How do APP and COM sales compare?

There is debate in the domain investing community on the resale prospects for the .app domain extension. Those optimistic about the extension point out that it is backed by Google, the security requirement is an innovation in our industry, early registration numbers were strong without deep discounts, the app development market is large and growing, and already there are significantly large aftermarket sales. Sceptics point out that the number of sales is totally dwarfed by legacy extensions such as .com, and that previous extensions sponsored by Google have had limited success.  Here I take a look at early sales numbers, scaling them according to the time period and number of domains registered in the extension. My comparison os with the gold standard .com extension.

Raw Sales Numbers and Volume

I used the NameBio database (data effective Sept. 27, 2018)  to look up sales numbers and volume in both .app and .com for 2018 YTD.  There is no doubt that .com dominates, with 51,861 sales (in NameBio database) totalling about $65,760,000 in sales volume.  The comparable values for the .app extension are just 10 sales totalling $43,720. These numbers are shown in the yellow lines at the top of the table.

Average Prices

It is interesting that the average price is higher in .app so far, with $4372 for .app compared to $1268 for .com.  While the average value for .app is influenced by two high value sales, even if you take median values, .app would be significantly higher than .com ($1103 vs about $300).

Scale for Full Year

However, the .app extension has not been in general availability all year, so no resales were even possible for the early months. I scaled each to a full year (assuming the current sales rate).  One could argue about whether the first day of general availability (May 8, 2018) or the period with aftermarket sales  (started June 1, 2018).  I used the latter for the scaling. If you scale the number and sales volume to project for a full year the data shown in the green section in the middle of the table is obtained.  Since .app has only been selling for about 4 months, over a year we expect about 30 sales  and a yearly sales volume of order of $130,000.

Scale with Registrations

As I have pointed out previously, when we compare sales volume and numbers between extensions data should be scaled according to the number of domains that are for sale in that extension. For example, if you had  only 1000 domains for sale in an extension, and 5 of them sold in a year, that is far more significant than if 5 sold out of 1,000,000 domains for sale. Therefore I scaled the number and volume of sales according to registration data.  For .com the registration numbers are fairly static, and I used 134 million registrations.  For .app the numbers continue to increase, so the question arises how to obtain an effective number for the period.  I used 319,860, reflective of recent dates in the extension.

The scaled data are shown in the blue portion of the bottom of the table.  Once we scale in this way, while .com still is favoured, the two are within the same order of magnitude.  The number of sales favours .com by about a factor of 5, while the sales dollar volume favours .com by less than a factor of 2.  The latter is well within uncertainty of the small number statistics so far for .app.

Discussion

The final step for a domain investor requires consideration of at least three other factors. The data should really be scaled not according  to the number of registrations in an extension, but rather the number of domains actively for sale in that extension.  The percentage of domains that are parked is unusually high in .app (about 81%) and the number of domains in active use in an Alexa 1M website is low, 1 per about 2000 registrations. These would both argue that the fraction of domains that are for sale is higher in .app.

A second factor that must be taken into account is acquisition and holding cost for each extension. The situation is made complex in .app as some domains were sold for higher prices in the early availability period for the extension. In .com, the acquisition cost is also variable, unless it was an  original hand registration, which is probably not true in most 2018 sales.  In terms of holding cost, at time of writing the best renewal rate for .com was $8.75  and for .app was $13.88.  Probably within the accuracy of the analysis, costs are not distinctly different in these two extensions, although may favour .com.

The third factor to take into account are trends. The first months of sales in an extension may be non-representative. Sometimes early optimism for an extension fades, and most major sales happen in the first year.  In many other extensions,  there are no significant sales, at least outside registry premium sales, for years, and then interest grows, sometimes with spectacular sales, as more become familiar with the extension.  I think it is too early to say what the situation will be for .app.

