DAN.com

Is it time we stop comparing domain names to virtual real estate?

Labeled as discuss in General Domain Discussion, started by Dave, May 19, 2020

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  1. Dave

    Dave Top Contributor VIP ★★★★★★★★★★

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    For many years domain investors have compared domain names to virtual real estate. Owning a premium .com domain is like having a store on Fifth Avenue, or so we've been told time and time again.

    I believe that comparing domain names to virtual real estate is outdated and even somewhat damaging to the retail value of domain names these days. This analogy stems from a time before the likes of Google were technology giants, when search engines didn't have the depth and capabilities they do now. A time when people would type in a url directly instead of searching on Google.

    I believe more companies are waking up to the realisation that if they don't establish a strong online presence, they're going to be left behind. But should we still continue using this analogy of virtual real estate?

    Here are the reasons why I think we as investors should stop using this analogy:
    • Physical real estate does not typically have a 5x, 10x or more markup in such short spaces of time.
      • It also doesn't have any notion of wholesale and end user pricing.
    • Type in traffic is far lower than what it used to be, and quite frankly very easy to fake so how can any end user ever be expected to trust such statistics?
    • Brandables are more popular now than ever, and it is very unlikely many people are typing in such domains
    • It still gives off the vibe that we are merely domain investors. As an industry we should be striving to be more than just domain investors, we are branding professionals/experts/consultants that provide a real value to end users.
    So what alternative analogies can we use?

    Is it fair to compare domain names more to unique one of a kind paintings or antiques? After all every domain name is a unique one of a kind asset.

    Or is it fair to compare ourselves as pawn brokers? This would certainly help end users understand the disparity between aftermarket/reseller/liquidation pricing and end user pricing.

    When you consider antique dealers, pawn brokers etc. nobody ever questions how MUCH they paid for an item. They do with domain names because we ourselves keep comparing it to virtual real estate. You wouldn't try selling a house you paid $200,000 for 6 months later for 2 million would you?
     
    Last edited: May 19, 2020
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  2. WhoaDomain.com

    WhoaDomain.com WhoaDomain.com Gold Account

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  3. Ategy

    Ategy Arif M, NameCult.com TheDomainSocial.com VIP Gold Account

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    I've heard this a few times. I think it might have been Chris Zucker who said in one of the Sherpa shows something about this. Either way I don't agree that it's a bad analogy. But obviously it's not 100% exact (nothing is) .. so use it when it makes sense and don't use it when it doesn't.

    Purchase price really should never come into play when we talk to end users. The real estate comparison isn't really for talking about ourselves .. but in the context of pitching potential buyers of the benefits of having a good "location location location" on the internet. It's simple, easy and something just about everyone in business understands.

    Again .. I don't really see the relevance here. The comparison to real estate isn't because of the exisiting traffic. It's for the traffic potential. I've never sold a domain where existing traffic was even mentioned once. People want good domains and brands because it makes their service/product look good/cool and easier to remember.


    But most domainers are just domain investors .. lol. Yes some are involved in branding services .. and ultimately "Branding Specialist" might seem like a more exciting/intriguing label. But ultimately it's not about us .. it's about our domains . .which indeed are digital addresses (aka digital real estate .. lol)


    The comparison to antique dealers isn't an inaccurate one. But I'm not sure we want to be compared to antique dealers. More importantly, again, it's not about us or our "profession" .. it's about our product.

    I'm also pretty hesitant to compare us to pawn shops/brokers whether accurate or not. Again .. we want to take focus away from what we bought our domains for .. and instead focus on the actual value it could potentially bring your buyer.


    Ultimately I don't get why saying domains are like land/property is a bad thing when one of the few general societal consensuses we have is that real estate has value .. and can strongly influence your life/business depending on the specifics of your location.
     
    Last edited: May 19, 2020
  4. Joe Nichols

    Joe Nichols Common sense consultant VIP

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    Great discussion, @Dave. I've also struggled with finding more appropriate analogies, but have come up short, so it's a great topic to knock around here.

