Let's generate some hope - Effects of the recession waring off?

[jacal1]

Hi all. In looking at the selling sections here, the scary thing that happened at the height of the recession was that many buyers had suddenly become sellers. That certainly slowed things down!

Now I am noticing that some of the buyers are back - or at least they are not selling (transition period?).

What, if any, other hopeful signs are you seeing for this industry as the economy moves in a positive direction OR what signs would you expect to see when things really start to improve?

 

[labrocca]

Low level domains imho will never recover. Stuff like you have in your sig will languish and the days of holding crap are dwindling as prices increase and money goes elsewhere.

IMHO if you have a domain you can't sell for $100 you need to drop it. Better to hold stuff you can sell for $x,xxx. I'd rather sell 2 domains a year in that range than 20 domains at $100. To be honest it's easier to do that.

You want hope? Sorry. I got none.

 

[tristanperry]

*Bookmarks thread*

I've been wondering this too. I got into domaining in 2007 and made some fairly nice cash with it... until the end of 2008 when I went off to Uni (thus had less time for domaining) and when the recession hit.

Nonetheless I've got some nice domains and I love(d) domaining, thus I too have been wondering whether things are looking up recently.

My hunch is that things are certainly a heck of a lot better than they were mid-recession, but still not 100% recovered. Certainly, I think that the low-level market hasn't recovered much at all.

However I disagree with labrocca since I think this will change. I think this because the low-level market seems/seemed to be easily fuelled by people buying the low-level domains from their full-time (i.e. usually offline) income.

The recession has caused this spending to stop (thus really harming the low-level market), although I think that it'll recover as soon as confidence in the World economy recovers once more.

Just my $0.02.

So in short, yes, I think the effects are starting to ware off. I think that all parts of domaining will recover, albeit some quicker than others.

 

[labrocca]

One thing that fueled the low-level market was typos and PPC with parking. That market is dwindling to it's all-time lows and imho will never recover. Parking was never highly regarding and I think the wind has changed for them.

Where is the bright spot for domaining? Especially at the entry level. Where do you go? The sunset periods of new extensions used to also be lucrative. New suckers born every minute sort of thing but that's dead too.

 

[ecalc]

30,000 feet
The domain business is fueled by online advertising. When Google sneezes, domainers catch pneumonia. Google's Q2 results improved partly due to shaving traffic acquisition costs (ouch) as a percentage of ad revenue. source Omnicom, another ad industry bellwether, also reported positive Q2 results. source "Last year, the focus was survival," Omnicom Chief Executive John Wren said of his clients, which include household names like McDonald's Corp and Pfizer Inc. "Today, it's growth." source Looking ahead, Zenith Optimedia just upgraded its influential annual forecast of worldwide ad spending growth to 3.5% in 2010, up from the 2.2% increase it had forecast for this year only three months ago. source Watch macro trends of sovereign debt, tax policy, private sector employment and real estate foreclosures that can accelerate or derail ad industry momentum.

Sea level
There are 2 kinds of domain names - those that earn more than reg fee from direct traffic and those that don't. Domain earnings (RPM) are down in the global recession and much related wealth has fled to greener pastures or been destroyed. Rising RPM would boost earnings and confidence - some of that cash would trickle down to speculative names that have little or no direct traffic earnings. A domain bull market is unlikely absent RPM growth.

 

[sleepysentry]

I think there will always be a market for low-level names. A lot of "low-level" buying and selling is fueled by news of major sales, which will never go away. New businesses started during the recovery will need a web presence. Many businesses have been holding off on acquiring domains and will want to make up it when the economy kicks back. Finally, some businesses are expanding into the web market right now and need domains. If business isn't doing well locally, a logical step is to look to the Internet for buyers.

Technology giants like Google and Microsoft are spending a lot of money on new data centers right now. Google has doubled its data center spending from last quarter to this quarter. Google increases spending on data centers

Generally companies do not spend money on infrastructure unless they expect to see returns on their investment in the near future. If Google and Microsoft think the economy is doing well enough to spend wads of cash, it's good news for everyone.

Don't expect a massive bounce back, though. The general consensus among economists now is to expect a slow recovery. It could take up to a decade for the US economy to completely recover.

