Tuesday, July 24, 2018

Same Domain Sales Analysis


In retail performance analysis, same store sales are important measures. By looking only at sales from a fixed set of stores, we exclude outlet expansion or contraction effects, and get a better measure of how well the company is really doing.  The same idea is used in analysis of restaurant chain performance and other areas of business.

Each day I read the daily domain report produced by Michael Sumner at NameBio. One feature included in the report, along with the sales data, is a listing of domains with a sale history, that is that had a previous sale reported in the database. For these domains the change in price and percentage increase or decrease is included. It seemed to me that more of the domains with history saw a price decrease, occasionally a dramatic one of up to 99%.  I wanted to see if this perception was really supported by the numbers, so I performed an analysis at what I call same domain prices on only those domains that have sold multiple times. The question I wanted to answer was simple: When a domain name sells multiple times, is the price more likely to go up or down?

The Study

I used the NameBio daily reports for a 61 day period from May 24 through July 23, 2018 inclusive.  This included an analysis of 13, 165 domain name sales, of which 288 had a history of a previous sale price in the database. For each NameBio daily report I recorded the total number of sales for the day, along with the number showing an increase or a decrease in price.  I then computed whether each day was net up, down or even, using the definition of even as being an equal number of domain sales increased and decreased (not that the amount of the increase and decrease were equal).  For example, if 3 domains with history sold this time at a higher price, and 2 at a lower, it would be a net up day.


I summarize the key results below.

  • This study analyzed 13,165 NameBio reported domain sales in all extensions over the 61 day period from May 24 to July 23, 2018.
  • Over the reporting period, on average there were 216 domain sales per day recorded in NameBio.
  • Of the 13, 165 domain sales in the 61 days, 288 had a history of a previous sale, or 2.2%.
  • Of these 288 domain sales with history, 104 showed an increase and 184 a decrease in price.
  • For the 61 days in the study, 43 days were net down (more sales with decrease), 10 were net up (more sales with an increase), and 8 days had equal numbers of increase/decrease.
  • There may be a systematic bias that makes domain names that are available for sale again more likely to sell at lower prices.

Other Measures

It is of course easy to use NameBio to look at the average price of all domain sales in a year, or the price of for example sales in a single extension like com or net.  If you look at all extensions combined,  here is the average selling price (data as of July 23, 2018).
  • 2018 (up to July 23)  $1405
  • 2017 $1464
  • 2016 $1350
  • past 5 years $1778
  • all time  $2665
While one might conclude from these data that domain name prices have gone down from the early years (and are roughly constant over the past few years), that does not necessarily mean that  prices of similar quality names have gone down.  It may just be that in recent years there are many more domain names of lower overall quality being sold, bringing down the average price. That possibility was really the motivation for this same domain analysis. 

Does This Mean Anything?

If it were true that prices of domain names are going down, then domain name investing, on average, will result in portfolio losses for most domain investors. This would be true even if they make good choices regarding domain names and keep costs to a minimum by seeking the best deals on registration and renewal fees. The only exception would be if a domain name investor can consistently acquire domain names significantly below market value.  In a future post I plan to look at the question of whether the domain name market is efficient in the economic sense of efficient market hypothesis. This speaks to whether it is likely that such bargains can be consistently found.

To be truly statistically meaningful a larger dataset of same domain sales would need to be analyzed, probably one that looked at the magnitude of the increases/decreases as well as the number of each. I could not figure out any automatic way to extract the sales with history from the NameBio daily reports, so by hand I went through the 61 reports. That is why this study is limited to the 13,165 sales, only 288 of which have a history.  If someone knows an automatic way to do the same thing, please do let me know!

But even if we regard the number analyzed here as statistically significant, it still might well be meaningless due to a systematic bias.  A domain name that retains its value is more likely to continue to be used, while one from a business that is less important now than it was a decade ago is more likely to be sold at a decreased price, possibly a sharply decreased price.  For example domain names related to audio cassette technology are likely to be sold at lower prices today, while those in gene therapy or crypto currencies are less likely to have a sales history. Therefore, while interesting, I don't place much importance on the finding of this analysis that more same domain sales are at a decrease in price.

One number that probably does have significance from this study is that about 2.2% of the sales have history.  In a way it is surprising, but encouraging, that most digital assets only exchange hands once.  This also is evidence for those who promote the idea that an end user should take this chance to get a premium domain name, since the opportunity may well never arise again.  Of course sometimes domain names do change ownership without a domain name sale, through mergers and acquisitions. Also, many, probably most, domain name sales are not reported in NameBio either because they are private, are sold subject to a nondisclosure agreement, or from a marketplace that does not report sales to NameBio.

If there have been previous analyses of what i have here termed same domain sales price trends I would like to know about them so that I can make reference to them in a revision of this article, and give them credit with a citation.

Fine Print

This analysis and commentary is offered for educational purposes only, and comes without explicit or implied warranty.  Domain name investing is inherently risky, and any information in this blog should not be construed as advice for any course of action.  Each reader is responsible for their own domain name investment decisions. While every effort has been made to be accurate, readers should independently confirm any data important to them. I would like to acknowledge and thank NameBio for the incredibly powerful and useful database of domain name sales data that they make available.  This analysis and report was conducted in conjunction with our website, NamesThat.win.  We welcome contact through that website, or as comments directly on this blog.  We are active on Twitter - why not follow us

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