    I think there's a time and place to use the real estate comparison, as mentioned by @Ategy, but it definitely doesn't do an accurate job of describing this industry.

    It's possible that finding an apt comparison is so hard because nothing else is quite like buying and selling domain names.

    I like the artwork comparison. The huge markup of domains in the aftermarket occurs because only certain people understand their true value, and are thus willing to pay to acquire them. That certainly mirrors the market for collectible items.

    On the flip side, domain names have a very important functional use (housing a website), as well as an intangible use that cannot truly be quantified (the brand authority and memorability they can provide).

    So I guess I believe that domains are actually three separate things together: collectibles, assets, and advertisements/brands.

    Does anything else in the world really compare to that?
     
    Last edited: May 19, 2020
  5. Dave

    Dave Top Contributor VIP ★★★★★★★★★★

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    Hey guys thanks for your responses. More in depth than I anticipated so soon. I don't have time now to respond but I promise I will do later.
     
  6. HotKey

    HotKey Made in Canada VIP

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    Interesting outlook, moving away rather than continuing forward with using the term. Great discussion.

    Like Joe, have circled this countless times myself, but always end up coming back to along the lines of the virtual real estate analogy. It really seems to make the most comparable sense, in a way that can be familiar even to first-time buyers(no pun intended).

    Throughout millennia many different words and terms have been recycled and redefined or reshaped to match current cultural advancements. What may have meant just one thing at one time now has new meaning or additional ones. I think in this case comparing domain investing to real estate and calling it digital or virtual real estate seems just a natural branch of the term.

    Look at the word surfing. I mean just 50 years ago no one would have dreamt one would also be surfing something held in your hand or sitting on your desk.

    I think using the art, pawnbroker or antiques analogy has more of a targeted approach, where perhaps you've already surmised your buyer and have prepared a method of presentation. Or those analogies could even be based on the type of domain name itself. But not to say those analogies are like "subsets" of the general real estate understanding/approach of domain names.

    It would have to be something really good to compel me to move away completely from using the term, an analogy that resonates across the board as well as "virtual real estate" does.
     
  7. Nametree

    Nametree Nametree.com VIP

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    I've always thought of domains as somewhere between real estate investing and baseball card trading. There's an element of value attributed to something that doesn't intrinsically satisfy a necessity, which I think makes most domain investing feel like trading collectibles.

    Unlike real estate, domain names don't provide shelter, and there will never be a shortage of domain names at the shelter-grade level. With real estate, housing shortages are very real, and if you can't afford to buy or rent an existing house, you can't really make one up. But with domains, the "necessity" element comes from having an online address for your business. No matter how many are taken, there will always be an option for anyone to make something up from scratch.

    The 1% of the 1% of domains are like collectible real estate: the duplex penthouse with a balcony over Central Park you buy just because you can, not because it provides you shelter; because it confers you the perception of power. One could say, well, this is just like artwork - but I don't think it is, because at the end of the day, there's a lot more function to a $30 million penthouse, and a lot more function to a voice.com, than there is in a Klimt.

    And the next 1-3% of domains are like undeveloped land in the middle of expensive urban areas or high traffic areas in the world. That's what most of us hope to be investing in. Their value comes from visibility or access, and development potential.

    Sure, there are many ways in which domain names are different than real estate if you really break it down, but at the end of the day, if I had to have a discussion with an end-user who is buying their first domain, I think it would be infinitely more difficult to convince them to buy with the antiquities, pawn, or artwork analogies, than with real estate. Real estate is something everyone understands and can identify with, it's difficult to find that familiarity in any other analogy.
     
  8. lock

    lock DomainUsed.com VIP

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    As a sales pitch why take it away. It still probably is the only thing similar most can comprehend.
     
  9. Jimmysun

    Jimmysun Established Member

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    Real estate comprise of some factors that are: your friends near by you, and your family, school, jobs, convenience, hospitals..etc.

