
All of those things you listed above plus domain names are speculative assets. One buys these kinds of assets hoping that the price will go up enough to cover buying, selling, and holding costs (e.g., commissions, taxes, insurance, renewal fees, safe deposit box fees, storage fees, etc.) and still make a profit after the sale. Think players in a casino here.
An investment asset pays you all the money you need to cover those kinds of expenses while you are holding the asset — it’s a cash flow positive asset. Bonds, dividend paying equity shares, cash flow positive real estate, etc. are all bona fide investments because they put cash in your pocket while you are holding them to pay for all the expenses of holding them plus a current profit. Think Warren Buffett here.
I wrote an article about this on Seeking Alpha back in 2008 during all the crazy real estate speculation when people though real estate was the golden asset of prosperity (real estate didn’t turn out so well shortly thereafter). If you have a SA subscription, you can read it:
You Don’t Own Real Estate – It Owns You
https://seekingalpha.com/article/84724-you-dont-own-real-estate-it-owns-you
gene says
Logan,
I’m very happy to know that there are credentialed people on these boards, so kudos to you.
I have a few creds myself (Former member of an options trader at NYMEX, Trademark lawyer, and 20-years in domaining).
Regardless of the papers hanging on our walls, I’m not arguing with your second conclusion, i.e., that domain names are “speculative assets”: I took issue with your first statement, that “Domain names are not investments.”
It seems that you’re only willing to classify an ‘investment’ as something that generates an annuity of some sort. Based on that framework, some of the most valuable stocks on earth “…are not investments,” either.
But if you really believe that domain names are, for all intents and purposes, worthless IP, then why are you even on these boards commenting? It doesn’t make sense to me that you’d waste your valuable time on a domain name blog telling everyone – with the authority of a CFA – that domain names are worthless.
Your view seems to be that domains increase in value solely based on the ‘greater fool theory’ – because they’re (intrinsically) worthless. Except that that’s a completely flawed view of them.
christopher brennan says
It’s not so long since a lot of people lost their shirts in the stock market
Brad says
Not true given everything from PPC, leasing, development, affiliate sales, to the terminology growing in useage and raising the name’s underlying value.
JohnUK says
Iv’e got a 3 letter .com. What do you reckon, $2,000 selling through SEDO ?. Maybe even stretch it a bit $2,100
Alexander Schubert says
Educating the public about the value of DNS assets is really tough. And there is not only the 2nd level – do not forget about the top-level! Applying and running a gTLD needs sufficient funding.
I am soliciting funding for gTLDs since 2005 (12 years now) when we were seeking 7 figure funding for the startup that would eventually in 2012 apply for “.berlin”. I then had to do it again in the years after I founded “.gay” (a U.S. based company) in 2009. Now I am doing it yet again for a small portfolio gTLD applicant startup for the next gTLD round.
Even people who understand the “value” of DNS assets on second level have usually a steep learning curve when it comes to the uncharted territory of the top-level. ICANN and the process for applying for new gTLDs was largely a very secretive club of a few handful insiders who participated since many, many years in the ICANN process: for example in the PDP (policy development process – which eventually lead to the 2012 Applicant Guidebook). I did so in the 2006/2007 PDP – and I am doing right now in the “subsequent round GNSO PDP”. It is hell: You are involved in the main PDP process, in working tracks and sub-working groups. You have several phone conferences per week at the oddest of hours (they rotate the time zones). Of course you have to visit all the ICANN meetings: At your own cost. As a reward you are able to contribute to the shaping of the next applicant guidebook.
So I am feeling with SEDO: Educating anybody about investment into DNS assets on top or second level is a serious business. And nobody invests into a small new gTLD portfolio startup (or a super premium .com domain) when they do not understand the mechanics of the DNS business. So thanks to SEDO for doing the job that should actually be done by ALL of us!
virtualted says
I have always approached domain names from emerging technology applications – thinking if I could match a domain’s generic term with a mainstream consumer or community need… the timings would overlap.
Joseph Peterson says
Good idea on the part of Sedo. Any new investors brought into the market as a result of efforts like this will benefit all concerned.
