Domain renewal price increases make domain investing even more challenging.
We are about to see another 7% increase in .com wholesale prices on Sept. 1, 2023, and a 10% increase in .net prices on Feb. 1, 2024.
Prices for .xyz have increased each of the last two years, with timing and price increases roughly in line with the .com increases.
Several Radix extensions, including .site, .space and .tech, had major increases Aug. 1, 2024.
Within the last year .one became significantly more expensive to renew.
Over the past year, we have seen significant increases in .io and .info renewal rates.
So how should a domain investor respond? Increase prices? Trim portfolio size? Renew in advance? Something else?
Should You Increase Retail Prices?
When costs go up, most retailers and service providers increase prices. So if annual holding costs go up, what should be the increase in the retail price for your domain names?
Most domain names do not sell for many years, so it is not as simple as products typically purchased and sold within a year. As an approximation, to retain the same profit overall, retail prices need to increase by the product of the renewal fee increase by one over your sell-through rate (STR) for that type of name.
But Will Sales Rate Go Down If Retail Prices Go Up?
But will there be fewer sales, so it might end up counter productive to increase retail prices? That is a really difficult question to answer definitively. In some cases there is price sensitivity, but a modest price increase may not influence sales rate in most cases.
One could readily test this by randomly dividing names into two groups, apply a price increase to half, and see, after many months or years, if the sell-through rate is different. Most of us don’t have a large enough portfolio to do the experiment and obtain statistically significant results, however.
I do not know of any large-scale, publicly available research study on domain name price sensitivity. If you know of one, please tell us about it in the comment section.
Interest Rates
After a long time with low interest rates, we now have rates around 5% in many regions. If you have names with a significant upfront cost, you should also consider the cost of the tied up money as an annual holding cost.
Sometimes You Can’t Increase Prices
Price increases are not always an option. For example, if you have premium listings at SquadHelp, but have not attained silver or above seller status, you are not able to change pricing. BrandBucket gives you the ability to slightly increase base prices, capped at 20%. You may already be at the maximum, however.
Renew In Advance
ICANN rules allow registrations up to 10 years in length, so if you are flush with cash, one strategy is to renew many years in advance prior to the price increase.
You may wonder if that is wise, though, since if the name sells quickly, you will have needlessly paid years of renewal. I worked out the numbers in Applied Probability for Domain Investing, with the result that in most cases it is, on average, worthwhile to renew in advance, if you can afford to do so. I run through an example case below.
However, there are some situations when it does not make sense to renew in advance:
Get A Good Rate
Especially if renewing many years in advance, it is important to make sure that you are getting an attractive rate. Use resources such as TLD-List or DomComp to check transfer and renewal rates at different registrars. Keep in mind that there are other considerations than price alone in selecting a registrar, though.
Usually transfer costs are slightly less than renewal, but moving names involves work and usually impacts fast transfer eligibility, and in some cases transfer possibility if sold. In many cases the small saving on transfer over renewal is not worth it.
If registering for multiple years, it makes sense to have your names at a registrar that has the features and reliability you want.
If you buy many names via GoDaddy auctions or closeouts, or simply prefer to hold most of your portfolio there, the Domain Discount Club is worth it if your portfolio is large enough. Note that although they give the cost per month, you will be charged for a 12 month period all at once.
Make Portfolio More Selective
One response to the higher costs would be to be more selective, eliminating some names from your portfolio. This helps two ways: first, the renewal bill is less, and the higher quality names will have a higher STR, which will reduce the number of renewal years needed per name.
It is perhaps time to update with a new article on deciding which names to retain, but you may find Which Names To Renew, from a couple of years ago helpful.
More recently, there is a poll and discussion on What To Consider When Renewing.
Critically Evaluate Names With High Renewal Costs
If you have a portfolio that includes numerous extensions, it makes sense to take a critical look at the higher renewal cost names, making sure that the quality and sales probability plus price justify the high holding cost.
I am not saying get rid of all names that are expensive to renew. For example, .ai is doing very well now, even though somewhat expensive to hold. Also, while .io is expensive to renew, we saw in What Domain Sales Data Really Says that the extension has the highest sell-through rate.