 

[labrocca]

Generally companies do not spend money on infrastructure unless they expect to see returns on their investment in the near future. If Google and Microsoft think the economy is doing well enough to spend wads of cash, it's good news for everyone.

This helps domaining much the same way that digital cameras have helped the Kodak film industry.

One does not have to mean the other is going to do well.

OP is asking about the domain industry. The tech sector is very healthy. Domaining is becoming less popular and harder to make money for bottom feeders.

Maybe the only decent markets left is drops and typos of new technology/sites.

 

[sleepysentry]

This helps domaining much the same way that digital cameras have helped the Kodak film industry.

One does not have to mean the other is going to do well.

OP is asking about the domain industry. The tech sector is very healthy. Domaining is becoming less popular and harder to make money for bottom feeders.

Maybe the only decent markets left is drops and typos of new technology/sites.

A healthy technology sector, especially healthy web industry, spurs domain investment. Companies don't buy domains if web business isn't going well. Tech companies are also more likely to understand the value of a good domain and pay for one.

Besides, the number of domain registrations keeps growing steadily, especially with ccTLDs. Total domain sale revenue did drop 12.5% from 2008 to 2009. This doesn't mean that domaining is dead, though.

Keep in mind that end users on average know more about the web than they used to. I also think a lot of low-level sales are based purely on speculation. I see a lot of foolish sellers trying to get $xxx or $xxxx for .biz names when the .net version is still available, for example. Developers aren't going to fall for that kind of crap and are have gotten better at registering names themselves I think. There is still a market for quality, reasonably-priced names, however.

 

[jacal1]

I agree with Labrocca that some parts of domaining (e.g. quick flips and some low level sales) are getting less popular. People are only spending significant money on names that have either proven traffic/revenue, or are so strong that they are almost guaranteed to generate traffic/revenue/profit on sale. Also, people are much more aware of renewal fees adding up, so I think the average portfolio has fewer domains. Perhaps when the economy recovers some aspects of previous behavior will return. I'm not sure.

That said, lately I've seen an uptick in sales of mid-range names ($100-$500), and though perhaps they might have sold for twice or three times that a few years ago, there are still ways to turn a nice profit as long as you are willing to hold for a few years and/or acquire through auctions, boards, and private sales to begin with.

I've also seen an uptick in revenue from "legitimately" even minimally developed names (though not ones that are sitting en masse at sites that generate auto content).

Finally, I have seen more people lately willing to buy names that describe future or cutting edge possibilities. Speculation will likely never go away.

Anyway, I do see hope, but I also agree with several posters here that the bubble has burst a bit, revenue will be harder to come by, and strategies need to change. But the smart, humble, and patient domainer has reason for hope, IMO.

 

[garptrader]

My perception of the domain market is based purely on what I am selling - not what SEDO or DNJ report. From my perspective, the first 8 months of 2009 were depressing from a sales vantage point. From Sept 2009 onward I have seen a small but steady number of monthly sales. I certainly don't view domain sales as booming but Q1 2010 in dollars I sold more than all of 2009. In Q2 2010 I sold more than Q1. However, it is always a few rare big sales that tend to drive results. I have also seen my Adsense earnings growing at a rapid clip in 2010 but starting from a very small base previously. Anyway, just my view.

 

[labrocca]

A healthy technology sector, especially healthy web industry, spurs domain investment. Companies don't buy domains if web business isn't going well.

Back to my Kodak reference. People are into photography 1000x more than 20 years ago. Everyone has a digital camera and some have multiples. Not to mention every phone is pretty much a camera. You have giant sites like Picasa and Flickr for sharing them. Where would Facebook be without pictures?

And yet when was the last time you had film developed? My point is that technology can change and so can it's delivery mechanism. Domains are important and will probably be for some time but where they'll fit into a long-term position is still an unknown. The days where people 100% believed that any dot com they bought would gain in value no longer holds true. You could pay $10k for a LLL.com today and in 10 years that might still be it's value.

Domainers have real problems for their future with TLD's being released constantly, people being angry at squatters, and the judicial system that's not the least bit sympathetic. If you park and you have a UDRP coming you're basically screwed.

