The Study
If this is end of story, it certainly sounds pretty gloomy for the ngTLD investors. For every ngTLD domain name sold, 74 are sold in other domain extensions (the majority in .com). On average, there are only 3 sales in all the ngTLDs reported on NameBio each day.
Not So Fast
Therefore, if we scale the sales data using those numbers we have:
- So far in 2018 1 domain name has been sold for every 6953 registered in all domains.
- So far in 2018 1 ngTLD domain name has been sold for every 31,125 registered
While the picture is not as bleak for ngTLD sales as the 1 sale for every 74 in all extensions would suggest, still this suggests that if you hold a ngTLD the odds of it selling are about 1 in 4.5 compared to the industry wide probability of sale. While still gloomy for ngTLD investors, but roughly 5:1 ratio not as bad as the 74:1 ratio you would assume from just reading daily domain sales reports. Many more domains are com than anything else, and many more sales are com too, naturally.
Does Price Matter?
- So far in 2018 average sales price of all domain names $1393
- So far in 2018 average sales price of ngTLD $5531
So overall the ratio seems roughly 4/5 comparing ngTLD to all domains, about 1/5 as likely to sell as any old domain, but when it does 4x more cash per sale! This would suggest that overall return on investment is approximately equal whether one invests in ngTLDs or in other (mainly .com) extensions. But....
Not So Fast 2
It depends what the question is whether the registry sales should be included or not. If we are interested in the overall value of the domain industry for new versus all extensions, it really does not matter if the sale was made by an individual who used to own the name, a domain investor, or a registry. However, in domain investing communities they naturally feel that the registry sales should be excluded.
I recently looked, in same dataset, at the issue of how much of the reported sales are registry. You can read the full report here, but I found that while only 29% of the number of ngTLD sales are by registries, in terms of dollar value of sales about 54% are registry.
Combining this with our previous two factors (number of sales ratio, average selling price ratio), the overall comparison of ngTLD to all sales suggests a factor of (4.0/4.5)x(0.47) = 0.42. Therefore our overall conclusion is that investment in ngTLD domain names currently has a return on investment of roughly 42% that compared to the total domain name market.
A second issue is whether renewal costs should be taken into account in some way in scaling the expected return on investments. While the most important legacy domain extensions (com/net/org/info) have fairly stable registration and renewal prices often in range from $8 to $12, the model for many (certainly not all) of the new domain extensions has been to offer very low initial registrations but renewal rates that are higher in subsequent years. There is also much more variation from registrar to registrar. When I did an analysis for renewal rates of new extensions, for the most popular ones both in registrations and sales, I did not find that renewal costs were higher for new extensions. It is true that some premium domains also come with premium renewals. While a correction factor might be argued, it may well be offset by lower acquisition costs and (for non premium) slightly lower renewal rates of the new extensions. Therefore I did not apply any factor for possible differences in acquisition or holding costs.
The Assumptions
- We used NameBio data, therefore this study only applies to domain sales over $100 and only those in the venues that are reported on NameBio. The possibility exists that ngTLD sales are over or under reported because of this assumption.
- This study uses data only for 2018 year to date. Some NamePros users have looked at similar data using Sedo only sales for the previous two years, showing that the ratio was same order of magnitude, but ngTLD sales were smaller than for 2018. That makes sense to me, I think for whatever reason the past 12 months have been more favourable for ngTLD sales.
- We have taken out the effect of registry sales, so the final ratio reflects only non-registry sales.
- If the ratio of domains for sale to total registrations varies between ngTLDs and all domain names, that would influence the data. If one looks at parking data, the ratios are not that different. I think to first order the ratio is similar, but I totally accept there is probably a minor influence due to this. I suspect it would be unfavourable to the ngTLDs (a higher ratio for sale), but I do not have data to prove this.
- For reasons indicated above, we have not applied a correction for acquisition or renewal cost differential, if there is one.
Some Conclusions
So what does this all mean? While considering the assumptions made and how they might influence the data, I think we can conclude with a fair degree of confidence right now the following.
- There are on average 3 new extension domain sales per day on NameBio.
- Less than 1.5% of all domain name sales are in the ngTLDs (at least for publicly reported >$100 sales).
- The percentage of all domain names registered that are in new extensions is currently about 6.0 %.
- If one takes into account both average selling price and number of sales, and also correct the data to exclude registry sales, on average the return from investing in ngTLDs is currently about 40% of the value from investing in all domain name extensions. The number of domains sold is less, but the average price is more, although half of the sales revenue goes to the registries.