Prioritize
Divide your portfolio into three groups. In the highest group, place names that you are confident, based on metrics and other considerations, will ultimately sell for strong retail prices. Make sure that you protect your highest quality names, either by renewing in advance, or keeping sufficient cash reserves to pay their renewals, even if we enter a down market.
The lowest group will be names that you should consider liquidating, either because the quality is low, or they are not in an attractive niche, or simply no longer match your investment goals. At times of increasing renewal costs, it is a good idea to consider some liquidations so you can focus and protect the highest quality names.
The middle group will be names with potential, but not quite the quality of the first group. That group will also include names that are potentially valuable, but you feel less confident in appraising. It is probably wise to not renew these names too far in advance, and to continue to monitor them on a regular basis.
Some time ago I went through my entire portfolio, and for each name entered on my spreadsheet YES, NO or blank in a column indicating plans to renew. I change some of my decisions, but it is helpful to have tentative decisions made and recorded.
If you have not yet heard from your registrar about the .com price increase, there is a NamePros discussion on the Verisign .COM Price Increase that includes the retail pricing at some registrars after Sept. 1.
We are about to see another 7% increase in .com wholesale prices on Sept. 1, 2023, and a 10% increase in .net prices on Feb. 1, 2024.
Prices for .xyz have increased each of the last two years, with timing and price increases roughly in line with the .com increases.
Several Radix extensions, including .site, .space and .tech, had major increases Aug. 1, 2024.
Within the last year .one became significantly more expensive to renew.
Over the past year, we have seen significant increases in .io and .info renewal rates.
So how should a domain investor respond? Increase prices? Trim portfolio size? Renew in advance? Something else?
Should You Increase Retail Prices?
When costs go up, most retailers and service providers increase prices. So if annual holding costs go up, what should be the increase in the retail price for your domain names?
Most domain names do not sell for many years, so it is not as simple as products typically purchased and sold within a year. As an approximation, to retain the same profit overall, retail prices need to increase by the product of the renewal fee increase by one over your sell-through rate (STR) for that type of name.
Example
Let’s say renewal costs go up from $10.00 to $10.70 per year. You estimate the STR at 1% for this domain name. Your retail price would need to increase by $0.70 x 100 = $70 in order to, across the portfolio, retain the same total profit. Note that if there are multiple years of increases, this needs to be applied to each increase. Note that names with lower STR need to have higher price increases.
But Will Sales Rate Go Down If Retail Prices Go Up?
But will there be fewer sales, so it might end up counter productive to increase retail prices? That is a really difficult question to answer definitively. In some cases there is price sensitivity, but a modest price increase may not influence sales rate in most cases.
One could readily test this by randomly dividing names into two groups, apply a price increase to half, and see, after many months or years, if the sell-through rate is different. Most of us don’t have a large enough portfolio to do the experiment and obtain statistically significant results, however.
I do not know of any large-scale, publicly available research study on domain name price sensitivity. If you know of one, please tell us about it in the comment section.
Interest Rates
After a long time with low interest rates, we now have rates around 5% in many regions. If you have names with a significant upfront cost, you should also consider the cost of the tied up money as an annual holding cost.
Example
If you paid $400 for a domain name, at 5% interest rate that is like an additional holding cost of $20 per year. That is in addition to your annual domain name renewal costs.
Sometimes You Can’t Increase Prices
Price increases are not always an option. For example, if you have premium listings at SquadHelp, but have not attained silver or above seller status, you are not able to change pricing. BrandBucket gives you the ability to slightly increase base prices, capped at 20%. You may already be at the maximum, however.
Renew In Advance
ICANN rules allow registrations up to 10 years in length, so if you are flush with cash, one strategy is to renew many years in advance prior to the price increase.
You may wonder if that is wise, though, since if the name sells quickly, you will have needlessly paid years of renewal. I worked out the numbers in Applied Probability for Domain Investing, with the result that in most cases it is, on average, worthwhile to renew in advance, if you can afford to do so. I run through an example case below.
