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James Iles

Is This the End of the Chinese Market?

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By James Iles, May 5, 2016
  1. James Iles

    James Iles NamePros Writer PRO Gold Account VIP Trusted Blogger

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    Recently, a discussion has arisen on NamePros, asking whether the Chinese domain market could be at an end. This question comes after a couple of months of declining prices after a period of steep growth at the end of 2015. In this article, I wanted to give another perspective on this question from someone who speaks daily with investors and brokers in China.

    Where do we start when discussing the Chinese market? Twelve months ago seems like as good a time as any. According to LLLLSales.com, on the 1st May 2015, a "Chinese Premium" four-letter .COM would cost you around $215. At their peak in December, the same domain would cost around $2,500. The price today? Around $1,251 on average.

    Over the course of twelve months, every Chinese Premium four-letter .COM domain has appreciated by just over $1,000, or 481.86%. By any means, this is a huge increase, and there are still investors buying at this price point. Over the past week, I've had several requests for large portfolios of four-letter .COMs, with some investors looking to spend over $1mm on four-letter .COM purchases.

    The sharp increase in value of four-letter .COMs meant that other short domains such as two letter, two number, three letter and three number domains increased in value and demand too, with three-letter Chinese Premium .COMs selling for $70,000+ at their peak.

    This sudden boom meant that the wider domaining community realised what some investors had known for a long time: short domains are valuable, with domains that include patterns tending to be even more valuable. The boom brought about the occurrence of riskier markets such as six-number and five-letter, as well as new gTLD opportunities that all had low entry points.

    These entry points also meant that a small amount of investors could create hype around a market, driving the price up and then selling. It's a practice that is widely known, and has made several investors extremely rich. Unfortunately, smaller investors who can't afford to lose money sometimes get caught up in the hype, buying when the names are at their most expensive, and who may now be stuck with rapidly depreciating domains.

    Now that Chinese domain markets are showing dramatic drops, does it mean that the Chinese market as a whole is at an end? In my opinion, no. I think the market is entering another phase. From the data that's available, it looks like several riskier markets are dropping in value severely. Random combinations of numbers or letters are reducing in value whilst strong patterns are holding their value.

    From speaking with several Chinese investors and brokers, I think that the new phase of the Chinese market could be based around what domain names an end-user (Chinese or otherwise) would acquire. It's been proven over the past 20+ years that the lifeblood of the domain industry is in end-user domain sales, and I think that China could be realising this fact.

    For the Chinese market, the end-user demand is slightly different than a Western market. Numbers and short names tend to be more popular amongst Chinese companies, as has been demonstrated by @Kassey Lee on many occasions.

    Recently, Beijing's authorities have approved changes to China's business naming system. Now, companies can use a string of up to five numbers instead of a name. Could this mean that domains consisting of up to five numbers might have a higher value amongst investors, thanks to acquisitions from end-users?

    Whilst all "Chinese" domain categories have been affected to some extent, many categories are holding their value, and are still showing large increases from this time last year. Patterns look to be holding their value (or showing increases in some cases), whilst random strings are showing a decline. I'd expect this divide to continue, with the focus moving back to the end-user rather than the recent focus on investors. What do you think? Have your say in the comments section.
     
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  4. James Iles

    About The Author — James Iles

    James is the lead writer for NamePros' Blog and founder of Iles Media, a domain name broker working on both acquisitions and outbound sales. For all inquiries relating to stories and interviews, please email: [email protected]

    This is James Iles's 191st blog post on NamePros. View all blog posts

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  5. Comments (70)

  6. Keith DeBoer

    Keith DeBoer Top Member PRO VIP

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    Good thoughts
     
  7. elevator

    elevator DnCombo.com VIP

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    Most of the Chinese who bought domains last year seems like they are investors and they too need to sell some of their acquisions probably before they can buy again. A nd just few of them are still looking for domains to invest.
     
  8. Domain Wildcatter

    Domain Wildcatter Established Member

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    Intriguing insight! Thanks!
     
  9. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    Scary stuff these pump and dumps. Just a heads up I've noticed alot of 5L.com's ending and starting with VR . care to comment? I've kept mentioning that there seems to be a "perfect storm" of chinese premiums and shortage of affordable 4L domains that I think the Chinese are buying up 5L VR .coms as a good safe entry point into domaining investment. That plus the whole hype about VR. What do you think of this?
     
  10. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    Oh and it usually 3 letters With some meaning as abbreviations and plus VR.com
     
  11. Bros

    Bros Top Member VIP

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    The one thing I've learned about the "chinese domain market", is that it is very difficult to predict where it will move. The recent changes are great examples of this.
     
