Hopeful Week for New Extensions

Proponents of new domain extensions have waited a long time for much good news.  Yes, occasionally there were big sales announcements such as The.club and Home.loans sales, and some of the registries have reported a string of good value premium sales. However, the domain after market in new extensions has been slow throughout and almost non-existent for some extensions. While one should never place too much emphasis on any single day or even one week or month, I wonder if August  2018 might be viewed as when things changed for the new extensions.

The August 21 Daily Report

The August 21 NameBio daily report includes 16 new extension domain sales, with sales in 12 different extensions.  There were two sales in each of the .bid, .club, .date and .space extensions, and a single sale each in 8 other extensions.  I can't remember a day during the past year when so many different new extensions sold in a single day. To put it in perspective, on this day there were more new extension sales than .net, .info, .co and .io combined! Yes, critics will point out that most of these sales were at modest prices (average price was $254) and that it is just one day. For me, however, the more significant point is that this does not seem to be one isolated day, but rather an upturn in new extension sales during the past few weeks as I explain below.

The Last Week

NameBio allows you to easily search for data from a certain time period and extension class, so I searched for sales in new domain extensions (ngTLDs) for the past week (ending Aug 21, 2018).  It shows  that there were 44 sales in 23 different extensions, with an average price of $1809.  That is more different new extensions than sell in most months.

Here is the breakdown by extension for the week long period ending Aug 21, 2018.

• app 1
• bid 2
• club 3
• cricket 1
• date 2
• fun 2
• life 1
• loan 1
• men 2
• online 3
• party 1
• place 2
• review 2
• science 2
• space 3
• stream 1
• top 8
• trade 2
• webcam 1
• win 1
• world 1
• xyz 2

While some of these, such as .club, .online and .xyz have sales regularly, for a number of the extensions the sales reported this week are among the first.  For example, these are the first two .fun sales ever (at least in the NameBio database), while for .space these 3 sales represent almost 40% of all sales in the database (there are of course many others not in that database, either because of venue or dollar value). The only two NameBio recorded sales ever of .webcam have been in August, and this is the first recorded .stream sale in the database. This week saw the second and third highest  sales of all time in the .place extension. The sales in .review, .trade, .loan and .men, while not the first in those extensions, are among only a handful of prior sales.

It would appear that the new managers of the former Famous Four extensions are already having a positive impact on acceptance of the extensions. Many of their extensions, including .bid, .date, .loan, .men, .party, .review, .science, .stream, trade and .win, saw sales in this week. Spamhaus measured abuse is already way down in some (not all, for example .men and .date still have high levels of abuse) of the former Famous Four extensions - e.g. .science went from being among the worst just over a year ago to being broadly comparable in abuse to major extensions now (its score of 1.45 is a bit worse than .net and .com but much better than .us and .biz, for example).

It is important to realize that the average price was influenced by some high end registry .top sales, and any week, no matter how encouraging, could just be a statistical outlier. Nevertheless the news is encouraging (see also the section Other Promising Signs below).

Why Does The Value End Of Market Matter?

While high end sales (along with actual use) play a significant role in giving respect to new domain name extensions,  I think healthy new extensions also depend on a substantial number of aftermarket sales at the value end (which I interpret in the low to mid hundreds of dollars per sale).  Even in legacy extensions, many of the sales are at modest amounts, typical median prices of a few hundred dollars. Critics argue that end user sales are typically higher than this, claiming that NameBio data is biased by sales between domainers at venues such as GoDaddy Auctions. They argue that end user sales at venues not reporting to NameBio, or private sales, are usually at higher prices. I see logic in this argument, although without evidence it is difficult to be sure. No matter whether biased with respect to average price data, NameBio data clearly indicates that many sales do take place in the few hundred dollar range.

I don't think that it is healthy to have the only sales in an extension at the high premium end. The sales noted here, of many different extensions, sales that are for the most part not registry premium names, and across multiple venues, gives hope that the sputtering new extension aftermarket may finally be finding traction. The natural pattern is that if extensions become accepted through a multitude of sales in the $100 to $400 range that later values will go up for the better names.