Example
For this example assume that over the next 10 years there will be two years with 7% increases, followed by two years with no increase, then four more years of 7% increases, followed by two years without increase. Although similar to the .com 4 years of increases over a 6 year period, it is a hypothetical example, not exactly any real situation. I assume in year one the retail renewal is $10.00. Shown below are the renewal rates for each year, You can see that over the 10 years, the total bill will be $124.45, compared to $100.00 if all paid at start.
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
7% incr | 7% incr | no incr | no incr | 7% incr | 7% incr | 7% incr | 7% incr | no incr | |
$10.00 | $10.70 | $11.45 | $11.45 | $11.45 | $12.25 | $13.11 | $14.03 | $15.01 | $15.01 |
But what about the chance that the name would have sold, and we would not need the later renewals? If we assume a 2% STR, that would correspond to $0.20 per year ‘wasted’, or $1.80 lost over the 9 extra years. Therefore, statistically it is better to pay renewals in advance, at least for the assumptions in this example.
However, there are some situations when it does not make sense to renew in advance:
- If you are unsure that the name is a worthwhile long term investment.
- It is a trending niche, and may not hold value for many years.
- If it is already somewhat dated in sector appeal, and will get more so as years go by.
- You feel the chance of selling in just a year or two is high. For example, you plan outbound on a strong geo name, or it is a SquadHelp premium that has shown excellent interest from potential buyers.
Get A Good Rate
Especially if renewing many years in advance, it is important to make sure that you are getting an attractive rate. Use resources such as TLD-List or DomComp to check transfer and renewal rates at different registrars. Keep in mind that there are other considerations than price alone in selecting a registrar, though.
Usually transfer costs are slightly less than renewal, but moving names involves work and usually impacts fast transfer eligibility, and in some cases transfer possibility if sold. In many cases the small saving on transfer over renewal is not worth it.
If registering for multiple years, it makes sense to have your names at a registrar that has the features and reliability you want.
If you buy many names via GoDaddy auctions or closeouts, or simply prefer to hold most of your portfolio there, the Domain Discount Club is worth it if your portfolio is large enough. Note that although they give the cost per month, you will be charged for a 12 month period all at once.
Make Portfolio More Selective
One response to the higher costs would be to be more selective, eliminating some names from your portfolio. This helps two ways: first, the renewal bill is less, and the higher quality names will have a higher STR, which will reduce the number of renewal years needed per name.
It is perhaps time to update with a new article on deciding which names to retain, but you may find Which Names To Renew, from a couple of years ago helpful.
More recently, there is a poll and discussion on What To Consider When Renewing.
Critically Evaluate Names With High Renewal Costs
If you have a portfolio that includes numerous extensions, it makes sense to take a critical look at the higher renewal cost names, making sure that the quality and sales probability plus price justify the high holding cost.
I am not saying get rid of all names that are expensive to renew. For example, .ai is doing very well now, even though somewhat expensive to hold. Also, while .io is expensive to renew, we saw in What Domain Sales Data Really Says that the extension has the highest sell-through rate.
Prioritize
Divide your portfolio into three groups. In the highest group, place names that you are confident, based on metrics and other considerations, will ultimately sell for strong retail prices. Make sure that you protect your highest quality names, either by renewing in advance, or keeping sufficient cash reserves to pay their renewals, even if we enter a down market.
The lowest group will be names that you should consider liquidating, either because the quality is low, or they are not in an attractive niche, or simply no longer match your investment goals. At times of increasing renewal costs, it is a good idea to consider some liquidations so you can focus and protect the highest quality names.
The middle group will be names with potential, but not quite the quality of the first group. That group will also include names that are potentially valuable, but you feel less confident in appraising. It is probably wise to not renew these names too far in advance, and to continue to monitor them on a regular basis.
Some time ago I went through my entire portfolio, and for each name entered on my spreadsheet YES, NO or blank in a column indicating plans to renew. I change some of my decisions, but it is helpful to have tentative decisions made and recorded.
If you have not yet heard from your registrar about the .com price increase, there is a NamePros discussion on the Verisign .COM Price Increase that includes the retail pricing at some registrars after Sept. 1.
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