I think there  are reasons for optimism in the .app extension.  In the first few months  are are already a significant number of sales in the extension, including several above $10,000.  Domains are selling at respected venues like Sedo.  Registration numbers are significant without low promotional pricing.   Some major domain  investors that have shunned most new extensions have invested.  All that being said, I am concerned with the slow adoption of the extension for significant working websites.  Those using this analysis should  keep in mind that 10 sales is a tiny statistical sample.

I think the prospects for the domain extension will be clearer in a year  or so when we have a more significant sales record, and after we see how many end users are actively using the extension.

Original post Sept 29, 2018.


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. You also accept full responsibility for any domain investing decisions you may make.

I have no association with the folks who maintain NameBio or NameStat databases. I acknowledge the makers of these for the valuable products that they make freely available to the domain name community. 

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.  I do not hold  any .app extension domains currently, so have no potential conflict of interest.  I do hold a handful of .com extensions, but most of my portfolio is not in that extension either.

In a very few cases there may be affiliate links 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 your cost will be 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.

The text of this posting is ©R Hawkes, all rights reserved. However, you may, without permission, use reasonable length portions of the post as long as a link to this post is also provided. If you wish to use the complete contents of a post, please request permission. I am normally open to reprinting, but will consider each request individually. 

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.

How Many Domain Names Does the World Really Need?

Note: The official version of this white paper is available here.  While the one shown below is substantially similar, it is the website version that will be updated to reflect any additions or corrections, and we suggest that you use it for reference purposes.

It is easy to find how many domain names are currently registered. An interesting question to ask is how that compares to the number of domain names that are needed globally. While it is not possible to calculate a precise number, we can make an educated estimate. We provide that analysis in this paper.  This gives us an indication of the growth prospects for the domain name industry, including what component of the market are likely to see the most growth. This analysis may also help inform whether additional new global top level domains (gTLDs) are needed.

How Many Businesses Globally

We start with the premise that the majority of domain names will be utilized by businesses. The number of companies registered on the major stock exchanges is only about 50,000 (you can see the statistics from the largest stock exchanges here).  But most businesses are small and private, not registered on any stock exchange, so we must dig a little deeper for the relevant number of businesses.

For many countries information on how many businesses are registered (at different dates) is given in this resource from the World Bank. For example, in 2007 (the last date with data provided) there were 2.5 million businesses registered in Canada.  In 2005, the last year with data for the United States in the directory, there were 5.2 million businesses registered there, while the United Kingdom had 2.5 million businesses registered in 2007. The population of Canada in 2007 was about 33 million, the USA in 2005 about 300 million, and the UK in 2007 about 61 million. These data suggest a ratio of one registered business per 12 to 60 people.

It is likely the ratio will be less in developing countries, but the goal of this analysis is to predict the number of domain names needed in the medium term future, when development levels become more equal.

If we take the larger value, and assume it could be applied to the entire world population, this would suggest that, with a global population of about 7 billion people, the number of businesses globally might be about 120 million.

Alternative Method

We could estimate the number of businesses in the world another way.  It might be argued that the number of businesses should scale as the Gross Domestic Product (GDP), rather than according to population.  Data on the GDP of different economies is given here.  Applying this method, the Canadian economy represents about 2.3% of the world total, so if we scale the 2.5 million registered Canadian businesses to obtain an estimate of the world total number of businesses, we get about 106 million businesses globally.  If we use the USA figures of 5.2 million registered businesses in an economy that (by GDP) represents 24.7% of the global total, we scale to an estimate of about 21 million businesses globally.

These figures agree to an order of magnitude with those obtained in the previous section, although suggest a slightly lower value.  Therefore, considering both techniques, let's revise our estimate of the number of businesses worldwide to about 100 million. The advantage of the second method is that it should more properly handle the mix of developed and developing economies.

How Many Domain Names Per Business

While many businesses will use a single domain name, larger companies use additional domain names, both for different facets of the business (and/or specific product lines), and in multiple countries in which the business operates.  I could not find good statistics on the average number of domain names per business, although a response on Quora estimates that a typical large technology company owns thousands of domain names, many of them unused. A lot has been written lately about domain names owned by the Trump organization, and it appears that the number is at least 3000. Many large companies now operate in a hundred different economies, or more, and need at least that many domains to protect their brand with country specific domain name.

