- Impact
- 8,633
Hello friends,
hundreds of new gTLDs (new generic top level domains) went live since 2014, and more than 20 mil of them were since registered. Thousands of domain investors are now looking into opportunities and are purchasing these names. I am one of them, owning hundreds of new domains, selling and buying every week. In my honest opinion, a lot of NamePros members (and investors, in general), are not making good decisions when it comes to new gTLDs. Along with some good decisions, I am not afraid to admit that I have also made some pretty bad ones - as did every new gTLD investor I know so far. Hopefully, after reading this series of 10 brief articles, it can help members (mainly those which are just starting) to get some unbiased overview of investment opportunities, but also investment traps which one can face when investing in new gTLDs. Please excuse grammatical errors and I am sure clumsy style in all my articles, English is not my mother language. I hope though that I still can get some important ideas forward. Articles here are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which should be ready in October 2017.
Disclaimer:
Just a small disclaimer: all ideas here are just my personal opinion. This opinion might prove wrong, as, despite the fact that I tried to understand things I describe here the best I could, I might fail in that in some instances. You must, therefore, do your own due diligence before making any investment. I am a private investor and have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
What are new gTLDs?
If you do not know exactly what the new gTLD names are (in the further text I will sometimes refer to them also as "new gTLDs", "new gTLD domains" or I will even use very simplified "new domains") please read relevant sections at NamePros. I will skip all this and will go immediately to the point.
Part 1 - pizza.diamonds & short domains -> 2 investment mistakes
Investment mistake no.1 - "pizza.diamonds style of investing" in new gTLDs.
Today I will start with an investment mistake no.1 - something that almost no one was able to avoid when getting familiar with new domains. Some people call this mistake "pizza.diamonds style of investing". While it is very obvious to more experienced new gTLDs investors what is going on (those who already experienced at 2 or 3 cycles of renewals, holding larger new gTLDs portfolios), it is definitely not obvious to people who were just introduced to the concept of new domains and are starting investing in them.
So here is what is going on: in 2014, just after the introduction of new domains to the general public, a lot of people (some of them very experienced ccTLDs or .com investors) started to buy them. It was a very beginning of new domains era, so no sales data of new domains were naturally available. Therefore all purchases were based on individual projections and more or less educated guesses as of what will constitute good and profitable domain names in new gTLDs. As an inspiration, many domain investors and speculators brought concepts, which worked great in past, specifically for .com. One of the most prevalent concepts is to have strong keyword located at left side of the dot. So let's discuss it more in detail now.
Strong keyword located at left side of the dot - is that enough to make new gTLD names valuable?
While above concept work amazingly when it comes to .com (in 2017 almost all investors are very well aware how much "strong keyword".com can be sold for at today's market) we know now that it definitely can not be easily applied to new domains.
Not knowing that yet in 2014, many investors had bought into domains like (just an example) pizza.diamonds. The "logic" there was that both "pizza" and "diamonds" would be very strong keywords in .com - and as such could command premium prices also in new domains. As we see 3 years later, the answer is - of course not! There is no aftermarket and no demand for combinations of 2 strong keywords, which does not make sense when they are put together.
What is apparent though is that even in 2017, still a lot of people are buying this kind of combinations. When 1st renewals are coming, it will usually result, of course, into dropping of such names. Whoever does not believe me, can have a brief look at appraisal section of NamePros - a number of "pizza.diamond" style of names there is still very high.
Brandables - really?
Some new investors justify their purchases by calling those combinations "new brandable". Let's take an example, like "dog.hockey". While both "dog" and "hockey" are strong keywords in .com, together they do not make any sense. To call this brandable in the same sense as we have in .com (when some people put almost any of 2 non-related keywords together and they say it is "brandable") is not going to work for new domains, at least not in 2017. So if you want to be profitable with new domains, and to have good chance to sell your domains later for good profit, my opinion would be - just do not do that!
