Musings on Letters, Domains and Values

[zestydomains*com]

Hello All,

I've recently read many threads regarding particularly LL.com, LLL.com and LLLL.com domains (and all the other top extensions for those domain types as well), and I wanted to post a few thoughts and musings. Please consider them as just one opinion among many, but I have tried to research this prior to my posting so that I might have something of value to add to this discussion.

To my thinking, speculation is the central base that drives all these letter domain categories. There are many cheerleaders driving the recent buydown of the LLLL.com domains, and many are speculating as to what the future holds. I have no doubt that there will be many who make good money and great returns with their LLLL.com domains, but I too share reservations regarding the large number of poorer quality LLLL.com domains. When there are perhaps 200k LLLL.com domains (an educated guess on my part) in domainers/speculators hands, it's not that hard to imagine that a buyout will be difficult to hold in the near term (next 1-3 years) and price valuations are likely to fluctuate erratically. Further, when reg fees are due yearly, if the value of the lower quality LLLL.com domains are selling at or only above reg fee in a year, many speculators will likely drop those names and the buyout will fail, which will have some effect on all types of quality LLLL.com domains.

This, by the way, is exactly what happened in the first LLL.us buyout in 2004, which didn't happen by a natural progression buyout by both end-users and domainers, but was significantly driven by primarily just domainers (just as is this recent push to buyout the LLLL.com domainspace). This buyout didn't hold a year later and many LLL.us domainers let their registrations expire, or tried to sell at the last second for very low amounts ($1 or less). It took a while for bigger players to come in and make the 2nd LLL.us buyout hold, but even since then history has shown us just how volitale the still heavily domainer owned LLL.us market has been.

Many are speculating that a mathematical formula can be made to determine the minimum wholesale value for LLLL.com domains based on LLL.com values. This is an easily reasoned rationale, but the addition of just the one letter realistically affects value at a rate far different than 1/26th value. If this math were true, then the worst LLLL.com domains should not have been available for reg fee last week, for that would have placed LLL.com domains value at say $208.00 (reg fee of ~ $8 times 26). LLL.com domains, even in their lowest quality values are fetching far more than $208 each (now $5500 plus). For reference, $208 each is a price that for LLL.com domains hasen't been seen on the wholesale market since 2001.

Additionally, an LLL.com with any 3 letters (for an extreme example, let's us an all lower quality letter domain such as xzq.com) has a far better than 26x chance of finding an end-user with lower quality bad letters than does xzqx.com or xzqz.com or xzqq.com or xzqy.com. The logic is simple in a related example:

Z.com can be used by many companies that use a Z acronym.
ZX.com can be used by any company that uses a z and x acronym.
Along this thinking: ZXQY.com can be used by a company that uses all z, x, q, and y.
To the extreme, zxqyzqxyxzzxqzy.com is really pushing it and might have absolutely no end user value. The addition of each letter to the .com significantly reduces the possibility of end-user need and use, which plays a great role in a domain's valuation. The extra letter is a BIG deal in this way.

This of course doesn't focus on two of the other strengths of short domains; memorability and brandability. An LLLL.com is still far more memorable than a random letter domain of longer length, and is certainly a great candidate for brandability, though usually at additional expense beyond its value. This said, with 456,976 LLLL.com combos, it will take a large number of LLLL.com's to regularly fall in end-user uses to maintain values for the remaining non-end-user LLLL.com domains.

All this said, I very much look forward to the years ahead for all "letter focused" domains. I'd really love to see the LLLL.com buyout hold and for all my fellow domainers to earn some great returns. My caution is to invest wisely and to be consistent in making wise investment decisions. I wish the best to all investors and perhaps the history in the making right now will prove me quite wrong

- zesty

 

[accent]

Always a pleasure to hear your opinions, Zesty.

 

[-REECE-]

A fact that alot of people questioning LLLL's are missing is that the large portion of registrations are not 4x bad letter registrations.

