Demand for domains is off to a slower start this year.
Earlier today, I published the latest .com rankings, which evaluated top registrars’ performances in January of this year for .com domains. The numbers tell us something we already knew: demand for new .com domains is tempering.
Last week, Verisign (NASDAQ: VRSN) lowered guidance for how much the base of .com and .net domains will grow this year. It was a rare admission for Verisign, which has a habit of setting low goals and comfortably meeting them. It has levers it can pull, including discounts, to make sure it meets its numbers.
But the comedown from the pandemic surge is unavoidable. People registered more domains than ever during the pandemic as they moved business online. Now we’re entering the aftermath.
We knew a reversion to the mean was going to happen. Tucows has noted this in its earnings reports. Last August, GoDaddy tempered expectations for the second half of 2021. It ended up having a great Q4 but warned that 2022 growth would be slower.
Two factors are at play here. First, the comparables from pandemic years will be hard to beat as things normalize. Second, some demand for domains was brought forward by the pandemic. Once a small business gets online, it usually doesn’t need another domain.
So what does this mean for the domain aftermarket? I think it will be bifurcated.
On the lower end, we should expect some softening of sales. We’re not talking about huge differences here; January’s .com registrations were only down 6%. (I’m using .com as a proxy; while different TLDs grow differently, the overall market was likely sluggish in Q1.)
The higher end depends a lot on the state of venture funding. As long as the money continues to flow and the economy stays relatively healthy, expect valuations for one word domains to remain high.
In past economic slowdowns, like 2008 for instance, I remember the domain aftermarket continued on and big sales were still happening. So for the past 22 years, there’s not much that has stopped the domain aftermarket. Main reason is that the trend is still to be more online, and anything new coming online needs a domain. Some industries like crypto and web3 have had huge multi-million dollar investments in the past year, so these companies are cashed up and able to spend. In recent times still seeing lots of companies paying to upgrade their domains to a one word, for example. Maybe we are running out of meaningful terms to register, it’s mostly all taken. I think at least the domain aftermarket stays steady, and if you get a liftoff in some sectors like crypto or defi, look out.
You make some fair points, but on the lower end, I’m not thinking about recession. I’m just thinking about fewer people registering domains this year than last.
There has been a slowdown in VC funding as well to start 2022.
https://dot.la/venture-capital-slowdown-2022-funding-2657100434.html
Recession seems inevitable by Q4 2022.
Still, Buy low during bear market.
Sell high when bull market returns in 2024-25.
There is more than one dynamic at work. The main one is the spike in registrations during Covid washing out of the zones. Some of these were registrations by people who thought that they could move their businesses online. Some succeeded but many did not.
There is also a wider trend that is often missed with .COM and that’s the shift to ccTLDs in many countries outside of the US. The .COM is effectively the de facto US ccTLD (the .US being the acual one) so the US market drives a lot of the registrations. Outside the US, the countries where the ccTLDs are the main TLD have pushed the .COM down to replacement level and the other gTLDs are either losing registrations or are just getting brand protection registrations. The increasing renewal fees on .BIZ and .INFO have meant that anything other than brand protection registrations are grudgingly renewed.
The .ORG is a bit of an outlier in that it is performing better than .COM and has become a sort of ccTLD for its registrants. The whole “all the good names are taken” argument is a bit problematic and always has been. This is because it purely focuses on keyword domain names while the majority of registrations by ordinary businesses are actually business names or d/b/a names. The .COM is also a set of country level markets with a smaller global market. The US market would be the largest but the “all the good names are taken” argument often ignores the fact that there are many other languages than English. It is the shifts of registrations in those languages to their local ccTLD that is .COM’s major problem as it has become heavily dependent on its US market.
Greed on the part of Registries and parking companies and all of these corrupt
UDRP decisions is destroying our industry. Price hikes thru the roof at virtually
every registry this year in addition to the Verisign price hike has caused me to
want to completely get out of the industry after over 13 years as a domain
investor. Just little ole me has dropped over 500 domain names (mostly traffic
names) as well due to registration price hikes, and parking companies poor
payouts since January. Make no mistake about it our industry is being destroyed
by greed amongst all of the big players. Its ironic that everything is in decline
except registration fees.
The real crunch time for a TLD is when it starts losing domain names with developed websites. The turnover in PPC parked and for-sale domain names has always been high. The .COM price increases were not too much but combined with the lower payouts, they will make some of the lower traffic PPC domain names not worth renewing. From the April tracking survey (identifies PPC/Sales/Holding/Redirect sites across all gTLDs), approximately 16% of .COM was on PPC (including registrar parking) and 8.9% on sale. The PPC and for-sale percentages have been fluctuating a bit for the last few months.
Greed on the part of Registries and parking companies
and all of these corrupt UDRP decisions is destroying our industry.
Price hikes thru the roof at virtually every registry this year in
addition to the Verisign price hike has caused me to want to
completely get out of the industry after over 13 years as a
successful domain investor.
Just little ole me has dropped over 500 domain names
(mostly traffic names) as well due to registration price hikes
and ridiculiously poor parking companies payouts just since
January.
Make no mistake about it, it seems our industry is being
destroyed by greed amongst all of the big players.
Ironic that everything is in decline except registration fees!
The pandemic has changed the markets a lot, the arrival in a torrent of new domainers from many countries has made sales change, especially in Dan.com BIN to Rent, they only buy domains (Com) from $100 to $200 each month.
We already knew about the price increase, some registrars continue as before, the increase is not noticeable and in others the increase is $2.00 to $4.00.
The NFT is an interesting fashion for the sale of domains (Com) I have in Afternic.com and Efty.com
I have also dropped quite a few domains from my portfolio and am dedicating myself to investing much more in the stock market.
I own 50+ NFT .Com domains now that I’ve acquired at low prices In the last few months.
Just having 9 NFT domains and selling from $5K, Sedo has sold NFTs from $25K and they have also sold for $90k.
.Com is the gold standard, period.
I think it’s a combination of things like .Com price hikes, Covid hangover, Inflation, interest rate increases. The money squeeze is on!
But .Com is not going anywhere any time soon. Had my best 1st quarter in .Com sales since before Covid. Value investing in domains right now like I’ve done in past years (ie 2008/09). Buy low, sell high!