Leaving pizza.diamonds style of names to their destiny let us discuss another concept, which works amazingly well in .com, but will work only in very few instances for new domains:
Investment mistake no.2 - Very short names located at left side of the dot :
The intrinsic value of these names (N, NN, NNN, L, LL or LLL at the left side of the dot, where N represents number and L stands for letter) is much better comparing to "pizza.diamond" style in my opinion, but it still probably will not work the best for domain investors. Unless you are from China maybe and know very well their actual trends in new gTLDs there, the chance is that you will not make any profit as an individual investor. Why?
High renewals:
The main reason for that is high renewals. Imagine the following situation: you own a registry, and you just won the auction for specific TLD. For explanatory purposes, let's say the new gTLD extension is .MYEXAMPLE. You have paid all the auction fees, all setup costs - usually hundreds of thousands of dollars. Now, you as registry are the owner of .MYEXAMPLE and your task is to evaluate how to price the domains. It is not very intellectually challenging to understand that there are only 10 domain names in form of N.MYEXAMPLE, where N is a number (0.MYEXAMPLE, 1.MYEXAMPLE..9.MYEXAMPLE), less than 100 domain names in form of NN.MYEXAMPLE, less than 1000 domain names in form of NNN.MYEXAMPLE, etc, etc, the same logic applies to alphabet characters. This is very limited supply. So what you will do? You will, with high probability, attach higher premium renewals for all those names. After all, there are only limited number of such names, and you paid a LOT of money for .MYEXAMPLE. So, it is definitely not in your best interest to put a low standard renewal on them, and have all of them registered within first minutes by domain investors (it would mean you basically give away some of your best names). In addition, for you, as a registry owner, it is not such a big risk to price your short names with higher renewals, as you can test the market, and adjust your pricing based on the actual situation and your actual needs as time will pass. You can do that as you do not need to pay high renewal rates on your names every year.
Domain investors:
Obviously, many domain investors will not be happy with that approach and will tell you that you should price all your names with standard renewals so "your new extension will gain certain momentum at the market" (which usually translates just to: "we want to get your best names cheaply"). Your argument would be that you do not need to sell all your short names immediately for standard renewal to gain that momentum, which is probably true.
So what are the opportunities for domain investors here? Unlike registry owners, when you register such short name, let's say with 500$ yearly renewal, you are basically undertaking high liability for yourself unless you are able to sell the name within 1 year with some profit (so in your example for the price at least 501$+). Or within 2 years for 1001$+. Or within 3 years for 1501$+. So unless you are pretty sure you CAN sell the name and have a very good idea who your buyer(s) is(are), it is probably not a very good investment idea to get into this type of names.
Which strings will be in demand?
While higher premium pricing is one of biggest obstacles when it comes to achieving good profitability of trading with short new domains, it does not end there. At the moment we have hundreds of new gTLD extensions (very good source to check what is going on is here) So, (now putting pricing aside), should you buy those short names in .HOCKEY or .ONLINE or .VIP or ..SHOP or .ACCOUNTANT or .XYZ or .CENTER or .CLICK..or .PHOTOGRAPHY.....where?? The list can go on. This is, of course, a 1 million-dollar question for new gTLD domain investor and I am not going to answer it here. I have thought my strong opinion about it, and I believe some of the new gTLD extensions are much more suitable for short domain investments than others. I will touch that lightly in future articles.
But in general (taking into consideration generally higher premium renewals, and hundreds of possible extensions to choose from), when I consider very short names, there are definitely better opportunities in new gTLD space in my opinion. This is what I think for 2017 - it might change in future.
Summary of this article:
Pizza.Diamond type of names usually do not have intrinsic value - therefore there are massively available even in 2017, and usually not priced with premium renewal. As a domain investor, get only names which make sense, forget automatic appraisal tools or ideas about strong keywords brought from .com realm.
Short new gTLD domain names - some of them have very good intrinsic value (but registries know that too, and that is reflected usually by high renewals, which in many cases makes them unsuitable for domain speculation).