Total domain sale revenue did drop 12.5% from 2008 to 2009. This doesn't mean that domaining is dead, though.

Dead...nah. There is still money to be made but would you recommend to a 50 year old to take his 401k and invest in domains? You'd be out of your mind to do that. Bad investments are bad investments. I can't see domains recovering in price enough to warrant a buy market for anyone. Without fresh suckers to spark sales the market will remain stagnant for many years. Guys holding top-quality will still garner sales but who is entering the low-level market pushing new domains higher?

The concept that you can find a $1000 domain and wait 2-3 years and sell for $10k are pretty much over. Those that do it are the lottery winners in the industry.

That said, lately I've seen an uptick in sales of mid-range names ($100-$500), and though perhaps they might have sold for twice or three times that a few years ago, there are still ways to turn a nice profit as long as you are willing to hold for a few years and/or acquire through auctions, boards, and private sales to begin with.

It's become very difficult to pick the low hanging fruit. So much so it's not worth the effort. As you say you can score a $xxx sale but is that enough to put food on the table? I need a $x,xxx or $xx,xxx every now and then to make it all worth it. The $xxx sales just help with reg fees and some gas money. I can earn that mowing lawns or stuffing envelops.

Finally, I have seen more people lately willing to buy names that describe future or cutting edge possibilities. Speculation will likely never go away.

But what are people willing to pay for that? $50..maybe $100. I been in this market a long-time. Sorry but the party is over.

 

[DomainTalker]

During every boom, people think it will never end. It does.

During every downturn, people think it will never end. It does.


The business cycle is alive and well. The economic cycle is alive and well. It was ever thus.


Domains, like everything else that has supply & demand elements, are subject to the cycle, too. Demand will always be related to need, and to the capacity to pay for them....ie the price:value equation.


As long as the domains you hold have a use (ie are relevant to a specific real-world market niche - or, have a brandable use for some commercial activity out there) they will have value.

...However, the level of that value - at any one time - is subject (in general terms) to the stage of the business/economic cycle.


Right now, imo, the business/economic cycle is still flat & fragile - thus, prices for domains are generally subdued. There is still uncertainty in outlook in all global economic markets, except China/Asia. As long as this uncertainty of economic outlook remains, I think domain prices will remain flat.

If your domain strategy is short term profit, then I'd suggest you trim your portfolio to only those domains that offer lower-end $$$ investment (smallish dollar profit, but relatively high $$$ ROI %)....and churn them cheaply, and often.

...But, if your goal is super-profits, then, invest in far fewer quality domains - and develop/wait. The cycle will turn again.


Big capital gains on domains will be on offer again in the future, I'm sure. But, it may be a while...

.

 

[snoop]

Low level domains imho will never recover. Stuff like you have in your sig will languish and the days of holding crap are dwindling as prices increase and money goes elsewhere.

IMHO if you have a domain you can't sell for $100 you need to drop it. Better to hold stuff you can sell for $x,xxx. I'd rather sell 2 domains a year in that range than 20 domains at $100. To be honest it's easier to do that.

You want hope? Sorry. I got none.

I think people would be better off focusing on higher priced names as suggested. With Reg fees creeping up to around $9yr a 9% tax on a $100 name is going to sap most of the profit long term.

---------- Post added at 08:38 PM ---------- Previous post was at 08:35 PM ----------

One thing that fueled the low-level market was typos and PPC with parking. That market is dwindling to it's all-time lows and imho will never recover. Parking was never highly regarding and I think the wind has changed for them.

All time lows is exaggerated. It is probably back to 2004-2005 levels. The domain parking area fell very heavily during the last bust, traffic values were about 5-10% of today. $3RPM was pretty normal for fairly good traffic.

---------- Post added at 08:58 PM ---------- Previous post was at 08:38 PM ----------

Sea level
There are 2 kinds of domain names - those that earn more than reg fee from direct traffic and those that don't. Domain earnings (RPM) are down in the global recession and much related wealth has fled to greener pastures or been destroyed. Rising RPM would boost earnings and confidence - some of that cash would trickle down to speculative names that have little or no direct traffic earnings. A domain bull market is unlikely absent RPM growth.