On the other hand, the majority of businesses are essentially a single person, or a few people, engaged in one activity, such as a local contractor or an independent professional.  Most of these need only a single domain name, or possibly two with the second used in marketing and directing to the primary company domain name.

It is probably safe to argue that the average number of domain names per business is higher than 1 and less than several thousand. I think the range is not really as wide as that though, and surely it is at least several, but on average, not more than several dozen.  Let's somewhat arbitrarily assume that the average number of domain names 'needed' per business is 10.

Number of Business Related Domain Names

If we combine data from the previous two sections it suggests that the number of business domain names needed globally would be about 10 times 100 million, or about 1 billion domain names. It should be stressed that we have implicitly assumed that businesses in all regions have reached a technical, marketing and communication stage similar to that of major developed market companies.

But What About Non-Business Domain Name Needs?

Of course many organizations that are not businesses register and need domain names - professional organizations, educational institutions, etc.  It is perhaps even more challenging to estimate this number.  One way to get an estimate is to consider the number of .org domain names relative to the number of .com.  At the current date there are about 128 million .com domain names registered, and just over 10 million .org domain names. This might suggest that the needs of other organizations is of the order of 1/10 the number of domain names needed by businesses, although other organizations disproportionately use country code and alternative gTLDs, so it is likely the 10% estimate is too small, perhaps significantly so. We will assume that organizations that are not businesses might use 20% of the number of domain names utilized by businesses. Therefore we estimate the total number of domain names needed, both for businesses and other organizations, is of the order of 1.2 billion domain names.

What About Domain Phrase Needs?

Recently there has been interest in using domain phrases in marketing campaigns and redirections. For example Names.of.London and NamesThat.win both offer these services (and undoubtedly many others as well).  It appears likely that creative uses of domain name phrases will increase significantly in the near future. Will this significantly increase the demand for domain names? The answer is probably not, since a single domain name is used with multiple first words, so the total number of new domain names is limited (essentially numerous sub-domains are used to support multiple phrases concurrently). While we see extensive growth in domain name phrase/expression use in the coming years, it will probably contribute only slightly to the total domain name market.  Nevertheless, this is an example of the use of domain names in ways that were not foreseen even a few years ago.

What About Personal Domain Names?

In the near future will most people claim a personal domain name?  If this were to happen, the potential market for domain names would be much larger, of the order of the global population of 7 billion.  Clearly at the current time many people have no ability, or interest, in acquiring and using a personal domain name.  Some promote the Montenegro country domain name (.me) as a personal website extension, and that TLD has grown in popularity driven largely by the personal domain market. There is a significant market for personal domain names, and it will probably continue to grow strongly in our opinion.  However, we do not foresee a time when essentially everyone will have a personal domain name. We estimate, somewhat arbitrarily, that perhaps 1 person in 25 globally will want and have the resources to obtain and utilize effectively a personal domain name. This would suggest a need for roughly 280 million domain names for this purpose, or the total number of domain names needed globally for all purposes would be almost 1.5 billion by our analysis so far.

Other Uses for Domain Names

Will applications for domain names emerge that we don't even foresee now? For example, will one or more large retailers assign a domain name to each individual product, or will the ISBN system assign a domain name to each book product? Will advances in biotechnology, or other areas of science, lead to big data situations which are most efficiently handled by assigning a large number of new domain names? Will the structure of the Internet of Things emerge to assign individual domain names to each connected product? It really is not possible to meaningfully estimate the domain name market related to new technologies, but it probably makes sense to include some factor even though it is highly uncertain. We arbitrarily suggest that there might be a need for 300 million new domain names for use in ways not currently conceived and related to modern science, technology and innovation. Therefore we increase the total to 1.8 billion domain names.

