I'm still thinking this over but for now, I can't see any major changes on my pricing, renewals or general acquisitions. I do see a change forming in my longer term strategy. I'll break this down and share some other thoughts...
The easiest way for me to think about this, is that there is a new domainer (Neustar/ CO Registry) who has two distinct and unfair market advantages. One advantage is that they have first right of refusal on all dropping domains - and never need to participate in backorders or backorder auctions. The second advantage is that they have no renewal fees, so their portfolio size is not hampered by any direct registration costs. This allows them to instantly build a huge portfolio and then sell the domains within the portfolio at a lower cost compared to other domainers. They have fewer worries about sell-through-rate or yield compared to us, so it's a win-win for them.
Aside from Neustar, the winners are GoDaddy and less obviously, the end-users. GoDaddy win because the bidding activity will be increased on GoDaddy Expired Auctions... unless they decide (or get paid) to drop .CO from this process and pass them back directly to the registry for first refusal. I think that overall, this is also a win for end-users. CO has always been an anti-domainer registry from the outset. They want to prioritise end-user demand, reduce inappropriate use cases (spam/phishing) and keep the extension in the race as a popular alternative to .com. Because the registry has minimal holding costs and no visible acquisition cost in this method, they are able to resell the domains for prices like $130. The domains that would have been picked up by domainers would have been priced higher than this - I would guess maybe around $300 to $4000. The 'premium' pricing by the registry is low enough to entice end-users and high enough to deter most domainers. It's a middle ground designed to push the domains into the hands of those that will actively use them. In the long term, this will hopefully mean the extension has more popularity, more end-user awareness and longevity. They've specifically chosen to have a one-off upfront premium fee rather than a reoccuring premium fee for every renewal (fees for renewals are still not cheap at $22+). The latter strategy of charging $XXX+ for renewals would have killed the extension and they know it.
I try to look at this from the perspective of what impact it will have on end-users. If the impact is positive, I think the outcome is largely favourable for domainers holding quality domains in the extension. The primary caveat/warning here is that this change is a clear indication of the registry's ability to make changes without prior consultation or communication to the domaining community. They set the rules and don't give a monkey about domainers... that much is certain and they are legally entitled to make decisions in that way. Old school domainers and .com stalwarts have long held a sentiment, which is clearer (and truer) than ever: if domainers invest long-term outside of .com, they expose themselves to inherent risks and have zero control over mitigating them.
There is nowhere to complain if .co renewal fees increase. There is nowhere to complain if .co decides to change the waterfall rules of expiry and deletion. It is not a domainer-friendly extension, but it's has found it's way through a tenacious focus on creating and promoting end-use rather than speculative holding.
The obvious losers are dropcatch/backorder services and many domainers that focus on deletes or backorders. The dropcatchers/backorder services are deprived of a revenue stream (users only pay for successful catches). I suspect that .co is insignificant volume for most of them compared to .com.
The domainers who build inventory from deletes and backorder are also deprived of a source of stock from which they can build inventory. A lot of 'flippers' on NP make money from buying through backorders and then reselling to other domainers at a wholesale markup. The change is a loss for that business model, but also closes an inventory acquisition path for domainers like myself who buy from those domainers.
This 'premium' pricing change is also less positive even for domainers who don't flip at wholesale, but have relied on hand-regs and expiring domains for end-user inventory. It pretty much leaves
my deletes strategy dead in the water. I shared that information because I was planning to stop hand-regging in volumes on a daily basis. I really wanted other domainers to have a chance at making some money, so I laid out a blueprint. From this perspective, I'm incredibly disappointed in the change.
Going forward, the remaining domains available to handreg (not taken by the registry) will be of a lower quality. We can assume they'll have a much lower sell-through-rate to end users. In turn, this also reduces the value of coupons and discounts, because the can only be utilised on the weaker leftovers.
However, I wouldn't be surprised if discounts and coupons emerge for registry-recognised 'Premium' domains at some point in the future.
There are still a lot of great .co domains that are in private hands. It is unlikely or rare that these would ever be dropped or make it to delete. They will either be sold to end-users, traded from domainer to domainer, or be resold at GD expiring auctions (dependant on which registrar held them). On those types of acquisitions, this makes no difference to the price I am willing to pay for a good domain. If I thought I could make money on a domain, I would pay the same price through GD auction, domainer resale or direct from Neustar. I normally look for at least 10x resale on purchases that range from $100 to $500. So if I think the domain is priced at 10% or less of it's potential resale value, I'm indifferent to the acquisition source. I'd prefer that money going back into the pockets of a private domainer, rather than a big company like Neustar or GoDaddy!
In the near future, the lower-middle market that might emerge is domainer to domainer wholesale/resale of .co domains on places like NP.
I may not be wanting to renew a particular domain for $23, but there may be others who will take a punt on it. As a domain comes up towards expiration, the aftermarket may be more willing to buy this domain for $10 to $30 (plus the renewal fee) - in situ of the traditional backorder or closeout cost. But I don't think that would be a massive market, because the volume of domainers willing to pay $50+ (in total) for a .co domain is relatively small.
Regarding renewals, I don't think I will hold onto substantially more domains because of this. If I picked up a domain for $4 and wouldn't renew it for $23, the same logic still applies. What has changed, is my ability to refill inventory with similar quality of domains at those discounted rates. It still doesn't make me want to pay $23 for a domain that I was planning to drop. My investment in a domain is based on it's propensity to sell, so I don't see any major changes in that. I think I'll renew an additional 5% of .co inventory as a result of the changes.
I do think twice about what I drop, but I don't hold onto a domain just because I already have it. It's only worth renewing, if I think it's worth the renewal cost and has a good chance at selling. I have different expectations on a $1 reg and a $23 renewal. It's not worth renewing just because my replenishment costs have increased to restock the portfolio. I always think about the opportunity cost of the renewal fees. I also ask myself if I would hypothetically buy that domain from another domainer at the renewal price.
I also won't be increasing resale prices - because I don't think that end-users will or should absorb the change. The general rule is that if prices go up, total number of sales go down - unless demand also increases or supply wanes. There is no additional end-user demand created in the short term, but there may be different demand signals from domainer to domainer. Outside of wholesale, nothing really changes for me in terms of pricing or resale targets. If renewal costs do go up, and end-user prices don't - it just means a squeeze on margins.
I've been acknowledging the over-dependence on .co within my own portfolio for a while... so I think this will act as a catalyst for me to seek some diversification.
I haven't really practiced what I preach, and I have a lot of eggs in the same basket. This has been a helpful reminder that I need to spread out my risk - and also bring some focus back onto quality vs quantity.
To conclude, I think the impact of this change depends on where your strategy is focused as a domainer.
Last year, when I was testing .co handregs at scale, it would have hit me hard. This year, I am less worried... but I still think it's far from ideal. Nonetheless, these changes are outside of our control, so as domainers, we have no choice other than to learn and adapt.
Hope that helps