Agree, I just can't see the domain market making serious progress without PPC improving, so watch that like a hawk in my view. Not sure if it is going to happen or not, I certainly wouldn't bet either way.

 

[.X.]

Low level domains imho will never recover. Stuff like you have in your sig will languish and the days of holding crap are dwindling as prices increase and money goes elsewhere.

IMHO if you have a domain you can't sell for $100 you need to drop it. Better to hold stuff you can sell for $x,xxx. I'd rather sell 2 domains a year in that range than 20 domains at $100. To be honest it's easier to do that.

You want hope? Sorry. I got none.

I agree with all your posts in this thread, Domainers have been able to stimulate the DN economy in the past. I don't see that happening any more, Oh well, Every one for them self, Domain names are a high yield investment today, Put to much money in domains today, You lose. I am still domaining for PPC and as a hobby, Considering my monthly PPC pay went from low x,xxx a month, To low xxx a month, That told me to have fun while it lasts. I know time isn't on my side with PPC.

I will continue to do what i do in domaining, If it all ended today, I wouldn't have any regrets. I would miss it terribly though. Not so much for the money, But the friendships i have made through the years, as well as my desire to domain.

 

[labrocca]

The business cycle is alive and well. The economic cycle is alive and well. It was ever thus.

Some truth to that but in many ways domains were a collectable fad for many. I think like Beanie Babies or other hot quick sell items that sold for many multiples of their retail value. I know it's not quite like that but I think that's how many treated the market causing the bubble and crash.

Considering the changes likely to occur in the next decade with mobile, delivery changes, and effects of new TLDs I can't be so sure the market will recover to the levels of 3-5 years ago.

I am still domaining for PPC and as a hobby, Considering my monthly PPC pay went from low x,xxx a month, To low xxx a month,

Ouch. Me personally I'm making more money online than I ever have but it's from real websites not by selling domains. Five years ago I mainly made income through sales. I'll be first to admit I never did very well in PPC but I was well aware through friends and forums that the market was indeed healthier back then. Now I feel I can't sell domains for profit and I stopped looking to buy them unless it's 100% for near-term development. I went from peak 700 domains to about 300 now. I am still probably going to let another 100 drop. And it's not even worth trying to sell those 100 drops for $5 each. People just aren't buying the sub-$100 domains anymore. If you don't have something with good PPC, traffic, or a term and it's not going to sell for $x,xxx then it's just ignored by most.

I'd love to see a chart of Sedo sales by range comparing today to 4 years ago. What percentage was under $250, $250-$1000, and $1000+?

Good convo though. Thanks everyone.

 

[DNProperty.com]

From a big picture standpoint, we haven't scratched the surface in terms of Internet growth and high speed broadband access.

There is room for growth (High Speed Broadband and include mobile) in the US, this will boost the future of domain names (the good ones anyway).

Asia, Africa and South America are still at roughly 5-10% internet penetration, not to mention high speed broadband access. (For example: India has about 80 million users right now, with about 10% of that have high speed broadband access, the number of internet users could reach 250 million easily, that still is only 25% market penetration)

 

[sashas]

From a big picture standpoint, we haven't scratched the surface in terms of Internet growth and high speed broadband access.

There is room for growth (High Speed Broadband and include mobile) in the US, this will boost the future of domain names (the good ones anyway).

Asia, Africa and South America are still at roughly 5-10% internet penetration, not to mention high speed broadband access. (For example: India has about 80 million users right now, with about 10% of that have high speed broadband access, the number of internet users could reach 250 million easily, that still is only 25% market penetration)

Lets be very honest about a few things:

a) Its going to take a lot, LOT of years for the markets in China and India to catch up to US and Europe levels. Are you really willing to hold on to a domain for the next 10 years or so?

Probably not. Neither am I.

b) After getting involved with development, I see domains very differently. Honestly, except for the strong keywords, or extremely short super generics that I owned a few years back (No.org, Natural.net, etc.), most domains don't seem to have any value whatsoever, especially for the kind of prices people ask for them.

I've seen people trying to sell domains with just 3000 exact searches per month that will at most make me $50 each month through AdSense for $1000+. Its really not worth it to make an investment like it and actually get a good return. You could very well rank higher with a slightly inferior domain. Sure, the exact keyword will make things easier, but its not worth spending an extra $991 for.

