The Long Term View

Over the past week I spent some time evaluating my domain portfolio, and deciding which names I wanted to invest in for a longer time horizon. My main reason for doing that is I expected a significant and irreversible price increase in a few of the extensions in my portfolio based on this information from Kevin Murphy. I had alerted others through NamePros to the anticipated price increase in case they wanted to register new names or extend registrations.  My main registrar (Namecheap) had for some time offered great 5 year renewal rates on a number of extensions, although as of Aug 20, 2018 they are gone due to changes in the management of the former Famous Four registries.

Why Register for Multiple Years

I think it is accurate to say that many domain investors generally only register domains one year at a time.  Naturally, being optimistic, most hope to sell their names quickly, and registering a domain name for multiple years could be seen as either negative thinking (It won't sell in year one) or wasteful (I sold it so those extra years were of no value for me).  I don't agree.  Let us consider some of the reasons you should consider multiple-year renewals on domain names in your portfolio.

1. You lock in future costs at known rates.  
2. You take advantage of promotions and savings. 
3. With the luxury of future years registrations prepaid, you will be more confident in asking good prices.
4. The additional years will make your domain names more valuable to potential end users, and give them more confidence about long term costs.
5. Deciding which names warrant renewal for multiple years will force you to critically evaluate your portfolio and emphasize quality over quantity. 
6. The long term approach saves you time that can be put into other domain portfolio priorities.

While reasons (1) and (2) were the dominant ones for my recent renewals (and a couple of new multi-year registrations), really all of these factors played a role. My pricing is always value oriented,  but I now feel more confident asking reasonable prices for quality domains (3). I think uncertainty in future renewal prices has made some end users leery of new domain extensions, and purchasing a domain name with multiple future years of registration prepaid does add value for the new owner (4). It is a good feeling that I have a longer term window to set up attractive sales pages for the domains, and to facilitate getting offers.

It was also a good exercise for me over the past week to literally look at almost every domain name I hold and rank them in categories of definitely hold for multiple years, possibly hold for an extended period, or definitely keep only a single year if no interest. For a few domain names I am currently undecided, and that prioritizes where future research is needed. As I limit my entire domain liability, I had specified a total amount I had available to spend, and the exercise of forced me to prioritize which domain names to focus on.

Concluding Remarks

I offer the following points in conclusion.

• Following authoritative news from the domain field will be financially beneficial at times.  Had I not read Kevin's posts, I would not have known about the impending price increases, as my registrar did not inform me. This is one reason to be on social media and  to read NamePros regularly.
• Your domain portfolio business plan should have at least a several year time horizon both for both costs and projected revenue. Renewal costs are a major part of the overall plan.
• It is better to focus on fewer names of higher quality, and over extended periods, rather than a lot of domains you only plan to hold one year. 
• Note I am not saying you should always register for multiple years. It is often a good move to test drive a domain name for a year, see if you get any inquiries, and then review whether you want to keep it. 
• I wish that registrars and registries more frequently offered multi-year discounts. I think the stability would be good both for the industry and for domain name investors.  I was encouraged to see this week that Namecheap now has a 3 years of the .online extension promotion (see  if it is still on should it be of interest to you). 
• Always shop around for the best renewal prices using a tool like TLD-list.  Remember that it may not show all multiple year discounts though, so also do your research and  be alert to time limited promotions.  If your main registrars have blogs read them, and use social media and online domain communities to stay up to date.
• Your business plan and personal branding statement should make it clear which domain names are congruent with your operation and you should make  sure that  your long term acquisitions in particular are a good fit.

Many of the points mentioned here are congruent with the overall advice to domain investors I offered in an earlier post.  One good place to learn about promotions is NamePros - if not already a member, you should be!

By having some of your domains registered for five years in the future, it will help you keep going during down times, knowing that you are in this for the long run.  I guess that is me!

PS

In case you are wondering what I decided to renew for 5 additional years, most were science extension single words and acronyms that I think will be more important in a few years compared to now.  I also have  registered for 5 to 10 years a few that I have development plans, including my main domain website NamesThat.win. I forget who told  me this, but it is good advice to focus on those domain names that you would develop if you had  time.  This tells  you two things: it is a topic with current interest (so development is worthwhile) and that you have expertise in that niche (we sell best what we know best).

Links:

• Famous Four Restructuring (updated column from Kevin Murphy)
• TLD-list (find the best registration, transfer and renewal prices)
• Namecheap
• Advice to domain name investors
• Namecheap Online Promotion (limited time)
• NamePros
• Our site NamesThat.win - thanks for visiting
• Permanent link to this blog post

Original post Aug 21, 2018.

Disclosure: I have no association with any of the companies or individuals mentioned in this post, except that I have a number (somewhat over 50% currently) of my portfolio of domain names registered at Namecheap, and I am a member of their affiliate program.  I also have domain names registered at Alpnames, NameSilo, CanReg, GoDaddy and Web Hosting Canada.

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.