Friday, February 16, 2018

Is it "silly" to invest in new gTLDs?

Introduction

Elliot Silver of Domain Investing published a post called "It's silly to buy something that is much harder to sell!".  After thinking about the points in his posts for a few days, I have developed the following response (I also posted a short version in comments on his website).

I don’t disagree with Elliot, whose writing on the domain industry I respect a lot, on the key points (domain selling is hard, the evidence supports the fact that generally selling .com is easier and more lucrative). I also agree with his view that at least currently the new global top level domains (ngTLDs) may be good for some end users and even the registrars in some cases, it is really tough to make much money from them in the resale market.  However, I do feel that calling those who invest in new global TLDs (ngTLD) “silly” is maybe slightly harsh, although that is not the main purpose of my post.  I think there are multiple good reasons to consider investing in ngTLDs as outlined in the next section.

Reasons to Invest in ngTLDs

Not overlooking the limited resale market to this point, I would argue that there can be good reasons to invest in ngTLDs.  Let me suggest a few of them.
  1. The investor is primarily interested in developing and encouraging use of domain name phrases, which don’t really work with .com but are ideally suited to some of the new gTLDs. If you are new to the idea of domain name phrases, check them out at NamesThat.win or Names.of.London
  2. The investor seeks to primarily serve end users who are in the NGO/organization space. While clearly .org TLDs are suitable (most would say preferred), and .net to some degree, some small organizations will be looking for higher impact or more affordable domain names in the ngTLD space. Many organizations do not want to be associated with .com or .biz (I know some are OK with it).  Something like 10 to 20% of domain names go to non-commercial organizations.
  3. It is best to sell what you know, and it is natural for those with expertise in an area of one of the new gTLDs to include them in their portfolio. For example, my professional background was primarily in science and space, so it makes sense to consider investment in those ngTLDs (among others).
  4. If the goal of the investor is to set up a diversified, creative portfolio without risking too much money, this is more possible with new gTLDs if one selects carefully.  Some domain name investors like searching for good value in creative, overlooked domain names, yet don't want to risk more than hundreds of dollars total. Yes, the odds are probably better of making money from one medium value .com but then all of your work and risk is in a single name and you don’t have the fun of developing a creative set of possible names for end users. 
  5. You want to be part of an innovative change in domain name use.  Personally, I find many of the .com domain names available ugly (that is not surprising with over 130 million registered), while there are sometimes available, even at registration cost, aesthetically elegant simple domain names.  It is not surprising that search results are enhanced when the two parts (domain plus extension) match perfectly the topic of your website, and that is only possible with the ngTLDs.

Final Thoughts

Most businesses fail (yes statistics show that clearly), but if everyone took the lowest risk, easiest route of never gambling on starting something new, we would not have innovative businesses. Yes, for every Apple or Amazon there are thousands or tens of thousands of failed ideas, but occasionally one takes off! I think it is healthy and positive that some creative, idealistic people want to invest in new gTLDs.  And, well, let's not call them silly please!  

I appreciate the central message of Elliot's post - it is indeed hard to sell ngTLDs (in fact hard to sell any domain name other than the most cherished high value ones I would say). I think that those who say "It's easy, buy and flip for big profits"  for com or any extension are misleading and bring into the industry those who are in it for all the wrong reasons.  Like those who start innovative businesses, the domain name industry will be best served when it is full of people who first and foremost want to innovate and serve (yes, it is important to make a little money, but you should be driven by the service side of the industry).

I personally think that if you have more than a very tiny amount invested it is probably not wise to invest only in ngTLDs.  Although the majority of my portfolio is in ngTLDs, I also have about 10% in my own country code, a small selection of .com names in the niches I concentrate on, and about 15% in "global" country code names such as .co, .me and .pw. In any form of investment, diversification is wise. But I will admit that it is the ngTLDs that I like personally best.  I would be over the moon if you would have a look at some of my domain names.  Some of my favourites are in the Features section of my catalogue here.

Image credit: Pixabay user 12019. The content of this post is intended as educational information and commentary, and is not to be taken as individual investment advice. The reader is solely responsible for any domain name investment choices he or she makes.

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