Logan says
Hi Gene,
I never said domain names were “worthless”. I said that they are speculative in terms of generating a return for the holder. Subject to the quality of a name, there are few opportunities where the odds are in the favor of the domain name holder to turn a profit. Once all expenses are accounted for, few domain speculators turn a profit as operators of domain name portfolios in a given year. The top domain speculators with the best quality names in their portfolio might turn a profit each year, but the vast majority of domain speculators do not because they just don’t have the quality names in their portfolios that yield huge revenues on each sale. With some navel gazing, I believe most domainers would reluctantly agree they are not turning a profit after all expenses are accounted for.
As I recall, Rick Schwarz, the Domain King (R), has argued that most of the 250 million domain names in existence today — I believe he estimated 99% — are completely worthless. He has called them “pigeon shit”. I too contend that most domain names are “pigeon shit” and are worth no more than reg fee to an end user, the ultimate desired destination for a domain name. I am sure you have seen many domain speculators’ portfolios over the years that you would agree were worthless pigeon shit, yes?
Now, the remaining 1% of domain names could be classified as “investment grade” domain names. These are in the hands of a relative few, with many of these already in the hands of corporate end users, long-time early-bird Western investors, or Chinese speculators seeking to bypass China’s capital controls at some point.
If only 1% of an asset class could be generally classified as “investment grade” and the remaining 99% could be generally classified as “pigeon shit”, then that’s a pretty shitty investment asset class, yes? This is why I challenge the idea that domain names are investments, per se.
By and large, I think we are splitting hairs on semantics. I am using investment as an adjective modifying asset while you are using investment as a noun. Admittedly, my definition is much more restrictive than most people’s definition, while yours is less restrictive and more the norm. I am a notch more conservative in my thinking, largely because I am more anal retentive by nature. 🙂
I am classifying assets based on the strategic intent behind the allocation of capital to those assets. If I am allocating capital to an asset looking for a positive cash flow return while I hold the asset, that to me is an investment asset. If am allocating capital to an asset understanding that I will not receive any positive cash flow while I hold it and I am merely hoping that the market value or price of the asset will move upward so that I capture a return large enough to cover all my accumulated holding and transaction costs plus deliver to me a profit at some unknown point in the future, then that to me is a speculative asset. In my real estate article, I also talk about a personal asset, which is generally a cash flow sinkhole from which the intent is not to obtain a net positive return from the capital outlay and future sale but to primarily enjoy the utility or luxury of owning the asset; this is the class in which most of our personal residences would fall.
I am here on this blog — and in the industry in general — because I love domain names. I think the hunt for good domain names is a lot of fun and the thrill of the completed sale is exciting and addicting. Hell, my Texas license plate is DOMAINS! I have been on the Internet since 1988 when I was in college using Gopher, Telnet, email, and all that old school Internet stuff during the mainframe days (no, I did not date much).
I too have been buying domain names for 20 years. However, I made shitty choices in my domain names early on – I registered pigeon shit. I wasn’t as smart or as perceptive as Rick Schwarz, Frank Schilling, Sahar Sarid, or Mike Mann were about which domain names were the investment grade domain names to register even though I was right there alongside them working in the broader Internet industry all along.
Today, I largely play the drop catch game and compete in the ‘wholesale’ auctions hoping to sell a domain name to an end user at ‘retail’ at some point in the future. Hope is of course wishful thinking. It’s speculation on my part that I will ever sell any domain name to an end user at a profit. As most large domain portfolio holders have experienced, only 1% to 3% of domain names in a portfolio get sold to end users each year; meanwhile, the burden of renewal fees on the remaining 97% to 99% of domains still in the portfolio must be borne. So, the odds of my speculating correctly are low, plus I have uncompensated-by-current-cash-flows holding costs in the form of renewals each year, PLUS I expose myself to unforeseen but not improbable legal risks as the holder of any “unused” domain name desired by an entitlement-minded end user who could sue or file a UDRP frivolously. I do make sales here and there, which I usually post about on Facebook and report to DNJournal, NameBio, and DNPric.es to help others find comps for their own domain names.
For my capital allocated to investment assets, I tend to focus on dividend-paying equities, royalty trusts, and income real estate.
ramp1610 says
@Logan – Thank you for your useful comments.