A big part of the potential domain market is currently not purchasing, in any extensions, domain names.  If new extensions play an important role in serving these end users it would be positive for the entire domain market.  I am encouraged that there are other recent promising signs for the new extensions as outlined below.

Other Promising Signs

There were other recent promising signals for new extension proponents. I list a few below.

1. There has been at least one ngTLD sale each day for the last 30 days (starting July 24), with an average of 4.1 NameBio reported new extension sales per day.
2. The .club extension reported generally promising financial numbers.  This interview with  Colin Campbell of CLUB and DomainNameWire has insights on the overall picture as well as insights on the strength of premium domain sales in the Asian market and the success of selling premium domains with extended payment plans on Namecheap in particular.
3. A major investor and personality in the domain name field announced a major sale of a new extension when Andrew Rosener announced on Twitter the $15,000 sale of token.xyz on Sedo.  Andrew is a well known and  highly respected individual who usually deals  in legacy extensions, so I think this sale will influence others.
4. The .fun extension announced strength in real world use, which coupled with the first after market sales seen here is encouraging news of the health of the extension which recently reached 100,000 registrations as well.
5. The .app extension seems off to a reasonable start in terms of aftermarket sales. with 6 sales in the first few months since general availability and an average sales price of $4426.
6. With 24 major sales of new extensions (on NameBio) of $25,000 or more so far in 2018, the high end seems very strong currently.
7. Both the introductions of .app and .icu seem to have been successful when compared with previous new extension introductions.
8. As I pointed out, while the new extensions still represent a tiny amount  of major website use, they are growing in use faster than legacy extensions. 
9. While the difference will not be large, 2018 seems on track to have the highest total dollar value in new extension sales ever. 

Conclusions

I realize that this  could be a statistical blip, and we may return next month to a small number of new extension sales per week dominated by a few extensions. I am hopeful, however,  that this is an early sign of a brighter future.  I see inherent worth in the new domain extensions when a high value word is combined with an extension that meaningfully matches that word.  Some of the extensions that saw movement this week have good potential in my opinion. For example, .fun and .win are both ideal keywords to use as part of a domain name phrase. Extensions like .club, .online, .space and .xyz have already achieved reasonable actual use, and it is good to see them also being traded in the after market. App has a clearly defined role, emphasizes the importance of a secure environment, and will no doubt continue to grow in sales. Most of the new extensions are intended not as broad extensions, but for uses in specific niches.  As such it is important that we see sales at a range of prices in a variety of different extensions.  How bright is the future for new domain extensions? Only time will tell, but this has indeed been a good week!

Links:

• NameBio Daily Report Aug 21, 2018.
• NameBio database
• Previous monthly ngTLD sales report (July 2018)
• New management at former Famous Four extensions (Domain Incite)
• Colin Campbell of CLUB (Domain Name Wire)
• My look at the global domain market and needs
• DNJournal look at the Radix .fun extension
• Spamhaus TLD scores
• Website use and trends for different extensions
• Domain name phrases
• Our site NamesThat.win - thanks for visiting
• Permanent link to this blog post

Original post Aug 22, 2018.

Disclosure:  I am  not associated with NameBio, but would like to acknowledge their incredible database and their generosity to make it available to the domain community. My portfolio of domain names is mainly ngTLDs, as well as a number of .co, .com and .ca (and a few other country codes).

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 that use data from this post.

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.  

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. 

The images used are either those associated with a product or service, my own images, or Pixabay images believed to be available for use without attribution. If you see any image that you believe is problematic, please let us know and we will immediately correct the situation.

Some Numbers and Reflections

Let us consider a few numbers regarding the supply and demand for domain names.

1. The number of aftermarket domain name sales publicly recorded in the NameBio database varies a bit from day to day, but averaged over the past year is about 220 domain name sales per day on NameBio.
   