Happy investing
hundreds of new gTLDs (new generic top level domains) went live since 2014, and more than 20 mil of them were since registered. Thousands of domain investors are now looking into opportunities and are purchasing these names. I am one of them, owning hundreds of new domains, selling and buying every week. In my honest opinion, a lot of NamePros members (and investors, in general), are not making good decisions when it comes to new gTLDs. Along with some good decisions, I am not afraid to admit that I have also made some pretty bad ones - as did every new gTLD investor I know so far. Hopefully, after reading this series of 10 brief articles, it can help members (mainly those which are just starting) to get some unbiased overview of investment opportunities, but also investment traps which one can face when investing in new gTLDs. Please excuse grammatical errors and I am sure clumsy style in all my articles, English is not my mother language. I hope though that I still can get some important ideas forward. Articles here are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which should be ready in October 2017.
Disclaimer:
Just a small disclaimer: all ideas here are just my personal opinion. This opinion might prove wrong, as, despite the fact that I tried to understand things I describe here the best I could, I might fail in that in some instances. You must, therefore, do your own due diligence before making any investment. I am a private investor and have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
What are new gTLDs?
If you do not know exactly what the new gTLD names are (in the further text I will sometimes refer to them also as "new gTLDs", "new gTLD domains" or I will even use very simplified "new domains") please read relevant sections at NamePros. I will skip all this and will go immediately to the point.
Part 1 - pizza.diamonds & short domains -> 2 investment mistakes
Investment mistake no.1 - "pizza.diamonds style of investing" in new gTLDs.
Today I will start with an investment mistake no.1 - something that almost no one was able to avoid when getting familiar with new domains. Some people call this mistake "pizza.diamonds style of investing". While it is very obvious to more experienced new gTLDs investors what is going on (those who already experienced at 2 or 3 cycles of renewals, holding larger new gTLDs portfolios), it is definitely not obvious to people who were just introduced to the concept of new domains and are starting investing in them.
So here is what is going on: in 2014, just after the introduction of new domains to the general public, a lot of people (some of them very experienced ccTLDs or .com investors) started to buy them. It was a very beginning of new domains era, so no sales data of new domains were naturally available. Therefore all purchases were based on individual projections and more or less educated guesses as of what will constitute good and profitable domain names in new gTLDs. As an inspiration, many domain investors and speculators brought concepts, which worked great in past, specifically for .com. One of the most prevalent concepts is to have strong keyword located at left side of the dot. So let's discuss it more in detail now.
Strong keyword located at left side of the dot - is that enough to make new gTLD names valuable?
While above concept work amazingly when it comes to .com (in 2017 almost all investors are very well aware how much "strong keyword".com can be sold for at today's market) we know now that it definitely can not be easily applied to new domains.
Not knowing that yet in 2014, many investors had bought into domains like (just an example) pizza.diamonds. The "logic" there was that both "pizza" and "diamonds" would be very strong keywords in .com - and as such could command premium prices also in new domains. As we see 3 years later, the answer is - of course not! There is no aftermarket and no demand for combinations of 2 strong keywords, which does not make sense when they are put together.
What is apparent though is that even in 2017, still a lot of people are buying this kind of combinations. When 1st renewals are coming, it will usually result, of course, into dropping of such names. Whoever does not believe me, can have a brief look at appraisal section of NamePros - a number of "pizza.diamond" style of names there is still very high.
Brandables - really?
Some new investors justify their purchases by calling those combinations "new brandable". Let's take an example, like "dog.hockey". While both "dog" and "hockey" are strong keywords in .com, together they do not make any sense. To call this brandable in the same sense as we have in .com (when some people put almost any of 2 non-related keywords together and they say it is "brandable") is not going to work for new domains, at least not in 2017. So if you want to be profitable with new domains, and to have good chance to sell your domains later for good profit, my opinion would be - just do not do that!
