.COM Domaining - A ponzi scheme

[netfleet]

That's how I see it... the only reason .COM values don't completely fall through the floor is because more and more fresh blood in the form of eager newbie domainers come in every day and push more money into the .COM market.

Investing solely on the basis of a hoped for investment return can never be sustainable in any market and this applies equally for domains.

The fundamentals need to be considered and in domain names that means end-users. If a domain has neglibible potential or end-user value, leave it alone!

This post has been prompted by looking through the boards here and seeing so many people new to domaining who have just bought or registered a few dozen domains, post a few times only to then disappear and never post again. Invariably they have invested in the .COM market because they are led to believe it's the best area but coming so late into the game, with only a few hundred to spend they end up buying or regging worthless domains with no inherent value. I reckon it's this flow of fresh cash into the market that is propping up the whole .COM industry.

I expect this is a bit controversial so I hope I've not offended anybody & keen to hear some responses....

 

[notlikeyou]

This post has been prompted by looking through the boards here and seeing so many people new to domaining who have just bought or registered a few dozen domains, post a few times only to then disappear and never post again. Invariably they have invested in the .COM market because they are led to believe it's the best area but coming so late into the game, with only a few hundred to spend they end up buying or regging worthless domains with no inherent value. I reckon it's this flow of fresh cash into the market that is propping up the whole .COM industry.

I expect this is a bit controversial so I hope I've not offended anybody & keen to hear some responses....

Pick any TLD and this would apply. Com is a known extension, thus making it a more frequent for newbies reg worthless domains on the sheer merit of not having the knowledge yet. How many noob registrations do you see that are with an utterly worthless extension. It's not about a COM Ponzi scheme, it's about lack of knowledge in what makes a domain valuable.

 

[footodors]

It's the 99/100 rule.
99% of domains are crap

 

[RLW]

I tend to agree with netfleet.

Like any investment, you really need to invest your time into a domain to come out in front.

You can invest your time into building a successful website for your domain or you can invest your time into finding an end user for your domain.

I've seen so many people selling domains in the NP$ marketplace that are just completely useless. Why these domains were ever registered in the first place is beyond me. There is no use for an end user, and the topics really aren't popular enough to be able to build a successful site around.

I think netfleet is very right, the reality is that a large majority of undeveloped domains are being passed between experienced and un-experienced domainers. But never to end users. Until a domain finds an end user who has a use for it, the domain is really not worth a lot. Domainers are buying domains from each other on speculation that there are end users willing to pay a lot more for them. But for most of the undeveloped domains out there, they would already have found an end user by now. (Obviously there are exceptions to this).

Too many people value domains based on what other similar domains have sold for, but realistically, a domain is ultimately only worth as much as an end user is prepared to pay. Domainers are therefore jacking up prices to try to make a profit.

It's all about perceived value and end users in my eyes...

Eventually, many domains will reach the 'end of the line', where there are no domainers who are interested or can afford the domains at a marked up price. The domain bubble will burst and we'll see more realistic sale prices. Domainers are essentially pricing themselves out of their own market.

 

[ecalc]

Most worthless names get hand regged, possibly renewed, then drop. Worthless names rarely change hands in the aftermarket, making them poor candidates for all but the most skilled Ponzi operator. Junk that sees a 2nd registrant is the exception, not the rule. Money pissed away on worthless hand regs goes directly to OEM vendors (registries & registrars) and neither inflates nor sustains dot com aftermarket prices.

 

[-REECE-]

.COM doesn't fall through the floor because .COMS make money. If I have a domain which makes me $100 per year, what incentive do I have to sell if for $100 or $200? Not much.. If I have some .mobi, .tel, etc which makes $0 per year, then maybe when I want $200 bucks I'll sell that one.

.COM is a brand. .COM is King and will always be King. If you're not a domainer, .COM + key ccTLD are probably all you know.

 

[netfleet]

Most worthless names get hand regged, possibly renewed, then drop. Worthless names rarely change hands in the aftermarket, making them poor candidates for all but the most skilled Ponzi operator. Junk that sees a 2nd registrant is the exception, not the rule. Money pissed away on worthless hand regs goes directly to OEM vendors (registries & registrars) and neither inflates nor sustains dot com aftermarket prices.

