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† Did We Know That There Aren't Really Thousands Of Bands Who Might Be Interesting, We Will Get To Deleting All Bands That Aren't In Flames, Cannibal Corpse, Morbid Angel, Deicide †
The value in 4 letter .coms is their intrinsic rarity. But when you consider that if only 5% of 4 letter.coms are developed 22,848, that is more than all LLL.coms put together (17,576); its so much wiser investing in LLL.coms, as the ratio of those developed will raise above 60% 70% 80% so much quicker, than as a percentage of all LLLL.coms developed; and therefore increase their intrinsic value sooner. I’m not knocking LLLL.coms only that the smart money will invest in LLL.coms. My estimate is that 3-4% of all LLLL.coms are developed where as LLL.coms its nearer 65 - 70%.
Most LLLL.com research suggests between 15-25% of LLLL.coms are developed.
LLL.coms are a good investment but nothing that'll ever make someone rich investing in them today. While 50%+ annual ROI is great, it'll take one hell of a long time before that makes your average Namepros domainer with maybe 20k to invest rich, even if LLL.coms continue to increase at the same rate they have in the past which I believe they will not.
Personally, I'd rather lose 50k investing in the LLLL.com market than know I'll never reach my goals staying invested in LLL.coms. An expensive lotto ticket? Perhaps, however it's one risk I'm more than willing to take.
ssts - $800
stmp - $800 (really would look for an enduser on this one)
hhkg - $150
Reece, you are really committed to LLLL.coms, because by all the measures I use, LLLL.coms are far more risky than LLL.coms at the current values. I accept it’s not an exact science, so appreciate your position on this, but personally I would jump into the safer LLL.com camp.
It’s the development ratio that wins me over every time, even at your 15% - 25% - I doubt very much the 25%. LLL.coms still have plenty of growth left: yet when you see portfolios of 1000s of LLLL.coms being put up on eBay, it jars against the perceived rarity of these names. They just are not rare.
Saying that I don’t get it right every time but feel I've called this one right.
LLLL.coms are indeed a much riskier investment, but I see it as simple as this:
Which is more likely to occur:
1 - LLL.com goes from $10,000 to $200,000 for the worst one
2 - LLLL.com goes from $15 to $300 for the worst one
In both cases the ROI is exactly the same, yet I see a $300 LLLL.com as a much more likely event than every LLL.com fetching $200,000 -- this is what I meant by no risk, no reward.
LLL.coms are a safe investment. Safe investments are great (especially in this case), but playing it safe always means compromising on ROI in the long run.
If you own stmp.com please let us know. I am VERY curious to know about the traffic. As a typical typo of SMTP I would think it could get great traffic. imho it's a $x,xxx domain. It can also be a stamp.com typo.
Nice setup for a thought experiment - it gets a bit more complicated to calculate when including renewal fees though!
Without renewal fees, would need minimum price to increase by about 35% - compounded each year for 10 years to go from $15 to $300, or from $10,000 to $200,000
so (just to help simplify the calculation) let's prepay 10 years renewal for each right now for approximately $70
effect on ROI is as follows
instead of $10,000 -> $200,000 (34.9285% compounded over 10 years)
we have $10,070 -> $200,000 (34.8342% compounded over 10 years)
instead of $15 -> $300 (34.9285% compounded over 10 years)
we have $85 -> $300 (13.4411% compounded over 10 years)
now, taking this "renewal adjusted" ROI into account, it may make sense to compare chance of the $10,000 LLL.com market price increasing to $35,318 over the next 10 years (about 13.5% compounded annually) - during which time LLLL.com market price of $15 would have to increase to $300 (about 35% compounded annually).
seen in this light, LLLL.com growing at 35% vs. LLL.com growing at 13.5% annually seems a lot closer to "even odds" than the straight-up $15 -> $300 vs $10,000 -> $200,000 scenario.
But, also some other important factors to consider:
1) I'm more comfortable "investing" $85 than $10,000 at this point ... though others with bigger budgets certainly might see this the other way around.
2) $15 or even $300 is way below the "$1500 UDRP filing fee" risk threshold. A $10,000 name might require more (expensive) protection against reverse hijacking attempts. This one is a biggie, IMO.
I tend to sell most of my cheap domains (including LLLL) about 6 months before renewals and incur very little in the way of renewal costs myself -- let someone else pay the renewals but do it enough in advance that the other person doesn't take renewal costs into any value they associate with your domain
Keep in mind that pre-paying significantly alters what the end result would otherwise be.
Take the compound interest forumula:
M = P(1+i)^n
where M = final value including principal, having taken the cost of future renewals into account
P = principal amount
i = annual interest rate
n = number of years invested
Adapting that to our unique problem, we need to account for renewal fees which currently run approximately $7 per year. I'll also factor in an annual 7% price increase (denoted as 1.07 in the formula) Verisign has us now most likely paying for the next 4 years. We'll assume prices do not increase further as there is no indication at this time that they will.
To properly compare an LLLL.com, lets assume P = $15 and lets assume an annual interest rate of i = 0.35 (NOT including renewal fees - these are covered separately as seen above) over n = 10 years (eg. equal to what we assumed on LLL.coms).
Subtracting our initial cost of $15 from M yields a profit of $198.26 from a $15 investment -- all renewal expenses taken into account.
$198.26/$15 = 13.2 times initial investment
Taking the worst LLL.com as being worth $7500 (a more fair comparison than my earlier example) would suggest that 10 years from now it should go for $106,500 if experiencing the exact same 13.2 times increase over 10 years as LLLL.coms (I'm using a real annual interest rate of .294 which is what LLLL.coms yield if renewal fees are taken into account and a nominal interest rate of .35 is assumed. Inflation is assumed nil for the purpose of this calculation, as are the miniscule effect of renewal fees on LLL.com data.)
Yes, thanks for keeping me honest in regards to renewal fees Dan.
The higher the rate of appreciation, the more it tips in an LLLL.coms's favor (eg. renewal fee makes up a lower portion of the overall value). Conversely, the lower the rate of appreciation, the more apparent it becomes than an LLL.com is a better investment.
My calculation makes a very large assumption that such an interest rate is possible which we really won't know until we look back 5-10 years from now
The LLLL.com has considerable more risk involved, as is evident by the recurring renewal fees. What is $15 today will require an investment of $103 to breakeven 10 years from now -- not at all a small amount and something to carefully consider before investing in LLLL.coms.
I really wouldn't recommend investing in the low end of the LLLL.com market unless one anticipates $250+ prices 10 years from now -- when inflation and opportunity costs are accounted for, it just doesn't make sense to invest in these according to the math above unless one truly believes that $250+ come 10 years from now is what we should expect.
Would, Should, Could... All we can do is wait I'm afraid
Well then ... based on these assumptions - hard to make a rational argument to rush into low-end LLLL.com - seems like one could hold off buying for 3 years and still come out with a better ROI.
But speculative markets aren't always so rational, so who knows how and when (and whether) the low end will move. Renewal fees do seem to be a big drag - unless prices make a quantum leap to $40+ (again!) ...
You're 100% right Dan -- the optimal time to invest may very well be 2-3 years away. The higher the price an LLLL.com goes for, the less of an impact renewals have, so it's only logical that there's considerably less risk involved in investing (and renewing) LLLL.coms when the market is (stable) at $40+ than at present.
Value of 4 letters .com 
and it also helps in putting eggs in different baskets. You are making more probabilities in your favor for yourself by investing in LLLL.