So How Many Domain Names are Currently Registered?

A recent report shows that the total number of domain names registered is of the order of 330 million domain names currently registered, with .com and .cn being the most widely held TLDs. Of that total, there are about  27 million new gTLD based domain names,

A good question is how many of these domain names are in active use, rather than simply being held for resale, and what fraction of these are potentially useful in meeting the market need for new domain names. One way to estimate this is to look at what fraction of domain names are parked.  Among the new gTLDs the parked fraction is typically a bit over 60%.  The parked fraction is less for country code and the traditional gTLDs. Of the 330 million registered domain names perhaps 100 million are not actively used and it could be argued that many of these will not be attractive for future use and therefore do not contribute to the future domain name need. That is, perhaps 200 million useful domain names are currently registered.

How Many New Domain Names Are Needed?

Therefore this analysis suggests that there is a need for almost 1.6 billion additional domain names. This will be driven primarily by business uses (about 60%), although non-business organizations, personal domain names, and future domain needs related to technological developments will all play significant roles. The market will decide how this need is met, through country code, traditional gTLDs, existing new gTLDs, closed TLDs, and not yet released newer gTLDs. We summarize in the next section the key results of this analysis.

Executive Summary

• We estimate the number of businesses globally currently at about 100 million.
• If on average each business utilizes 10 domain names, this suggests a business domain need for about 1 billion domain names.  
• Domain name needs of organizations that are not businesses might require about 200 million domain names, bringing the total to 1.2 billion.
• The growing tendency for personal domain names may add another few hundred million to the potential market.
• While the domain phrase/expression market will grow significantly, the total impact on number of needed domain names is limited.
• Future uses, not specifically predicted, related to advanced science, technology and commerce may add another few hundred million domain names.
• This analysis suggests that the total domain name market is about 1.8 billion domain names.
• There are currently about 330 million domain names registered, but probably only about 2/3 of those are potentially useful.
• The analysis suggests the need for about 1.6 billion new domain name registrations.
• This analysis would suggest that the number of domain names to be registered can increase from current levels by roughly a factor of 5.

Final Notes

This analysis is based on the concept of Fermi Problems, first popularized by physicist Enrico Fermi. He famously used the method to accurately estimate the number of piano tuners in the city of Chicago, and to estimate the energy of a nuclear blast from the displacement of a paper at considerable distance from the blast. The Drake equation, that estimates the number of intelligent extraterrestrial civilizations in our galaxy, is another well known application based on similar principles.

The technique cannot provide a firm number, but does provide a more reliable estimate than simply proposing a figure, and makes the assumptions of the components which go into an estimation. It would be possible to use Monte Carlo methodology, based on uncertainty estimates for each component of the analysis, to express likely uncertainty ranges in the final result. Given the difficulty in assigning the component uncertainties, I decided that at the current time the precision of the analysis does not warrant an attempt to use Monte Carlo techniques to estimate overall uncertainties.

One of the biggest uncertainties in the analysis is the number of domain names per business.  Should that number be at the lower end of our suggested range (about 2), this analysis would suggest that the total number of domain names needed is much lower, with business needs almost met by current domain name registrations.

This analysis is offered to the community without any implied or explicit warranty with respect to accuracy or applicability. We welcome comments and corrections to the analysis presented here.

The author, Dr. Robert Hawkes, MSc, PhD, P.Phys., is a physicist and author who has employed data intensive analysis techniques in physical sciences. He operates several websites, including NamesThat.win, a site specializing in science, space and technology related domain name sales and use of domain expressions for marketing.

This paper is ©R. Hawkes, all rights reserved.  If you would like to reprint the article please contact the author for permission and conditions. You may quote small sections in news or review articles without specific permission.  You may also freely link to this site without prior permission.

What is a domain name 'win'?

Earlier this year we launched our website NamesThat.Win. We wanted to take the opportunity to discuss what the word 'win' means to us in the context of a domain name and website.