I can see your point to an extent but I think even the act of registering worthless domains does actually have an upward impact of pricing of other domains.

Eg if crappy-domain.com, crappy1domain.com, crappydomain2u.com is registered you would think that crappydomain.com would be worth a little more than otherwise wouldn't you?

Also when these tens of thousands of worthless domains get listed for sale for $100, say, it makes the $200 domain look like value when it's advertised for $300.

 

[RogueWriter]

This is true in every industry, not just domains. Every industry sees fresh blood, they find out that success usually requires a combination of sustained effort and self education and they move on to something else. Some succeed some fail, either way demand over time within a niche usually grows.

 

[ecalc]

I can see your point to an extent but I think even the act of registering worthless domains does actually have an upward impact of pricing of other domains.

Eg if crappy-domain.com, crappy1domain.com, crappydomain2u.com is registered you would think that crappydomain.com would be worth a little more than otherwise wouldn't you?

That logic gives false comfort. Crappydomain is junk whether or not worse variations are registered. Inferior names being registered shows that people are more than willing to hand reg progressively worse names instead of paying an aftermarket premium for crappydomain or better. Each one of those regs is one less bidder for crappydomain, deflating its eventual sale price. VeriSign's naming business ended Q1 2009 with approximately 92.4 million active domain names in the adjusted zone for .com and .net, representing a 9% increase year-over-year. 92 million and growing, but only a tiny fraction have value above reg fee. Most newbie action deals with names worth reg fee and less.

Also when these tens of thousands of worthless domains get listed for sale for $100, say, it makes the $200 domain look like value when it's advertised for $300.

Better to compare auction sold prices not ask prices. 99% of names never sell.

 

[accent]

While I agree with nearly all that others have posted here, it bears mentioning that the number of websites continues to grow at a rapid rate. While a rising tide will certainly not float all domains, the line between domains with legitimate end-user potential and those without continues to move outwards. Those who catch the better domains at that edge can do well with reg fee domains.

But yes, 99% of all domains registered are crap - at least. Take a look at the raw drop lists. Some of those are end-user projects that never got built, but it appears that most are bought for speculation - 40,000 per day! There must be an enormous number of wannabe domainers who never spend any time on the forums.

 

[RLW]

If .com is a Ponzi scheme then why were .com's making big money before there was a single buyer in the 90's?

Didnt the internet bubble burst soon after that because of escessive, unrealistic pricing and money making structures? There must have been buyers if this was the case...

 

[netfleet]

If .com is a Ponzi scheme then why were .com's making big money before there was a single buyer in the 90's?

There was no "fresh blood" but the domains still made money.

I honestly think this thread shows how little some folks understand domains. I do think there is an incestuous aspect to domaining, but many domainers that don't involve themselves in this are making big money with no domain sales.....just PPC income.

I've never sold a single domain to a domainer and could stop now and just let the money roll in.....I need to make NO domain sales and I need to develop NO domains to live very well.
.

It hasn't always been a ponzi scheme. All the money made in the 90's and early 2000's were from domains with real end-user and therefore inherent value.

What I'm saying is that now, because all these domains in .COM are owned by a select few, the main part of the .COM aftermarket consists in trading in 2nd-rate domains whose values are propped up by this fresh blood.

You can't start in domaining in .COM these days and expect to make a profit through PPC.

 

[-REECE-]

I think it would be more accurate to say "It takes money to make money" -- not really true but more true today than it would have been 5+ years ago when it comes to .COM.

I think if you're starting today, your best bet is to abandon the PPC model entirely (unless you're coming in with money) and look for good deals on domains -- learn what domains are worth and buy ones that are sold for less than they're worth. Giode is a good example of a new domainer who has made a lot of money doing this.

It hasn't always been a ponzi scheme. All the money made in the 90's and early 2000's were from domains with real end-user and therefore inherent value.

What I'm saying is that now, because all these domains in .COM are owned by a select few, the main part of the .COM aftermarket consists in trading in 2nd-rate domains whose values are propped up by this fresh blood.

You can't start in domaining in .COM these days and expect to make a profit through PPC.