We already have a premium LLLL.com market that's fairly established at $100+ for every LLLL.com that has all premium letters. There's 17x17x17x17 = 83,521 possible such names -- and that is holding strong, so I don't think a comparison to a struggling cctld such as .us is warranted.

Most of my LLLL's are of the 1 bad letter variety. It would seem illogical (unless something is wrong with my math?) to suggest these names do not have a strong future, granted we already have a market of 100,000+ LLLL.coms (all premium, CVCV, VCVC) fetching $100+ and I would argue that a 3x premium + 1 bad letter name certainly does not have a lower chance than 1/26th that of an all around 3x bad letter LLL.com at finding an enduser.

As for the 2x, 3x, and 4x bad letter.. I think their future is less certain... Those that bought them out the last 2-3 days (last 5k), especially.

 

[VURG]

Thanks Zesty for your input.

I know many people who consider a 20% ROI for LLLL.com over 10 years to be a very good investment. (LLLL.com to be worth $300 in 2017) Judging by current trends with LLL.com and by my two and a half years of observing LLLL.com trends, I think that there is a good chance that they will sell for over $300 by then and hence the bad letter LLLL.com are good investments.

I've seen the LLLL.com and LLL.us comparison before and I think that it is like comparing apples and oranges. .US has not taken off in the US like other extensions do in other countries. Who visits Google.us, Yahoo.us, Dell.us, MSN.us, or similar .us for most US based companies? As an australian, I visit Google.com.au, au.Yahoo.com, NineMSN.com.au, Dell.com.au, Apple.com.au, etc... Most Australian companies have a .au in the name somewhere. (Dell.us, eBay.us and MSN.us don't even redirect anywhere!) It is very risky in Australia to not have the .com.au extension if the Australian population is your main market. Alternatively, .US is very risky as the major companies within the USA tend to ignore it.

I agree with the 1/26 thing.

From My understanding:
~ 85% were registered 2 years ago.
between 70-75% of LLLL.com were registered 2 years ago.

I have seen huge drops of LLLL.com domains in the last 2 years where people must have lost thousands or tens of thousands by buying the names too early. I get the impression that the overspeculative early purchases on unregistered LLLL.com have been done already. I have not been buying many of the bad letter LLLL.com but I think that those who can afford to keep them will do well with them now.

I see some domainers who are predicting minimum $200 for a LLLL.com in 2009 and others who are saying that these domains are rubbish. I think that it is probably somewhere in between. I wouldn't be suprised if there is going to be a jump to $60 in the next 6-18months and then a plateau is reached for a good 6-36 month period afterwards.

Who knows!

 

[Kenny]

Just a little bump...

 

[Ronald Regging]

Well, as far as end user sales are concerned, the math has to account for far more than just 26x.... Sure, there may be 26x more LLLL.coms than LLL.coms, but what is the multiplicative difference between the number of companies using LLL acronyms and those using LLLL? You really need to factor this in. With LLL.coms, you have much smaller supply and far greater demand, based on both the limited number of domains available and the higher number of companies who use LLL acronyms. When you consider both of those, the gap increases tremendously.

I agree with you though. It isn't hard to see that speculative forces are driving this market. We're essentially creating a bubble that can't sustain itself with end user sales on a large scale. Is this a bad thing? No, because this creates opportunity that will allow people to make good profits. However, if you're going to be playing in this market seriously, you have to acknowledge this fact and be prepared to jump ship when the time comes.

Generally I agree with most of your points. I think the truly pronouncable names will continue to rise in value, and I also think that there will be enough nice end user sales with all premium letters to make their value stable. And as Reece pointed out, domains with a single bad letter may prove stable over the long run (though much lower in value), however, the lower end of the spectrum is going to burn at some point.

 

[filter]

[...] However, if you're going to be playing in this market seriously, you have to acknowledge this fact and be prepared to jump ship when the time comes.

