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.
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.
Look back on the last 6 months of 2015 
