When I talk to people who don't know a lot about domains, I tell them about the hoarders who buy thousands of names. There definately is a lot of money in hoarding large volumes of the right names. In the last few months we have seen the buyouts of the following domains L-L-L.com, LLLL.com, LLL.in, N-NN.com, NN-N.com, Premium LLLL.net and NNNNN.com. As everyone keeps jumping on the boat of the next buyout I thought I'd do some small calculations to estimate what returns I would expect after 10 years in order to buy domains in bulk or not.
Here are my assumptions for my calculations:
Todays price of .com - $7.10
Annual growth of .com price - 7%
A good average annual return on investment - 20% or more
Traffic revenue of domains compared - $0
Domainers have been spoilt for too long and so many domainers complain when they only get 100% ROI per year while the majority of the investment community considers 20% growth per year large. I think that this is a good long term goal for an investment.
I compared 3 alternative investments. A reg fee domain, a $100 domain and a $1000 domain. The minimum value for these domains after 10 years (with my assumptions) in order to reach 20% growth rates are approximately:
$300 for the reg fee domain
$990 for the $100 domain and
$7700 for the $1000 domain.
You can see that the reg fee domain has to increase in value over 4200% while the $1000 domain only has to increase in value less than 800%.
When I set a lower goal of 15% growth the following results occured:
$230 for the reg fee domain
$660 for the $100 domain
$4850 for the $1000 domain
The reg fee domain required >3200% growth in contrast to less than 500%
When I set a higher goal of 25% growth the following results occured:
$390 for the reg fee domain
$1480 for the $100 domain
$11,900 for the $1000 domain
The reg fee domain required >5500% growth in contrast to less than 1200%.
Personally, I think that there is a lot of great long term opportunities for buying reg fee domains but I would recommend asking yourself the question "Is this domain going to be worth more than $300 in 10 years time?" The phenomenal growth (4200%) required is not to be sneezed at and it may be a lot easier to find the $1000 domain that will rise in value 800% over 10 years than $1000 worth of reg fee domains that will rise 4200% in value.
It is important also to consider that the reg fee domains requires a larger long term commitment to paying renewal fees. The domainer who buys the reg fee domains will be continually investing more money into renewal fees while the domaining investor who buys the more expensive domains can have more flexibility in future investments and is under less pressure to find money for renewal fees.
I think that in the long term the opportunities for reg fee domains are going to get more and more difficult to determine but they will always be there.
Here are my assumptions for my calculations:
Todays price of .com - $7.10
Annual growth of .com price - 7%
A good average annual return on investment - 20% or more
Traffic revenue of domains compared - $0
Domainers have been spoilt for too long and so many domainers complain when they only get 100% ROI per year while the majority of the investment community considers 20% growth per year large. I think that this is a good long term goal for an investment.
I compared 3 alternative investments. A reg fee domain, a $100 domain and a $1000 domain. The minimum value for these domains after 10 years (with my assumptions) in order to reach 20% growth rates are approximately:
$300 for the reg fee domain
$990 for the $100 domain and
$7700 for the $1000 domain.
You can see that the reg fee domain has to increase in value over 4200% while the $1000 domain only has to increase in value less than 800%.
When I set a lower goal of 15% growth the following results occured:
$230 for the reg fee domain
$660 for the $100 domain
$4850 for the $1000 domain
The reg fee domain required >3200% growth in contrast to less than 500%
When I set a higher goal of 25% growth the following results occured:
$390 for the reg fee domain
$1480 for the $100 domain
$11,900 for the $1000 domain
The reg fee domain required >5500% growth in contrast to less than 1200%.
Personally, I think that there is a lot of great long term opportunities for buying reg fee domains but I would recommend asking yourself the question "Is this domain going to be worth more than $300 in 10 years time?" The phenomenal growth (4200%) required is not to be sneezed at and it may be a lot easier to find the $1000 domain that will rise in value 800% over 10 years than $1000 worth of reg fee domains that will rise 4200% in value.
It is important also to consider that the reg fee domains requires a larger long term commitment to paying renewal fees. The domainer who buys the reg fee domains will be continually investing more money into renewal fees while the domaining investor who buys the more expensive domains can have more flexibility in future investments and is under less pressure to find money for renewal fees.
I think that in the long term the opportunities for reg fee domains are going to get more and more difficult to determine but they will always be there.
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