James Iles

Why Is China Investing in Domain Names? Here's the Answer

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By James Iles, Nov 4, 2015
  1. James Iles

    James Iles NamePros Writer PRO Business Account VIP Trusted Blogger

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    Have you ever wondered why Chinese investors have turned to buying domain names? Over the past couple of years, we've seen the market for two-letter .com, three-letter .com, four-letter .com, two-number .com, three-number.com, four-number .com, and five-number .com heating up with prices steadily rising.

    Every week there are reports of rare two-letter and three-number .COM domains being sold to China, with leading domain investor George Kirikos estimating that 19.4% of all two-letter .COM domains are owned by companies or investors in China.

    What has brought about this surge in acquisitions? I asked the team at DN.com if they could help us answer this question. DN.com is an international domain name escrow platform, who are also affiliates of the popular Chinese marketplace 4.CN. 4.CN's parent company are listed on the WhoIs information for many of the most valuable domains in existence.

    The first question I asked was, "What has changed in recent years that made domain names a desirable investment asset?"

    DN.com told us:

    Everything has changed. The overall economy is much more advanced. Plus the fluctuation of the stock market caused many people to withdraw their funds from the market. They are re-investing those funds into new areas, like domain names.

    Since the quantity of premium names are limited, and demand has risen, it has driven the price to a new level. We still are amazed, everything seems to be unreasonable, yet it is still going on.

    This summer the Chinese stock market crashed, with markets nosediving 8.5% on 24th August. According to some analysts, around 1 in 30 people in China owns stocks of some kind, accounting for 20% of a household's wealth.

    As DN.com said above, this uncertainty in the stock market has seen many investors withdrawing their money and placing their faith in domain names.

    In recent weeks, we have seen a vast number of four-letter .COM sales, most fetching well over $1,000 and there have been questions - especially in threads on the NamePros forums - about how these domains are being used, and whether Chinese investors will look to sell to other investors or end users as markets rise.

    DN.com told us:

    I believe that only a few are targeting end-users. The IT industry has entered into a new phase, the capital market has become more and more level-headed, hence the start-ups. Even long existing IT companies are influenced by the change. I believe that most investors are investing because of the rarity and uniqueness of domain names.

    Recently, a bunch of Chinese investors registered thousands of names over one night, to be honest, I don't understand the reason why.

    This comment is referring to the registration of numerical, four-letter, and letter-number combination domains in various TLDs. For example, at the end of October there was a report here on NamePros by @djum stating that all English Premium LLLL.net domains have now been registered - with 5,020 being registered in one day.

    DN.com's beliefs regarding investments based upon the rarity and uniqueness of domain names are backed up by the fact that two- to four- letter .COM's and two- to six- number .COM's have risen quickly in value, with domains including patterns and repeating characters being considered more valuable.

    A data website I use is LLLLsales.com to track recent four-letter .COM sales. Their charts show a continuing upward trend in four-letter Chinese premium .COM, but how long will that trend last? Will Chinese investors still be investing in domains in five or ten years time?

    DN.com have these comments to make:

    It's hard to say, no one knows the future. From our point of view, as the value of CNY continues to decrease, people will tend to invest those funds into something that would maintain the value, i.e. gold, real estate, and to some, domain names. So I believe that investors will still be buying in the coming 2 years.



    Thanks to @Eric Lyon and DN.com for helping with the creation of this article.
     
    Last edited: Nov 4, 2015
    The views expressed on this page by users and staff are their own, not those of NamePros.
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  4. James Iles

    About The Author — James Iles

    Writer for NamePros.com, domain name investor and broker. For all inquiries relating to stories and interviews, please email: [email protected]

    This is James Iles's 90th blog post on NamePros. View all blog posts

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  5. Comments (32)

  6. Konga

    Konga Active Member VIP

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    Thanks for the explanation
     
  7. Howie

    Howie Business Member Business Account

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    This was still a small dive compared to what happens in Europe, but as it hardly happens in China it was seen as impact. And the rationale behind the buying of stocks was behind the government's free push to the public...

    So, how can we say this has not led onto a different investment attitude?...
     
  8. Acroplex

    Acroplex Top Member DomainGang.com PRO VIP ★★★★★★★★★★

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    The suggestion that Chinese stock market investors, having been burnt by the summer's market collapse, turned to alternate investments, seems plausible. The current trends can equally be attributed to an artificial demand, created by those that acquired large blocks of such domains inexplicably.

    However, one needs to be very careful making statements that constitute an endorsement involving investments: "for the time being it seems that this upward trend will continue with Chinese investors are looking for patterns, uniqueness and rarity."

    As with every market, past performance is not indicative of future results.
     
  9. Acroplex

    Acroplex Top Member DomainGang.com PRO VIP ★★★★★★★★★★

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    @Howie - The Chinese stock market's devaluation was estimated at $4 trillion. Not quite a small dive, eh? ;)
     
  10. djum

    djum Active Member VIP

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    The only correction is "all English premium LLLL.net were registered" on that day.
    But I'm getting ready for new report: "All 456976 LLLL.net names are registered" - coming up tomorrow.
     
  11. domainerfella

    domainerfella DN.DOMAINS VIP

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    two to four letter .COMs and two to six letter .COMs have risen quickly in value

    >> did you mean two to six number .coms?
     
