information Expert Exchange: As an Industry, How Could We Attract More Institutional Investors?

Likely lots of interrelated factors, but one key factor is that as long as registrant rights are undermined by a flawed, biased, and inconsistent UDRP process, ownership of domain names is not secure and domain names as an asset class are less attractive.

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I don’t think we will ever be able to attract them. The market is too unstable, inconsistent, and non-liquid for that type of investing, in my opinion.

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Time and infrastructure. Names need to become easier to use and to trade... That alone will open the door to more market participants.

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More transparent prices and appraisals. I feel the biggest hurdle to consider domain names as legitimate assets is how discretionary (random) prices are. In 2010, you could find two-letter .com domains that sold around $100,000 (JF.com, XI.com and SZ.com) and one domain for $8 million (FB.com). That is an 8,000% difference! It is hard for institutional investors to invest in assets that is unclear how much they are worth.

Thanks to the growth of the Chinese market in the past two years, the industry has produced so much information that anyone can easily understand the prices at which certain type of domains are trading. For example, we now know that two-letter .com’s trade between $500,000 and $1.5 million, and it is increasingly hard to see transactions happening outside of this range. This is actually very good for the industry because outsiders can trust that there is a transparent market that gives the confidence to invest.

At GGRG.com, we are doing our best to contribute to the market transparency by releasing a quarterly report in collaboration with Intelium and ShortNames.com that provides valuable indicators about the trading activity for the most liquid domain categories.

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Kill the hype, and use math.

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More transparency – other institutional investments are regulated to some extent – and liquidity, which GoDaddy/Afternic seek to provide. There is always good and bad with anything. More institutional investors would bring more liquidity and more capital but the flip side is there may be less volatility and room for opportunity for a guy sitting in his room on a laptop to make big money.

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Education. Institutional investors need to see domains as a diverse means of investment to add to their portfolios. Investors need to be educated as to the value and stability of domain names throughout the years along with the booming aftermarket trading on these commodities.

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It all comes down to education. I think DomainSherpa is doing a great job of that. These articles on NamePros do a good job, too.

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Institutional investors would want predictability. You'd need to be able to show that when you put $X in, you get a lot more than $X out, and in a repeatable, scalable way.

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I’m not so sure we want to do this because those types of buyers usually want to buy assets at a wholesale value and most domainers only make serious money when they sell for retail value. As an industry, we’ve barely even figured out how to sell premium domains to end users via conventional retail methods. I’d rather we focus on fixing the consumer-facing retail side of things than introducing the confusion and mess of tons of bulk wholesale deals by buyers who don’t understand or even care about premium domains.

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