Leaving pizza.diamonds style of names to their destiny let us discuss another concept, which works amazingly well in .com, but will work only in very few instances for new domains:
Investment mistake no.2 - Very short names located at left side of the dot :
The intrinsic value of these names (N, NN, NNN, L, LL or LLL at the left side of the dot, where N represents number and L stands for letter) is much better comparing to "pizza.diamond" style in my opinion, but it still probably will not work the best for domain investors. Unless you are from China maybe and know very well their actual trends in new gTLDs there, the chance is that you will not make any profit as an individual investor. Why?
High renewals:
The main reason for that is high renewals. Imagine the following situation: you own a registry, and you just won the auction for specific TLD. For explanatory purposes, let's say the new gTLD extension is .MYEXAMPLE. You have paid all the auction fees, all setup costs - usually hundreds of thousands of dollars. Now, you as registry are the owner of .MYEXAMPLE and your task is to evaluate how to price the domains. It is not very intellectually challenging to understand that there are only 10 domain names in form of N.MYEXAMPLE, where N is a number (0.MYEXAMPLE, 1.MYEXAMPLE..9.MYEXAMPLE), less than 100 domain names in form of NN.MYEXAMPLE, less than 1000 domain names in form of NNN.MYEXAMPLE, etc, etc, the same logic applies to alphabet characters. This is very limited supply. So what you will do? You will, with high probability, attach higher premium renewals for all those names. After all, there are only limited number of such names, and you paid a LOT of money for .MYEXAMPLE. So, it is definitely not in your best interest to put a low standard renewal on them, and have all of them registered within first minutes by domain investors (it would mean you basically give away some of your best names). In addition, for you, as a registry owner, it is not such a big risk to price your short names with higher renewals, as you can test the market, and adjust your pricing based on the actual situation and your actual needs as time will pass. You can do that as you do not need to pay high renewal rates on your names every year.
Domain investors:
Obviously, many domain investors will not be happy with that approach and will tell you that you should price all your names with standard renewals so "your new extension will gain certain momentum at the market" (which usually translates just to: "we want to get your best names cheaply"). Your argument would be that you do not need to sell all your short names immediately for standard renewal to gain that momentum, which is probably true.
So what are the opportunities for domain investors here? Unlike registry owners, when you register such short name, let's say with 500$ yearly renewal, you are basically undertaking high liability for yourself unless you are able to sell the name within 1 year with some profit (so in your example for the price at least 501$+). Or within 2 years for 1001$+. Or within 3 years for 1501$+. So unless you are pretty sure you CAN sell the name and have a very good idea who your buyer(s) is(are), it is probably not a very good investment idea to get into this type of names.
Which strings will be in demand?
While higher premium pricing is one of biggest obstacles when it comes to achieving good profitability of trading with short new domains, it does not end there. At the moment we have hundreds of new gTLD extensions (very good source to check what is going on is here) So, (now putting pricing aside), should you buy those short names in .HOCKEY or .ONLINE or .VIP or ..SHOP or .ACCOUNTANT or .XYZ or .CENTER or .CLICK..or .PHOTOGRAPHY.....where?? The list can go on. This is, of course, a 1 million-dollar question for new gTLD domain investor and I am not going to answer it here. I have thought my strong opinion about it, and I believe some of the new gTLD extensions are much more suitable for short domain investments than others. I will touch that lightly in future articles.
But in general (taking into consideration generally higher premium renewals, and hundreds of possible extensions to choose from), when I consider very short names, there are definitely better opportunities in new gTLD space in my opinion. This is what I think for 2017 - it might change in future.
Summary of this article:
Pizza.Diamond type of names usually do not have intrinsic value - therefore there are massively available even in 2017, and usually not priced with premium renewal. As a domain investor, get only names which make sense, forget automatic appraisal tools or ideas about strong keywords brought from .com realm.
Short new gTLD domain names - some of them have very good intrinsic value (but registries know that too, and that is reflected usually by high renewals, which in many cases makes them unsuitable for domain speculation).
Happy investing