2. Clearly there are sales that never get reported on NameBio, either because of privacy agreements or because the sale happened on a venue that do not report, or they are below the $100 price cutoff for sales reported by NameBio. Some estimate that 20% of all sales over $100 are NameBio reported, suggesting perhaps 1100 domain name sales  (over $100) per day in total over all marketplaces.
3. The total number of domain names for sale on the Afternic network is somewhat over 13 million, on Sedo about 19 million, and on Undeveloped just over 2.7 million.  Now clearly there are other marketplaces and sales privately, but not all of the above are unique listings, so probably the total number of domain names actively for sale is about 30 million. I accept that really more than that are in some senses for sale, but I think this number  reflects those actively listed somewhere.
4. The number of new domain names hand registered average about 8800 per day (across all extensions).
5. The global number of new businesses that start each day averages roughly 50,000.  I obtained this figure from the about 10,000 per day reported as starting in China, and then scaled by the fraction of the world's population that China represents.  

I accept that all of these numbers are uncertain to some degree. See my notes below for links and reasoning.

What Seems Obvious

The demand for domain names should be significantly higher than it is.  Even not counting non-business uses for domain names, the number of new businesses is about 5 times higher than the sum of new registrations plus domain market resales. 

These data suggest that some new businesses are either not online, using resources such as Wix or a Facebook company page that do not require a second level domain name, or using an existing domain name (as opposed to buying or registering one).  Another possibility would be if a significant number of businesses are using the 'free' domain names that are not included in these numbers.  The fact not many domains are being reported sold (at least in NameBio reported venues) shows us that the answer is not that new businesses are using domain names first registered some time ago and held by domain name investors. 

For every domain name resale there are at least eight times as many domain names that are being newly hand registered.  This implies to me that there is a disconnect between many business owners and the domain name industry, resulting in many companies choosing to register the best available name instead of buying a better name on the resale marketplaces.  Another valid interpretation is that speculation in domain names by domain name investors is responsible.  Undoubtedly both factors contribute. See the following section for additional commentary.  

We have not considered supply and demand for non-busines uses of domain names, but clearly that is important as well.  In a previous analysis I estimated that non-business  applications account for nearly 20% of the demand for domain names. 

Opinion

I believe that the numbers suggest a significant mismatch between the domain name industry as it currently stands and potential end users.  What are possible reasons why companies are choosing to hand register a domain name rather than buying a better one on the resale market, or run a business with no domain name at all?