  12. London555

    London555 Top Member VIP

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    James-as we posted on one of your threads a while back when it happened domain investors really need to watch the best in the business-if Mark Zuckerberg is unloading Facebook shares in volume-do you want to buy the stock? Of course not. Then why would anyone want to buy short numeric domains when you see Rick Schwartz selling and selling as he did the end of last year. re 898.com for $800K etc ?
     
  13. dotbay

    dotbay BrandChimp.com VIP

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    Why the number of inquiry from China is increasing?
     
  14. Avtar629

    Avtar629 MarketDN.com Gold Account VIP

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    lowball offers? maybe Chinese domainers trying to capitalize on Western fears that the Chinese Boom might be decreasing? many $100-$200 offers?
     
  15. theSun

    theSun Top Member PRO VIP ★★★★★★★★★★

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    I see it as a start. Fortune always favor the bold.
     
  16. theSun

    theSun Top Member PRO VIP ★★★★★★★★★★

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  17. donnied79

    donnied79 Top Member VIP ★★★★★★★★★★

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    Renewals are coming.. It will be funny to see how large portfolios of random domains will be handled
     
  18. whoischina

    whoischina Established Member

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    Good things can sell a high price,no wrried about it,we want look for 1100$ 4l .com domains.
     
  19. dotbay

    dotbay BrandChimp.com VIP

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    Yeah $90 for 4L .net chips and like $150 for 4L .com -_-

    They want us to be scared so they can buy all the valuable domains at bottom price..
     
  20. DomainVP

    DomainVP Domain Expert VIP

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    Pattern & Chip domaining within Alpha characters is about to die, because as you say....

    This is what it should have always been. So anything with totally random letters, which are the majority of 'chips', are doing to drop like the titanic.

    A price point of $1200+ for a 'chip' is still absurd.
     
  21. DN Invest Ltd

    DN Invest Ltd Established Member

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    We should wait to see what will happen after first week of June. However, I agree it is absurd to pay $xxxx for some random LLL.xyz chips.

    I don't understand Flippa craze about .io domains. Someone else don't understand chip craze. Pump & dump scheme is active with many types of chips, but some of those in .com might really have some real value.
     
  22. Sumit Agrawal

    Sumit Agrawal Established Member

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    This sums-up everything. As @Kassey Lee - pinyin expert - has also mentioned so many times in his posts, it's important to think of a domain from end-users' perspective. Chip/non-chip doesn't have much significance, it's all about how a domain name can add value to a company.
     
  23. dotbay

    dotbay BrandChimp.com VIP

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    Are Chinese company looking to buy AABBB patterns? They seams to hold value
     
  24. DnEbook

    DnEbook DataGlasses.Com ★★★★★★★★★★

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    I think if you stick with .com there is always going to be some interest
     
  25. dordomai

    dordomai Top Member VIP

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    The chinese domain market has existed for many years and is not new. It won't go away but it might go back to where it previously was.

    The recent buyouts and massive rise in prices had all hallmarks of an asset bubble.

    Sooner or later there has to be a reversal of prices. Personally I wouldn't be surprised if it we see end 2014 prices again.
     
  26. deez007

    deez007 The More I Learn The Less I "Know" VIP

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    I think when it comes to renewal time, we going to see alot of really good domains being dropped....
     
  27. doubleU

    doubleU Top Member VIP ★★★★★★★★★★

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    The Chinese have always been a player in this industry, not all are newbies but recent trends have popularized domaining in this large country.

    Having a keen eye on whois records of recently registered domains I can tell you this is far from the end of the Chinese market.

    I have always noticed that the Chinese are particularly interested in technology related domains and despite the language barrier they have no problems grabbing the top shelf of English language tech .com domains.

    I'm actually quite shocked at the stats I see from my research lately that I can safely predict the Chinese will soon become a major/dominant player in this industry.
     
  28. kemjika11

    kemjika11 Top Member VIP ★★★★★★★★★★

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    Yes chips prices have fallen from high of $2500 to $1200 now, but IMO thats still Ok. isnt there profit for sellers? Sellers can also wait some more and see if their prices go up(afterall, supply of good names keeps reducing and interest overall wont dissapear), so i dont think its that catastrophic for domainers. If you can still sell and make a good profit then do so and move on. With enough volume the profit on chips and 4Ls should still be ok. I worry some people want to be overnight millionaires and get quick results. domaining has never been a quick buck industry really. I also agree chinese are not going anywhere. getting "swayed"by short term news is dangerous. lets not forget the internet in many countries is still expanding. Most of Asia, Middle east and Africa are still in growth mode.
     
  29. Terry Bryant

    Terry Bryant New Member

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    Thank you for the deep analysis about the Chinese domain market
     
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