    LV, Gucci, Prada are based on historical values, designing, qualities, celebrities, etc.

    Domain names: looks, meaning, branding, historical values( big companies adoption), virus vulnerability, etc.
    it’s more credited on soft values( mind implantation) due to all domain functions the same. It growing faster because it attributes to technological stuff, technically any domain can be replaced with other tlds but very hard to move in mind and imagination of .com is the king.
    Real estate is different, if you want to work in LA you move there, something there is irreplaceable, if you want to move .com to .net, you can do it by single few clicks, only thing change is image, nothing more.

    and domain name is more than house number, car license plate number because it has branding function and word and logo designing including.

    if crypto domain became main stream in trend( so called decentralized domain) that would not be good news for Gtlds, but I believe both will harmonize but just under different regulations.

    so my conclusion is domain is more like semi religions semi real estate.
     
    Last edited: May 19, 2020
  10. Dave

    Dave Top Contributor VIP ★★★★★★★★★★

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    In my experience it does come into play occasionally. I personally have had many messages like "why should I pay you $5000 for something that cost you $200", if it was say a GD expired auction that is available for anyone to research on NameBio etc. These same people may have done research on domain names and discovered articles about how they're the virtual real estate of the internet. This comparison could be what is deterring them on any valuation I give.

    This is fair and I agree, better domains will always have an increased potential due to their memorability/pronounce-ability/spelling etc.

    I agree with you Joe, it is difficult to compare and I think that is exactly my point. Comparing to virtual real estate does NOT do domains justice. They are actually much more than just virtual real estate like you say. Premium domain names offer more than just a good home on the web or at a good location.

    I think we need something that encompasses all of these factors so we can better educate end users.

    Again, I must dash for now but will try to write some more later.

    Thanks to everyone who has responded, will great discussion here.
     
  11. CraigD

    CraigD 360promo.com VIP

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    Going back 20-25 years ago, if someone asked me to explain what a website was, I used the virtual address/ real estate analogy, because it was and (I believe) still is the best way to explain what domains and websites are.
    eg: we even have post boxes on the front lawn, and we can subdivide the property into apartments etc.

    As for domain investment, same thing:
    Would you buy a home in a bad district, or do you want to live on a popular street? You can live out in the country but you might not get many visitors because the telephone directory has not listed you in bold yet. etc.

    I think that good analogies hold true over time.

    EDIT: I'm not a salesman or spruiker and don't go around hawking my wares, but it was good back then when the majority of people didn't understand what the internet was, and I think it still works.
     
    Last edited: May 19, 2020
  12. garptrader

    garptrader Top Contributor VIP ★★★★★★★★★★

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    The real estate analogy may be valid for one-word or highly-searched two-word .COM domains originally registered 2000 or prior. The reality is 99.9% of the general public does NOT view domain names as worth paying thousands of dollars for when in their view you can easily add an extra word or a few letters or a hyphen or use one of hundreds of alternate extensions to have a website address. Many view a social media presence as more than adequate even though Youtube, Facebook and Twitter occasionally remove content or channels due to some policy violation.
     
  13. BrandAptly.com

    BrandAptly.com Established Member

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    While your thought process is sound and profound, I doubt it will be prudent to establish an industry-wide analogy. I believe we should leverage whatever comparison suits our purpose on a case-by-case basis. The nuances in domaining styles, business objectives, scope of services and marketing approach are far too vast to legitimately justify any cross-industrial juxtaposition.
     
  14. eyedomainous

    eyedomainous Top Contributor VIP ★★★★★★★★★★

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    Domains are digital addresses in namespace just as radio and TV stations are 'call letters' in airspace (frequency addresses). Both are 'media properties', in the distributed web technology and TV / radio studio 'real estate' sense. So the analogy applies.

    Of course, the act of registering a name does not require an understanding of the media trade, so many 'domainers' don't know, or care, that they are in the media business. But if you understand the industry, product and the market, there really is not much difference between a 'domainer' selling a four letter domain and a 'media broker' selling a four 'call letter' TV or radio station handle.