Generally I agree with most of your points. I think the truly pronouncable names will continue to rise in value, and I also think that there will be enough nice end user sales with all premium letters to make their value stable. And as Reece pointed out, domains with a single bad letter may prove stable over the long run (though much lower in value), however, the lower end of the spectrum is going to burn at some point.

Good to keep these points in mind - the more "anti-premium" LLLL.com are definitely a speculative play, not for the faint of heart. Without even a modest end-user market for these strange critters firming up in an obvious way over the next year, renewal fees could easily turn them into hot potatoes. Personally, I suspect that the market will be big enough to find good homes for many of them in the long run, but that's just a hunch. Wouldn't recommend betting the farm on it ... Still, I buy up the ones I like, and I tend to like them that much more when they're within an order of magnitude of reg fee ...

 

[srisri24]

As for the 2x, 3x, and 4x bad letter.. I think their future is less certain... Those that bought them out the last 2-3 days (last 5k), especially.

And as Reece pointed out, domains with a single bad letter may prove stable over the long run (though much lower in value), however, the lower end of the spectrum is going to burn at some point..

I really dont think that 3x or 4x bad letters would be bad investment.
I agree LLL.com are quite few and demand is more. But is there any or huge end user demand for ccc.com even a domain like 4xy.com or z7q.com is worth more than $100. There is better chance of having end users for a worst LLLL.com than a CCC.com If a ccc.com can reach a min resller price of $100, i dont see why a worst LLLL.com cant reach $100
This is because The number of ccc.coms is more are less equal to total number of bad LLLL.coms.

4x bad letter LLLL.com may not give 100xROI as cvcv or vcvc. BUt even a 10x ROI is good. I am sure that would happen.

 

[filter]

I really dont think that 3x or 4x bad letters would be bad investment. [...]

This is because The number of ccc.coms is more are less equal to total number of LLLL.coms.

4x bad letter LLLL.com may not give 100xROI as cvcv or vcvc. BUt even a 10x ROI is good. I am sure that would happen.

hello srisri24

you and maybe a few hundred other domainers like you (and me) might be the major factor to consider in gauging chances for success of the "anti-premium" LLLL.com market in the short run.

number of CCC = 36^3 = 46,656
number of "pure anti-premium" LLLL = 8^4 = 4096

that is, only 4096 possible LLLL combinations with nothing but Z X V Q Y U J K

... broaden the pool a bit by adding 2 more, say W and H (or whatever) and still only 10,000 of these critters.

And that 4096 or 10,000 would also be counting such "repeating letter" combos such as QQQQ and other interesting curios.

so these are actually among the rarest of all LLLL - with their own special exotic "anti-premium" esthetic. Delectable, and collectable ... Not to mention also potentially quite attractive in a more straightforward way to end users all around the world.

But the market's going to do what the market's going to do, and it's hard to say for sure what path it will take in the short run at least. It may be a bumpy ride for a while (ie, "buying opportunities" + many fun "opportunities" to scramble to pay renewal fees while prices are still treading water ...) Plan accordingly, and try to enjoy the ride! :hehe:

 

[accent]

4x bad letter LLLL.com may not give 100xROI as cvcv or vcvc. BUt even a 10x ROI is good. I am sure that would happen.

It may be that anti-premiums have considerably better ROI from here than CVCV. That is because of the vaccum effect - domainers / investment corporations buying any available LLLL.com below a given price. Such actions can move this market quite a lot over time.

A move from $15 to $75 for a anti-premium (call it $83 with a renewal thrown in) could come earlier than a move from $1000 to $5008 for a CVCV. It depends on how much investor money is chasing quality (perceived quality in the case of CVCV, IMO) and how much is chasing quanitity - of a now-proven finite resource.

As for those elusive end users - many that have three letter acronyms (and I have not been convinced that there are less fours than threes), will find their three letters either too expensive or, more and more often, in use and simply not available. Perhaps some of those will go to L-L-L, don't know about that, but many will accept another letter -company, -transport, -group, whatever. Do not count out three letter acronym companies from the four letter market.

It is all - um - speculation, anyway.