We suggest the following checklist when evaluating your website and its domain name.

• The website should reflect positively on your organization. While content is clearly critical, as well as attention to detail, the impression starts with the name you adopt. Yes, the name can be catchy and even cute, but always in a tasteful way.
• Honesty is critical. The name and website should reflect what you are about in a clear way. Never use a name to try to pretend your organization and goals are something that they are not. Many will disagree, but I say don't use an .org top level domain (TLD) if you are not an organization, and don't use .com if you are not a business. I wish there were controls so that someone could not use .science if they have nothing to do with science!
• The website should be informative.  After I visit your website I should feel that my time was well spent in terms of efficient access to valid information. Even if your primary goal is to sell a product or service, your website should provide information to help a potential purchaser make an informed decision, as well as support documentation. 
• Is the website sustainable? Is it designed so that you can reasonably do what is required to keep it current? Is the total cost sustainable in terms of the value that the website brings to your organization? If you go for a premium domain or an expensive .com, can that cost be justified?  Too many people rush into owning too much home for their means, and I find some companies do the same with respect to a domain name and website. Of course many do the opposite, and a year or two later purchase a higher quality domain name and need to rebrand to the new name.
• The name should be location appropriate.  If you plan to only operate in a single country, with essentially no customers beyond the borders, it does make sense to use a country specific domain name. Research shows that these are more respected and trusted. However, if your vision extends beyond your home country, seriously consider starting with a global top level domain (gTLD), or possibly multiple domain extensions with a common first name. It will be interesting to see how the .gdn (which stands for global domain name) takes off as a general extension for those from all regions.
• Almost all websites should feel current. While achieving this will depend partly on the  design, having current content is critical. Also, start with a domain name that suggests a modern site. Some domain names just feel ordinary and old. I realize adoption has been slow, but I think that the new global top level domain extensions (ngTLD) offer real opportunities. Make social media interact smoothly with your website. For example, it is easy to have your Twitter feed display on your website.
• How memorable is you name, and in what other ways will you help people find you? A name that people can easily remember, and that is also descriptive, will go a long way in people remembering how to find you.  I think the ideal domain name is common, but not too common to lend an air of distinctiveness. If you do decide to go with a made up brandable name, you will need to figure in the costs of promoting that name.
• Think about the goals for your website. Is it primarily to sell, interact with clients, provide support, contribute to public understanding, earn advertising revenue, or make your organization better known. Make sure your website structure, and the domain name, are both congruent with these goals. If you have two or more rather different goals, you might want to think about multiple domain names to keep the separation clear.

The last point is perhaps the most important. Before you consider available domain names and how much you are willing to pay, or how you will design and host your website, start with the goals you have for your online presence.  Make a written list, and get the opinion of others, revising as appropriate. 

So why did we select  our domain name NamesThat.win? We believe in the long term value of the ngTLDs, so wanted to model one ourselves. Also, we see value in using a domain name expression as our name, and wanted to model that.  As a small operation, but with potential customers from around the world, we wanted a global TLD. Considering sustainability, the domain name was reasonable to purchase and to renew (we have it registered for 10 years so our domain costs are completely known for a long time). We feel that your consideration of names ideally starts before you have registered a company name or domain name, so we wanted the word 'name' not 'domain' in our website. 

We realize that at first glance .win is an unusual choice.  The intention of those who set up the .win registry was that it would mainly support activities such as online gaming. However, as explained above, win is used in everyday language in a much more general sense.  A win is something that meets or exceeds your stated goals, and it is in that sense that we selected it for our website. 

Ultimately our goal is to help you clarify your goals, to set criteria for evaluating success, and to help you 'win' by achieving success in those goals. We hope that you will continue to visit this blog, access our website regularly, and follow us on Twitter @AGreatDomain.

But enough about us.  As the first step to your online 'win', elaborate on your online goals.  Only with goals clearly in mind will you be able to plan a successful route forward, and evaluate how successful you have been with your online presence.