The domain name industry is on a downswing. What can change this?
Over the weekend I read a blog post by Danny Aerts, CEO of The Internet Foundation in Sweden. IIS is responsible for running Sweden’s .se country code domain name.
I think he does a good job summing up where the domain industry is right now:
Now, one doesn’t need to be especially gifted to guess what is about to happen in the domain industry. The market is mature and largely over-established. We see too much speculation, too many top-level domains, too many registries (that administer top-level domains), too many back-end providers (delivering systems for the administration of top-level domains) and apparently also too-many ICANN registrars.
This also means that much will decline in the future. We will see a decline in growth of domains in new top-level domains, in growth for .com after a large speculation wave in 2016, and in the number of registries. Growth in .se may also decline. We have received a lot of new registrations during the spring that probably will not be renewed.
I’ve been following the domain industry since the late 1990s and have been covering it for this blog since 2005. I’ve seen ups and downs, and I think Aerts does a fair job assessing where we are right now.
Sure, some businesses are doing fine…even great. Others are struggling. But as a whole, I think Aerts paints the right picture.
The domain business took a hit after the .com bust of 2000 but was strengthened by deregulation. It was then on a strong growth trajectory until the domain parking business waned. Even for companies that weren’t directly involved with parking, parking revenues were responsible for growing registrations (benefiting both registries and registrars) as well as the aftermarket. People that made lots of money from parking invested it in other areas of the domain business as well. But parking has been on a downswing for nearly ten years.
There was another upswing thanks to the rollout of new top level domains. New money came into the domain business and those that achieved earlier domain riches also invested heavily. Many of these bets were bad bets and there are few spoils left from that business.
Money from China helped a couple years ago. Frankly, it’s still helping even though it’s down a lot.
Yet it’s difficult to see any meaningful event or market change in the near future that will pump new excitement into the domain industry. But I’m looking hard for it.
JohnUK says
Yes a pretty good summation with which I mostly agree. All the new gtld’s have done is made some money for some companies/people and yet now we see that they really aren’t that great after all and people will go back to .com and Country code’s. As for growth of .com it will depend on how the global economy goes I guess and that is fairly flux at moment but still I am optimistic.
steve says
Andrew,
I think your analysis is spot on.
My approach to domain investing was like “moneyball”. I was content to invest in undervalued domain assets, and make a decent ROI, but no home runs.
Domain investors used to buy my domains — but now mainly end-users. Too many domain investors got burned by the new top level domains, and there are so many other investing opportunities: cryptocurrencies, stocks, art, real estate, and more.
We’ll see how it all plays out.
J.R. says
I believe the U.S. economy will crash in October-November 2017, as a stock market bubble is ready to implode (tulip mania, 1929, Housing crash 2009, etc). Likewise, more than 1/2 of the new gTLD extensions will disappear by 2020 (as domain speculators are pulling out of this con), many registries will fold or merge, and the value of premium one or two word dot-Com domains with commercial meaning will sky rocket by the end of 2018. Remember, the brick & mortar stores are being largely eliminated by the e-commerce model since 2015 and it really sped up in 2017; these C-suite decision makers will turn there focus towards digital marketing strategy and savvy domain speculators will benefit greatly.
…stay tuned.
John says
People do need to stop the endless incorrect drumbeat about “one or two word,” however. That’s all it is – a mindless drumbeat and mantra that does nothing but leave money on the table including for those who are deceived by it, and all it does is needlessly treat the industry as a zero sum game. The truth and the bottom line is that if a phrase is the best top-of-mind and most compelling and natural commercial phrase, no matter how long and even if it’s three or four words or sometimes even more, then it is also worth a fortune big and small, in many cases even worth far more than a vast multitude of shorter and even good domains. This also in no way diminishes or threatens the value of any shorter domain. If Candy.com is worth $10 million or $50 million for instance, then acknowledging and admitting that ChocolateCoveredWhatever.com is also worth a relative fortune no way changes or diminishes that. And anyone who has ever been an end user instead of just focusing of buying and selling, who has ever looked at traffic stats when the SE’s used to allow you to see every search has seen that this is incontrovertibly true, that people will not only search for the phrase itself, but will even type and and literally search for the .com itself no matter how long the best and most natural compelling commercial phrases are.
John says
P.S. And just as one example of illustration:
• Staples.com = by itself for instance, apart from what it has obviously become, is absolute worthless garbage *compared to* many other much longer multi-word domain names with the best natural compelling commercial phrases in more lucrative industries. That is simply a no-brainer that requires denial to not recognize. Even a broad and brandable definition of “staples” is so extremely archaic that few people these days would even think of it.
• And so many more, including the two three-word .com’s I sold for over $21k recently…
J.R. says
You know more than I do about 3+ word dot-Coms , and I’ve seen long phrases sell for good money; just need the right end-user. However, my focus is on 1-2 word premium dot-Coms; but your point is notes.
John says
Some 3+ word domains are great, but staples.com is a phenomenal generic domain imho.
John says
@ J.R. – Indeed, it’s all about the “both/and” instead of the “either/or,” as in both the great one and two worders are each worth a fortune big and small, depending on the domain, and so are the best three, four and sometimes more. I would also love to have as many great one and two worders as I could like anyone would.
@ John – Exactly, it certainly is a good domain, though I would not go as far as “phenomenal” by any means despite how short and “one-word-only” it is, and that is why I also make a point of being very precise in what I’m saying and using important clarifying phrases like “compared to…” Staples.com is a classic case of a well known short one word domain not really being all that special or valuable in the big picture, in the context of other far more valuable commercial and cultural domains including many much longer. People don’t think literal “staples” that you put in a stapler when they are looking for a place to even buy such staples themselves, they search for “office supplies”; and as I pointed out even the broader meaning of the term is extremely archaic now and close to nonexistent in common usage practically speaking. It also carries little to no appeal or “specialness” in that broader sense. And the market for surgical staples, well, think about it. “NewYorkApartments.com” makes a domain like “Staples.com” look like, well, a box of staples. The kind you put in your office stapler.