  12. silentg

    silentg Active Member VIP

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    Thanks for this informative post.
     
  13. James Iles

    James Iles NamePros Writer PRO Business Account VIP Trusted Blogger

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    @domainerfella - yes, thanks for pointing that out. I'll get it fixed. That's what you get for writing late at night! (UK time)
     
  14. James Iles

    James Iles NamePros Writer PRO Business Account VIP Trusted Blogger

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    Article updated with a final statement from DN.com regarding the future of Chinese investment.
     
  15. Andy Dexter

    Andy Dexter Account Auto-Closed

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    There are so many Chinese always liked to follow the trend without mind.
    They saw others purchasing stocks, so investing stock.
    When stock market crashed, they find their surroundings turn to domain market, so do they.
     
  16. Acroplex

    Acroplex Top Member DomainGang.com PRO VIP ★★★★★★★★★★

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    Bitcoin is also surging due to Chinese activity:
    http://www.ft.com/cms/s/0/ee93bc2e-82f6-11e5-8095-ed1a37d1e096.html#axzz3qa12STQ0

    The price of the cryptocurrency bitcoin surged on Wednesday to its highest in more than a year amid a wave of Chinese testimonials for a “social financial network” called MMM, which bears the hallmarks of a pyramid scheme.

    New members of MMM have to buy bitcoins to join the scheme, which is the brainchild of Sergey Mavrodi, a former Russian parliamentarian since jailed for fraud.

    The bitcoins are sent to other members of the network as “mutual aid”. Participants are promised a 30 per cent return per month, with bonuses for referrals or posting testimonials online.

    “Today, on October 31, I received 20 per cent interest and [a bonus] as a recommender, for a total of $7,750. I truly experienced the greatness of 3M and the sincerity of all the participants,” said Wen Qiang, one of the hundreds of MMM evangelists taking to YouTube in the past 24 hours.

    The bitcoin price surged by more than a fifth to above $490 on Wednesday, in the latest spike for the virtual currency created in 2008 by an anonymous mathematician.
     
  17. djum

    djum Active Member VIP

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    LOL, everyone who knows Russian knows this scammer - Mavrodi.
    If you have Russian friends ask them and they will tell you 100+ stories about him.
    He've been scamming for 25 years now, last went global lately. Last time in Russia was 2011-2012, almost got jailed again, but now he's smarter then 25 years ago, he doesn't own anything, just makes the scheme and other people run it for him. He knows how to use internet and social networks very good. Now Bitcoin, it's just ridiculous, I bet everyone in Russia is laughing so hard now. If you have Bitcoin sell it now, because when his network goes down and it's always happens BTC course will be down. This scam may live for some time but eventually will be uncovered, and since it's typical Ponzi scheme a lot of people will be burned.

    I'm amazed that so many people in China and other countries have no idea about this guy already after amount of scam he committed.
    I just read at Lurkmoar that Russians are banned from participating in his new pyramid, and all Russian IPs redirected to Google.
     
  18. elevator

    elevator Active Member VIP

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    Thanks as usual. Cheers
     
  19. domeen

    domeen Active Member VIP

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    as long as the prices go up its all good. But if there will be a price decrese, then It will be like Chirstmas. The everyday "home stay MOM"/CHinese domainer (same as Taxi dirver investing into stock market) wants to get her funds and liquidite fast. thats when Christmas starts.
     
  20. Angelicus

    Angelicus Active Member VIP

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    They are moving money abroad, domains are just a part of it, small part... imo

    http://www.bloomberg.com/news/artic...eat-cash-controls-sending-real-estate-soaring

    There are some parts of China domain buying 'frenzy' are disturbingly similar to well known 'pump' phase. Nothing to worry about if you get out before the 'dump' rings the bell.

    The real question investment-wise is how long will this 'trend' last, and is it capable to move the residual value of secondary market domains up, even by small % in a long run. Which can be good for a domain industry in a whole.

    Then again, I can be completely wrong :)
     
  21. DnEbook

    DnEbook DnEbook.Com VIP ★★★★★★★★★★

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    It is an amazing time to be involved in domaining!
     
  22. wot

    wot Top Member VIP ★★★★★★★★★★

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  23. Tank

    Tank Collect.gold - Make Offer VIP

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    SHHhhh ;)
     
  24. djum

    djum Active Member VIP

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  25. asset.domains

    asset.domains Established Member

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    here is it, link between bitcoin price increase and MMM classic ponzi scheme relationship.

    now we must think if there is link between increase in domains price and a starter event (where even 4's and 0's were registered ! ) so can be a bubble.
     
  26. Deaol

    Deaol . .. deaol.com .. . VIP ★★★★★★★★★★

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    If anyone was involved with bitcoin/and altcoins over the last two years you will all notice similarities in the investment patterns. Its all just a way for a communist country to move money.
     
  27. DnEbook

    DnEbook DnEbook.Com VIP ★★★★★★★★★★

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    yep .........hidden money is the motive
     
  28. djum

    djum Active Member VIP

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    As soon as Mavrodi will start demanding people joining his new scam to buy domain and push it over to someone then we'll start talking about it. :)
     
  29. asset.domains

    asset.domains Established Member

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    hooe nobody will give that evil idea to him : )
     
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