I suspect it is true that, on average, domain name investors these days are not making money (clearly some are making a lot of money, but many more are losing money when all costs are considered). This analysis suggests that on average new domain investors are losing more money.
What Does It Mean?
I would not place too much credence on the high average selling price found for ngTLDs. It was certainly driven by a few very large sales, most but not all registry sales, in a relatively small data set. I expect a different number if I repeated this in a year time, probably a lower average sales price. Nevertheless, I have taken out the registry sale impact in the conclusions of this study.
If other extensions offer better returns on investment, should anyone ever buy ngTLDs? I think so, and in this post I gave 12 reasons (with real use examples) why new extensions sometimes make sense. I also posted previously on why new domain extension investing may be the right choice for some. In my opinion it particularly makes sense if one of the niches that you have expertise in is a good match for a new domain extension.
Another possible argument for new domain extension investing is that it is "the future". I don't think at the current time any of us can definitively say whether this is true or false. Most of the extensions were introduced two to three years ago (general availability) and it is discouraging that they have caught on in such a limited way. On the other hand, sales data are on track to make 2018 the best year yet (by a small factor) and there is no doubt that the majority of the big sales have taken place during the past 16 months.
It is true that .com has remained dominant for a long time, and many brokers, marketplaces and domain investors continue to push it as almost the only extension to consider. Things do change however. For example the computing experts in the 1990's and even early 2000's argued that with minimal market share Apple had no future, and that open PC systems would always dominate. The day I write this Apple has just become the first company to reach the one one trillion dollar valuation mark.
I would not feel comfortable betting in favour of, or against, the long term adoption of new domain extensions. Personally I feel a few will eventually find wide acceptance and adoption (I think .top and .xyz are best placed to achieve this status), a number will find niches particularly for sole proprietorships and some will in essence die in obscurity even if they are not formally closed.
How many people, before it started to take off, would have predicted that .io country code extension for the Indian Ocean region would become a popular option for technology and other startups and sell for good prices? It is not easy to predict domain name trends.
I certainly do not feel everyone, or even a majority, should invest in new extensions. If you have developed expertise in com/net/org, feel most comfortable with those, it makes sense to stay in those. Your domain investment is probably also less risky in the major domain extensions, depending on your names of course. Those who do invest in new extensions must be prepared for a relatively long time window, and the need to do more active promotion of their names. They also should make due diligence regarding both analysis of what is selling and at what prices, as well as where it sells and how best to limit acquisition and holding costs.
It would be interesting to extend this kind of analysis to look at specific extensions. For example, when scaled, is it better to invest in .org or .com or .io? I have already done some analysis along these lines, and will report results in the not too distant future.
PS What Do You Do?
I feel it is important to try to be fair, open and balanced in any analysis. It is a fair question to ask what do I invest in personally, so you can assess any possible underlying biases I may bring to the analysis. You can see almost 98% of my portfolio here. At the current time my portfolio has 13 .ca, 6 .co, 5 .com, 4 .pw, a few other country codes and one .net, and the rest (about 90%) is in new extensions. For my sales (all at modest values) up to this point, I have sold a single .co and 30 new extension domain names. I closely follow all areas of the domain name market, including extensions that I do not currently own but see value in (such as .org, .io).Original post Aug. 2, 2018.
Slight grammatical correction (no content change) Aug. 9, 2018.
Links:
- NamePros link that triggered this study
- NameBio database
- NameStat (statistics broken down by extension)
- nTLDs site (statistical data on new extensions)
- Verisign Domain Market report
- Our site NamesThat.win
- Permanent link to this blog post
Fine Print
This post is offered for informational and educational purposes only, and should not be considered domain name investment advice. While an attempt has been made to be accurate, there is no implied or explicit warranty, and you are responsible for verifying any information of importance to you.
In a few cases there may be affiliate links will on this blog. This means I receive a small amount if users visit or make purchases via the link. You do not pay any additional charge due to using an affiliate link, and in some cases below the normal price. I receive no identifying information about who clicks, or does not click, any link. I never accept compensation to provide favourable review of any particular service or product.
I try to be fair, balanced and objective in my analysis. If you feel this post does not meet that standard, please express your concerns to me. As disclosure, I do have a domain portfolio that is predominantly ngTLD domain names, although I do also own a number of .com, .ca, .co and a few other country code extension domains..
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