Is Domaining basically one giant pyramid scheme?

[domainsoup]

Been in the domain game for a while now.
People are sold the idea that getting the right domain can make them a lot of money. This idea is largely false as the majority of good domains have already been registered. People get lucky very rarely with a handregistration. The success stories are told over and over. But for each one there are hundreds of thousands of ones that go nowhere.

OK now on to how else to get a good domain. Drops and expired auctions. Entire industries have been setup for this. But guess who makes the most money on this? The companies that sell peoples expired domains after collecting renewal fees (double dipping). The auctions are either inflated or not representative of the actual price. There have been many times I've purchased at auction at domain with like 200 bids and sold for 800+. Then you list it on Sedo. And you get people offering maximum $100 paid. Most times these people cancel the negotiations even if you price it at 1000. So 20 bidders bid a domain up to 800 at auction. And the most you are offered is 1/8th of it? Companies like Godaddy are making a killing. I don't know if they are shill bidding but someone is willing to pay 790 at auction. But no one is willing to pay more after?

Domaining is largely a pyramid scheme. Why? Because the people that make the money have largely all been decided. There will always be success stories. But the majority of people who enter it fail. The big companies make all the money. And they sucker the average joe into believing a dream that doesn't exist.

It's like a lottery. The guy with the winning numbers is happy. But everyone else loses. Yet people get hope because of the story of the guy who won.

 

[bonanza]

I think the parallel of domaining to a pyramid scheme looses traction when you consider the potential value to develop websites on quality names. Domaining is closer to digital real estate than a pyramid scheme in my book for if no other reason than that alone.

 

[NameOmnia]

Let's not forget that a pyramid scheme is solely based on people recruitment and there is no material product or service to purchase or sell.
That's why it is considered a fraud and it's illegal in many countries in the world.

 

[Domainace]

When you have aged domains, they say keyword domains so you go ahead and buy aged keyword domains, they say numerics are the rage, when you have numerics they say LLLs are the craze, and when you buy that they say oh but not to my liking and you are the last man standing with the domain.

This really jumped out at me. In general, whenever everybody is saying that X is the big money investment, it's already too late. At that point, it is a pyramid of sorts. Lots of people making bad investments that they will sell to the "bigger fool" for a profit - before the whole market goes south.

This is a low-barrier to entry business with lots of competition. That means most people fail - especially those who follow the herd. The age of a domain, for example, rarely has anything to do with its value. You have to think for yourself what makes a good domain name, and tune out the noise.

There is a lot of corruption in the domain world, usually covered up. That might make you suspicious, and it should. But honest people still find a way to make money. But it's not that easy. It never was.

If you believe outbound marketing is spam, and refuse to do it because of that, then you might want to consider giving up on flipping names quickly. If you want to wait for inbound inquiries, you will need a good inventory and patience. It's a great way to make money (if you choose the right names) but it's not fast. You'll probably need years to get traction that way.

 

[Fancy.domains]

For me, domaining is about working hard and obtaining knowledge (+ up-to-dated data from statistics).

Add a little luck, and you're on your way.

 

[Cdomains]

If you believe outbound marketing is spam, and refuse to do it because of that, then you might want to consider giving up on flipping names quickly. If you want to wait for inbound inquiries, you will need a good inventory and patience. It's a great way to make money (if you choose the right names) but it's not fast. You'll probably need years to get traction that way.

True!!

 

[Bullock]

The age of a domain, for example, rarely has anything to do with its value. You have to think for yourself what makes a good domain name, and tune out the noise.

I agree

 

[BrandClub.com]

@imadoer - Yes some people do make money out of domaining and thats great. But to the rest of us in the industry - when we try to sell it - we dont find any users and its usually through some intermediate - who wants to get the domain cheap and then earn money by reselling it at a higher price. I have posted numerous keyword domains - aged domains - but most are interested in paying you say low rates - say $1~$10. Once in a while you may be lucky enough to get some rare offer at a higher price but all these are reseller rates. So in the end say me having around 100 domains each year am just paying renewal fees and developing a domain at a time. Have tried listing on @FlippaDomains / @NamePros and each time its all low low offers in the above range I mentioned. And suddenly you hear some odd domain being sold at XXXX rates makes me really wonder if really domains sell! Actually I even have my signature with the same line - Do Domains Sell? I don't think so! When users here talk of big numbers my only message has been - I have many keyword domains - sell me one domain I have and take a percentage out of it - and you wont believe no one has ever responded to that!

Like ANY outher business, DOMAINING has winners and losers ...
Value of a domain = what someone is willing to pay for it !!! Absolutely TRUE ...
but out there are people willing to pay thousands, hundred of thousands and even millions for a good domain name; you just need to collect the right domains. That´s an ART but can be learned !!!

 

[indam]

Lottery, yes. Pyramid scheme, no.

A pyramid scheme requires someone at the end of the line with nobody left to sell to. That situations doesn't exist in domaining and never will. There will always be buyers at some price..

tldr; Post contains stats! Skip to the next post for a motivational post!