     
    Last edited: May 21, 2020
  15. equity78

    equity78 Top Member TheDomains Staff TLDInvestors.com PRO VIP ★★★★★★★★★★

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    I have never used the term talking to someone about domain names.

    I have seen some go into places on the net they probably shouldn't have because they are outnumbered and use Real Estate, and people who hate domainers, just go off on tangents.

    I think personally that end users view domain investors as a necessary evil they have to deal with at times.

    Domain investing is not real estate investing no matter how many almost analogies people like to make. Less about real estate everyone knows what a good location looks like

    Real estate has been established for centuries depending upon the region. There are comps that make appraisals much easier to understand.

    Domain investing deals with each domain being unique, a person looking to buy a house cannot come in substantially below the most recent sales and comparable inventory in that area.

    Even when it comes to desperation, a property seller has something to go on, something to support them on, if a couple has decided that is where they want to live, they may not have a lot of other options that check all their boxes, and even if they have some options, they most likely do not have the number of options that an end user searching for a brandable domain has.


    It's also funny @Dave I have had a few people over the last few weeks emailing or chatting about the term "investing" The majority opinion was calling it investing was ludicrous, it's not investing.

    I think you can extrapolate parts of many different ideologies.
     
    Last edited: May 21, 2020
  16. Mytz.com

    Mytz.com Top 4L [email protected] IEIE.com CUTU.com NESU.com KKIK.com VIP Gold Account

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    At any point, domain names are only going to become so important that they can't be replaced by anything else. Right
     
  17. equity78

    equity78 Top Member TheDomains Staff TLDInvestors.com PRO VIP ★★★★★★★★★★

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    That's also much more rare, houses don't tend to have the kind of multiples of profit in as short of a time frame as domain names.
     
  18. NLP

    NLP Top Contributor VIP ★★★★★★★★★★

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    Like @Ategy, I've only ever sold names based on potential, and the strength of the keyword - not exisiting traffic.

    I think it's possible some who have an issue with the real estate analogy might be taking it too literally. I've found it useful for explaining domain investing to laypeople ("empty plots of land"), and illustrating value to others ("waterfront properties" (.com, or .co if that's what they're after) vs. a location that's less valuable.

    Maybe it's more like commercial real estate, in the sense that most retail shops would expect to pay more for a space on a well-known street with a lot of foot traffic, rather than a side street where fewer shoppers are likely to walk in.

    I've probably only used the valuable real estate explanation a couple of times with buyers. Most of the time, if they're after the name, they have a sense of its value and scarcity.
     
    Last edited: Jun 3, 2020
  19. equity78

    equity78 Top Member TheDomains Staff TLDInvestors.com PRO VIP ★★★★★★★★★★

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    Good point NLP most never sell on traffic.
     
  20. passini

    passini Established Member ★★★★★★★★★★

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    I've been selling art and antiques for 26 years, there are few things in common with the domain market. One is the high mark-up on every price and the second, as someone already posted above, is that the purchase price paid by the dealer is not important, the selling price is based on the value of the item offered for sale and also on what a collector (end user) is willing to pay.

    If tomorrow I will find a Pollock painting in a garage sale for $100, I will sell after for 7 figures anyway, maybe even for more than the real value because art collectors love this kind of "new" artworks never seen before in the market that arrive from nowhere...

    By the way (I never though about this) my 2 biggest profits are from domains.

    Two hand regs .it poker domains:

    10 euro each, one sold for 20.000 euro, the other for 10.000 euro, many years ago during the online poker boom. In my "real" work I buyed one poster on ebay for 100 USD and sold for 10.000 usd, another sale I remember was to turn 1.000 usd to 18.000 gbp. That's all, these are things that happen rarely.I am still looking to find a 7 figures painting at a flea market, lol...
     
    Last edited: Jul 13, 2020
  21. shojib

    shojib Top Contributor VIP

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    Great discussion
     

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