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Over the last few days I have developed the case for why the domain aftermarket is a good thing for end users. While it is partly a response to the recent Verisign post, the justification for domain investing comes up from time to time in other contexts. Here are some of the key points and a few quotes, but the complete post just went up at NameTalent.
Rewards and Risks
Aftermarket prices must have substantial profit to account for the significant risk of the name never selling for profit.
While some find negative connotations in the word speculators, all kinds of speculators play critical roles in our society and economy. For example, early funders speculate on which startups have more promise, and in so doing give them the resources to take innovations to market. Most will economically fail, so the rewards from those that succeed must be substantial. The same is true for domain investing. I would say the better analogy is with art collectors, however. They play a key part in the health of the art ecosystem.
Domains are Created
Domains (obviously not all types) should be regarded as no different than other creative works in art or literature. As such, domain investors are similar to those that invest in struggling early career artists. Many domain investors are themselves 'domain artists'.
Does the Domain Aftermarket Add Nothing?
This is the most preposterous claim in the Verisign report. Here are a few quotes from my response.
Better off with no Domain Aftermarket?
I point out that if we had a system of no aftermarket that the process of organizations securing domain names would be far less efficient and more complex. Many great digital assets would end up in non-dealing collector hands, and would go unused.
A Domain Community is Important
Their post is hurtful.This matters.
A Collection of Other Points
A few of the other points made.
Here is the link again to the full article.
https://nametalent.com/2018/11/why-we-need-the-domain-aftermarket/
Thank you for reading!
Bob
Rewards and Risks
Aftermarket prices must have substantial profit to account for the significant risk of the name never selling for profit.
"Those who hold these domain names have taken substantial risk that the domains will not sell at all, or if they do sell it may be for a loss."
"The vast majority of domain names never sell. Ever. The price charged for those that do sell has to be large enough to make up."
Speculators"The vast majority of domain names never sell. Ever. The price charged for those that do sell has to be large enough to make up."
While some find negative connotations in the word speculators, all kinds of speculators play critical roles in our society and economy. For example, early funders speculate on which startups have more promise, and in so doing give them the resources to take innovations to market. Most will economically fail, so the rewards from those that succeed must be substantial. The same is true for domain investing. I would say the better analogy is with art collectors, however. They play a key part in the health of the art ecosystem.
Domains are Created
Domains (obviously not all types) should be regarded as no different than other creative works in art or literature. As such, domain investors are similar to those that invest in struggling early career artists. Many domain investors are themselves 'domain artists'.
"Domains are not just any combination of letters or words, but a sequence that meets certain aesthetic and marketing needs. Many of the same principles such as simplicity, elegance, functionality and impact that apply to product design are equally relevant to the design of a strong domain name. Ideally, even a made-up word hints at the nature of the business while not boxing in the future directions. Whether made-up or not, the domain name optimally evokes positive emotions in a memorable way."
Does the Domain Aftermarket Add Nothing?
This is the most preposterous claim in the Verisign report. Here are a few quotes from my response.
"Do they really mean that someone who made a clever brandable name, or put together two words in a creative way, or finds a playful spelling, or that perfect memorable word, or a thousand other domain works of art has contributed nothing?"
"The domain investor who brought a domain opportunity to a big company that rebranded on that, they contributed nothing at all? The domain broker who had the connections to bring a business leader in touch with the person holding just the right domain name – no value in that at all? Everyone in the domain aftermarket, they add nothing? Seriously, Verisign?"
"The domain investor who brought a domain opportunity to a big company that rebranded on that, they contributed nothing at all? The domain broker who had the connections to bring a business leader in touch with the person holding just the right domain name – no value in that at all? Everyone in the domain aftermarket, they add nothing? Seriously, Verisign?"
Better off with no Domain Aftermarket?
I point out that if we had a system of no aftermarket that the process of organizations securing domain names would be far less efficient and more complex. Many great digital assets would end up in non-dealing collector hands, and would go unused.
A Domain Community is Important
Their post is hurtful.This matters.
"I think the health of the domain world, more than any other single factor, depends on an engaged community of domain proponents. Domain names will be more effectively used when domain names have advocates who appreciate their worth. The Verisign post, perhaps not deliberately, has dealt a blow to this community,"
"It is sad that a company entrusted with the most important TLD seems to so incompletely understand domain investing and the passionate, creative, innovative and skilled community that is the domain aftermarket."
"It is sad that a company entrusted with the most important TLD seems to so incompletely understand domain investing and the passionate, creative, innovative and skilled community that is the domain aftermarket."
A Collection of Other Points
A few of the other points made.
- The Verisign post seems to miss that prices in most parts of domain aftermarket are set through competition among registrars, marketplaces and available domain names.
- They claim that the cap price has zero influence on prices end users will pay. I suggest it is about $100 increase for each $1 increase in wholesale costs if that makes sense.
- I show that while yes there are occasionally high prices, they are not the norm. 1.2% of .com prices in the last year were $10,000 or more.
- While not disputing that some do very well, I point out that overall the domain aftermarket is near to break even.
- I point out that their figure for the excess cost to end users requires at least a market that is 18x the .com sales that are NameBio reported. However, even this includes the drop catches, auctions, etc. where domainers buy domain names as though those are sales to end users, so really you have to assume something like 25x factor to get their unreferenced number.
- Lower margins coupled with a higher probability of sale would be better for both end users and domain investors. Verisign should ask how they can contribute to that, rather than say the entire aftermarket add no value.
- I ask them to withdraw their post and apologize.
Here is the link again to the full article.
https://nametalent.com/2018/11/why-we-need-the-domain-aftermarket/
Thank you for reading!
Bob