YES! Domaining is a pyramid scheme! The proof is simple and is proving the quoted statement!

(P.S What I write below does not cover the talented people who can sell ice to eskimos)

Take a trend, like 4L.COM Domains. A few months ago, these domains where priced to about 40-50$. Now the price is around 300$ with a median of 800$. Why is that?

1. Who is buying!?
Check latest players involved in transactions from llllsales.com
My stats:
I checked 566 transactions of domains sold for more than 1000$

• There are only 294 unique users (emails) involved. (Unique Users who bought one domain for 1000$)
• There are 349 domains sold to domainers who bought more than 1 domain.
• There are 142 domain sold to domainers who bought more than 10 domains.

(There is a margin of error, but spend a few hours and do your own check to prove me wrong)

So, is there a pyramid? Of course it is. What happens in domaining is all about trends. Someone dictates the game, and domainers follow. You become a domainer when you learn that you are not someone special, you are part of a flock that is lead to "trends". You are smart if you study these trends! Few can predict the trend; in domaining the trend is always crafted.

Dictionary domains, domain hacks, generic domains, chinese chips... these are all trends. Majority of domains is owned by someone already.

More proof!?
There is a total of 456,976 LLLL.COM out there.
More (way more) than 110,647 LLLL.COM domains are registered to users who own more than *100* of this specific type of domain. (This is a very very minimalistic number, my data have limited GoDaddy numbers, and also missing references from many smaller registries).
Only about 50000 domains are owned by those with more than (4L) 6 domains. I am not even considering as "domainers" those who do not have 5 LLLL.COm (no disrespect, only for the sake of argument).

So is domaining a pyramid?
Here is a challenging question for you who say it is not! How many 4L domains are traded every day (easy to find)!? and what happens if one of those guys who ownes 8980 domains decides to sell them for "the profit" he is expecting/preparing one day ?
-Hint! None will sell all in one day, it will be a slow process of hopess and demand




P.S Definitely I am not a reliable/authority source in domaining.
P.S.S I still buy 4L.COM everyday if I can find with the right price.

 

[cocaseco]

You should read the definition of a pyramid scheme before you take such a strong position. Nothing you described fits within the definition of a pyramid scheme. Here I'll help..

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. Wikipedia

Ponzi scheme maybe, pyramid scheme, not even close. And your question to those who say no, doesn't even apply. A pyramid scheme is a well defined system with exact conditions. Just because one guy holds all the domains and sells them has nothing to do with being a pyramid scheme.

I would add, that not eeverybody followed the trend. I actually sold all of my 4l's and got out of the market about mid-way up. I'm not interested in anything but brandables and didn't want to waste my time or energy.

 

[wurdd]

The overall domain business is definitely not a pyramid. However, there are plenty of instances when buying in early helped.

I think there are different levels of domaining - speculative, buying and selling, EMD, brandables, etc.

The speculative level is the worst place to start out in this business, in my opinion. The herd mentality will break you. Hand regging will break you. Renewals will break you.

Speculative Domaining - I enjoy it and I feel that I'm learning something everyday while researching the market. Hell, my portfolio of short domains and numbers is marginal at best, though I feel there is potential long term. Fact is, if you buy decent domains and hold them you should get a decent return. You're just not going to make a killing overnight - you will have better luck buying lottery tickets.

EMD Keywords - the old recipe still works - buy good names and develop them with good content, focus on things that you know and enjoy, hold long term.

You can still make good money if you start today. Just know what you're getting into.

 

[RU]

Like my post if you like domaining!

 

[DNScholar]

I like the post but as in any industry hard working is the key in domaining too.

 

[heavend]

Everything in life is scheme, outside of birth and death.

Now, as far as Registrars making the most money - Yes, of course, like many people here said before me - just like during Gold Rush people selling shovels did much better then actual participants (on average) - all registrars do is sell us shovels

As far as shell bidding - I personally don't buy it, since if the name is being sold for $800 - it will most likely bounce back. Specially if there are more then 2 bidders. Now, it may take some time. People who wanted to pay $790 for the domain, probably spent this money already somewhere else, but if the domain name worth it and more then one person thinks so - it will eventually recover and most likely add in value. I am not actually certain what domain names are you talking about, since you never gave example, but I assume liquid domains.
The problem with shell bidding is - you are thinking about someone like Sedo, who makes millions - to try to cheat you out of extra few hundred dollars. This is simply not practical - as reputation is everything in this business.

I agree also with posts here, where people say that you work hard and you usually get more rewards then people who purchase a name and assume it will go up 100 X without any efforts.

In general - I am new to this community and I really like this kind of blogs - shows people actually think and work hard on their businesses.

 

[WhoaDomain.com]

lots of 4L chips were in expired lists last year. ???

ummmm you mean 2015? where was this list? I heard last year that the 4L.com's were all dried up already. where are you getting this intel from? and they were expiring? I kept reading that hand reg 4L's was drying up not 4L expireds. It was just assumed last yet that 4L domains were going to be kept for hold.

are you talking about crap 4L.com combinations? with alot of A,E,I,O,U and V?