1. They are not convinced of the value of a better domain name. I think more work needs to be done, using research evidence, educating that a premium domain name yields significant economic benefits. This information needs to find its way into schools of business. A stronger scholarly trend in the domain industry will help with coverage of domain names  become a more important part of university and college curricula.  
2. It is technically much easier to use a service like Wix rather than finding and  purchasing a domain  name, a hosting service, developing a  website, etc. The situation is easier when they can purchase the domain name via a company that will also provide web hosting, and I think the GoDaddy and Namecheap Marketplace have advantages for some purchasers. The fact that they are buying from the company that has registered the domain name also helps with trust issues (see next point). Wordpress and site builder software have made web development easier and less costly, which helps. 
3. They would like a better name, and are even willing to pay the price for one, but they have trust issues with the domain resale business.  The publicized cases of stolen  names have hurt our entire industry, as have, to be honest, impolite rhetoric from a tiny minority in the domain name industry.  Now with the GDPR induced Whois changes it is even harder to confirm genuine ownership of a domain name.  I am surprised how many domain sellers hide their real identity.  Would you buy a car from a salesman wearing a  mask who would only tell you his or her nickname and would not give you any idea of the car price to start with? Read this from Undeveloped regarding the importance of real identity in domain name extensions. 
4. They find the process of finding a domain name on the reseller markets confusing or complex. Misuse of the word 'premium', silly pricing of a few names, the plethora of domain name marketplaces, lack of attractive presentation of names, inefficient categorization making it hard to find the right name,  the  lack of provision of buy it now (BIN) pricing or at least minimum offer, etc. have all weakened our industry. To those familiar with domain names, it is trivial to see what is available, but it is a far different experience for someone who has never accessed the domain sites before. If we ever evolve to a single integrated global market,  like the blockchain powered DAN proposal from Undeveloped, I think the number of aftermarket sales will pick up. It will be good for end users and for domain name investors.
5. The plethora of new extensions has caused confusion for end users. Some of these extensions, and how they were 'promoted' with initial discounts, has cheapened and weakened the entire industry, as have some of the extension choices. Like seriously, why were singular and plural extensions approved, or an extension like .sucks? Who thought it was a good idea to approve so many extensions all at once? (These are intended as rhetorical questions for emphasis; I do know who, I just disagree with the decisions!)
6. The variable renewal rates on some premium new extension names have scared some away from domain names in general.  I think that the industry would be stronger if a universally enforced policy required all extensions (legacy, country code and new) to commit to suggested retail price renewal rates for a 5 year period.  I am not saying fixed at current levels, but price increases should be known - e.g.,  2% per year, or whatever.  I am  not arguing for uniformity, and registrars should be able to sell for less, but there should be a maximum renewal rate for years 2-5 for each extension that the buyer knows. Also, premium renewals should be outlawed. Period.  I am glad that the .icu extension, while having premium initial prices, has committed to standard renewal rates for all.
7. Volatility in value of domain names, in particular of .mobi, have caused some to fear a domain name they paid a lot for will go out of vogue and become worthless.  I think the persistence of .com owes much to this one factor. Businesses feel more confident that if they pay a large price today, it will have at least much of that in two years time.  Of course as the NameBio daily report shows, even many .com prices do drop by 90% or more on resale.
8. Independent Fair Market Value of domain names needs to be available through more reliable domain name worth estimates.  I am not as critical as many of GoDaddy GoValue and Estibot, and  do consult both regularly, but I feel that they could be much better.  I like the approach of using extension specific, or niche specific appraisals.  Ultimately we need the process of appraisal of value being separated from those who could profit from high valuations. Whether those appraisals are automated, by humans, or mixed mode,  is not really the point I am making.  The point is that as a potential purchaser I need to be able to go to an inexpensive and  trusted source and learn that the worth range for a domain name is between  $x and $y.  That does not mean that to me it is worth only that, or that much, but for those working in corporate environments we need that information.
9. We need to move the domain name business from a speculative model of holding assets until they appreciate, into a service oriented model where we help consumers make a good domain selection and through the steps of acquiring it.  I am not saying  that this is not being done currently by some, but it needs to become the standard within our business.

These are my thoughts.  A lot more could be written on each point, and some I do plan to develop into individual blog posts.  I am simultaneously both optimistic and pessimistic.  As it stands now, I am convinced that most domain name investors are not making significant money (but that is a future post!) and at the same time end users are frustrated and underserved.  However, I feel that the fundamental data supports the possibility that a much higher percentage of domain names held by investors could potentially be sold. 

Please let us know what you think through the comments section!

Notes:

(1)    I obtained the first number by taking the reported number of new businesses per day in China, and then scaling by the fraction of the world population represented by China.  While there is considerable uncertainty, this number is probably not less than one-half this figure.

(2)    The new registration data is from standard domain industry sources and is the number of new registrations, not the net increase that is much less when expired domain names are taken into account.

(3)     The domain name sales per day was obtained by multiplying the average daily number of NameBio reported sales (220) by a factor of 5 to represent sales not reported there.  Clearly this factor is uncertain, and some would suggest that it should be higher.  I don't think it can reasonably be argued that it would be high enough to make the arguments of this post invalid, however.

Links:

• NameBio
• Verisign domain report Q1 2018
• How Many Domain Names Does the World Need?
• Undeveloped Blog
• GoDaddy GoValue
• Estibot
• Wix
• NameStat (statistics on registrations, use, etc.)
• nTLDs site (statistical data on new extension registrations)
• Freenom ('free' domain name provider)
• Our site NamesThat.win - thanks for visiting
• Permanent link to this blog post

Original post Aug 6, 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.

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..

The text of this posting is ©R.L. 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. 

The images used are either those associated with a product or service, or Pixabay images believed to be available for use without attribution. If you see any image that you believe is problematic, please let us know and we will immediately correct the situation.