J.R. says
What are some examples of 3+ word domains that have sold for over $25,000? Like I said, its a niche I know little about or hear much about in the domain speculation blogosphere.
John says
Remember we only know about reported sales. I sold two three worders just recently for over $21k but I’m not saying which ones. If you sold 10 or 20 a year for $10k to $20k that would be $100k to $400k per year. Some are worth 7 figures even, and in rare cases 8. HomeImprovementLoans.com recently had a $250k ask on it, That is not only worth every penny but that’s a bargain to a qualified end user. To me a “small fortune” means $10k and up. Really good ones can be worth $10k or really great ones can be worth $50k, $100k, 7 figures, or on rare occasions even 8 figures. I don’t even want to say what I would consider worth that much right now. And that includes 4 words and more for the best of the best. There is a six word domain that even had a real $6.7 million bid on it once.
John says
You know, come to think of it, J.R., right now I can think of at least one three word .com that you can make a very good argument is realistically really worth 9 figures and not just 8. But even if not that would be hard to come by, definitely 8. I don’t want to say which, however. I’m sure many people were a bit surprised when they discovered the real price of LasVegas.com was $90 million, for instance, but the bottom line is that it simply makes sense for one like that and we need to examine or modify our and other people’s assumptions and dogma from time to time.
Sammy says
Long-tail domains are worthless.
John says
Troll. Blah, blah…
tintweezl says
Sounds like you got it all figured out, JR, so I won’t point out all the flaws in your logic to you. I will point them out to anyone else reading this thread.
First of all, it is extremely unlikely that any new gTLDs will “fold”, since there is a negligible cost in administrating and any gTLD out there right now has thousands if not tens of thousands of one word or short numeric that people will keep. That gives each one an intrinsic residual earning capacity that will be an easy sell to a registrar already paying administration costs for domains.
Travel.agency sold for millions. Casino.online same. I have no vested interest in promoting the new extensions, just in clarifying.
Things go in cycles. Domain names had a good run with CHips and the gTLD boom and now must necessarily have a correction before it resumes the long-term bullish trend. We are still early in this game, now is the time to pick up good names on the cheap. Remember what Rick Schwartz vis a vis Bill. Gates said about the domain name industry:
“Domains have and will continue to go up in value faster than any other commodity ever known to man.”
– Bill Gates
Ivan Rasskazov says
The technical aspect of the industry could very well be mature, but I would argue that the investment aspect is reminiscent more of a frontier market. If the future is to be bright, it is the latter that needs focus, transparency and development.
Michael Anthony Castello says
The new gTLD experiment has pretty much been settled. While there will always be a future need for extensions, in my opinion, Google/Chrome has pretty much killed the domain name market. The only true survivors are those domain names that can get direct navigation.
Until, there is a platform that promotes domain names to individuals where they can build their future residence and persona, most domain names will take a back seat to future technological advances.
(This reply box will only allow so many characters, I will continue on another post unless Andrew can paste them together)
Michael Anthony Castello says
The large tech corporations have reduced online populations to become merely consumers. The internet has become a tool when it should have also become a place where we could find each other through addresses called domain names.
The only “big ticket” items in the domain name space now are those that are brandable, generic or have direct navigation. Those will most likely be consumed by big business. They are very valuable in the commercial marketplace.
Fear not; destiny can not be circumvented, only delayed. Domain names will still one day rule the universe. 🙂
John says
Well put. And thanks for saving me the trouble of doing what I was just about to do here now before seeing your posts, which is point out what so many seem so often unwilling or afraid to call attention to, that the biggest enemy and deliberate destroyer or would-be destroyer of domain names has been none other than:
Google.
And now perhaps you can throw in Facebook as well.
Mark Thorpe says
ICANN has hurt the domain Industry, too. Flooding the market with useless domain extensions and not regulating the domain Industry the way it should be regulated.
The domain swamp has almost been drained though, of new gTLD pumpers and unethical domain brokers.
But, the new gTLD and domain broker damage has already been done. Thanks guys!
We now know who and what you are.
All this has set the domain Industry back at least three years!
Richard says
I think there was a false narrative about domains that caused a big rise and fall in speculative domains that didn’t have much of a business model to fall back upon.
.com domains are by definition “commerce” and value is derived from marketing value, competitive advantage, brand recognition. Anyone who bought/sold based upon anything else most likely got hurt.
We all wanted to hear that domains were the new store of value, you can easily transport, etc. Maybe that will all be the case one on a retail/end user level. Domains aren’t going anywhere. Not there yet though.
I think blockchain will give premium domain names in particular a springboard to raise capital and dissiminate ownership amongst multiple owners in an easy/economical manner. This should help bring in new investors who will have more ability to limit risk. Fractional ownership of premium domains is clearly superior to full ownership of non premium domains.
Maybe the problem right now is the gap between corporate level domains and non corporate level domains is widening. There just isn’t much middle ground imo.
steve says
@Michael
“The new gTLD experiment has pretty much been settled.”
Absolutely — you have to wonder what the H were they thinking? & the pump and dumps, “fake” sales, free domains, etc —
Lesson #1: Never overwhelm the consumer with too many choices
I believe it was Rick who said it will take about 3 years for the domain industry to recover from the GTLD experiment
Not sure. You guys are the experts. I’m just an amateur
Alan Dodd says
Without the data from Godaddy it’s very hard to tell. That is the definitive guide (excluding the ultra-premiums).