The only domains I would consider buying today would be super strong generics or strong 2 keyword combinations. No LLL.com or LLL.mobi or speculating on random, new ccTLDs. Those days are gone, and very honestly, they won't ever come back.

Also understand that the internet itself is changing. The new people coming online are more comfortable using it than ever before. The old guidelines of 'don't have a domain longer than 8 characters' etc. don't hold true any more. People are okay with typing in deliberately misspelled domains like Tumblr.com

This is not to say that a great domain like Tech.com won't have any value, but IMO, the balance has tilted a lot against such domains - you can now set up a great website with a huge brand name without actually owning a half decent domain name.

 

[labrocca]

The old guidelines of 'don't have a domain longer than 8 characters' etc. don't hold true any more. People are okay with typing in deliberately misspelled domains like Tumblr.com

IMHO it speaks well of brandables which don't really have high value. Even great CVCV.com combos can be had for under 10k. Lots of startups are using 5L and 6L brandables which imho is a smarter idea.

After getting involved with development, I see domains very differently.

I liked playing domainer for a while but it's tiring and now it's not even profitable. The math just isn't there when you factor in costs and risk.

 

[DomainTalker]

Good discussion, guys...

Lets be very honest about a few things:

a) Its going to take a lot, LOT of years for the markets in China and India to catch up to US and Europe levels.

I think you may be surprised on this, sashas...


In Australia, we're closely enmeshed with Asian economies - China & India, in particular. The sheer rate & speed of economic development, wealth creation, business formation & expansion, and social change, going on there - right now - is phenomenal.....And, it hasn't slowed at all, whilst western economies are stalled.

...I heard recently that 30 million new internet users were coming online in the Asia region every month...

Whilst all this means that there's a long-term shift in the centre of economic power from west to east going on, we live in a global market. Business will be done. Globally. And, all businesses - everywhere - will adapt to where the profits will be in the future.


The global economy will get bigger and bigger, imo - it just that the major engine of growth will be Asia, not the US & Europe, in the future.


What does this mean for the domain market?

Well, I don't know. I suspect a huge increase in ccTLD's like .in & .cn, of course....But, beyond that?


The internet is not going away. For the foreseeable future, domains will remain at the core of online activity. Western business will not go away. The world economy will continue to grow.

....The demand for domains (.com & ccTLD's) - that say something - will therefore logically continue, imo, after this adjustment period is over. There'll be plenty of capital gain opportunities in domains again, over time.


But, I think excellent quality keyword domains are essential....and, that labrocca (& others) are right - ie focus on the development of your suitable domains, for better ongoing income, and adding value to them.

.

 

[sashas]

Good discussion, guys...


I think you may be surprised on this, sashas...


In Australia, we're closely enmeshed with Asian economies - China & India, in particular. The sheer rate & speed of economic development, wealth creation, business formation & expansion, and social change, going on there - right now - is phenomenal.....And, it hasn't slowed at all, whilst western economies are stalled.

.

The sheer number doesn't make a thing, really.

Its the purchasing power that counts.

In terms of pure numbers, sure, China has already leapfrogged US. India will probably take about half a dozen years or more to do so, but that doesn't mean that all these people are going to start spending online.

Unless your users are spending money online, the numbers simply don't count.

I still can't point to one good e-commerce site that serves the Indian market like Amazon. Credit card penetration is still very, very low here. My dad is 66 years old and he hasn't owned a single credit card.

And its not just a case of the older generation not trusting online transactions. My brother who is 26 wouldn't shell out his debit card details on any site, even Amazon.

You have to understand that the culture here is entirely different from the US and Europe. Its going to take more than a decade before people actually get comfortable with the idea of spending money online.

In China, social networking sites make money by selling pre-paid cards for virtual gifts. Things like that won't work in the US, but they do in China.

We're talking about entirely different cultures, and IMHO, its going to take quite a while before they align together.

That again brings me to the original point: it doesn't make sense to hold onto such domains for half a dozen years. You could make a LOT more money by investing it on a good .com and building a site around it.