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Hello friends,
This is the fourth of 10 articles, which, I hope, 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. Articles here are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which will be ready on October 30, 2017, and you will be able to get it here.
Today I will discuss pricing of new gTLD domain names, with some specific examples. I will also show that notion that new gTLD names are more expensive than more traditional legacy names is, in many instances, simply wrong.
If you have not done that yet, you can read the first 3 articles here:
New gTLDs Investment Mistakes and Opportunities (Part 1 - pizza.diamonds & short domains)
New gTLDsInvestment Mistakes and Opportunities (Part 2 - chaotic versus structured portfolios)
New gTLDs Investment Mistakes and Opportunities (Part 3 - big guys, flippers and builders)
Disclaimer:
all ideas here are just my personal opinion. This is not an investment advice of any sort. My opinions 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 cases. You must, therefore, do your own due diligence before making any investment. I am a private investor and I have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
Part 3 - understand the pricing
Are new gTLD domain names more expensive then more traditional legacy names (.com, .net, .org and ccTLDs)?
The answer to this question is, it depends. There are hundreds of new gTLD extensions, and some names can be registered (and renewed) for as much $1, while other names can be registered and renewed for as much as $120 000. Why there are such differences?
To understand it more, we need to understand some basic characteristics of new gTLD extensions. One of the most useful characteristics (from domain investing point of view) will be to either categorize new gTLD extension as broad or as narrow. These terms will be explained immediately - I just want to point out that I have not found any consistent terminology yet, so I am inventing them - if someone has, or can suggest better names for those categories of new gTLD extensions, please feel free to comment below
Types of new gTLD extensions (broad vs narrow)
broad gTLD extensions
In further text, we will call new gTLD extension a broad one, in case it does not semantically alter the meaning of the keyword or keywords which is (are) put on the left side of the dot (or this alteration is just very small).
Few examples of such new gTLD extensions are: .online, .xyz, .site, .website
(Also .com, or .net can be seen as examples of broad extensions in this sense - as they are not new gTLDs, I am not discussing them in further text).
This also means that one can create following domains, and they all make sense - an extension does not influence the keyword (extension is basically neutral). Let's take keyword "pizza" as an example (in rest of this article I will always put character "*" instead of character "."):
pizza*online, pizza*xyz, pizza*site, pizza*website
All makes sense. If you want to have a website about pizza, you can choose any of them.
narrow gTLD extensions
In further text, we will call new gTLD extension a narrow one, in case it does semantically alter or complement the meaning of the keyword or keywords which is (are) put on the left side of the dot.
Examples of such new gTLD extensions are: .accountant, .horse, .broker, .win, .gold, .repair, .restaurant
(Also .org can be seen an example of, kind of, narrow extensions in this sense, but as it is not a new gTLD, I am not discussing it in further text).
Because the extension influences the keyword semantically, some combinations of extensions and specific keyword make great sense, while others do not. Let's take our keyword "pizza" again as an example and let's insert it in front of our examples of narrow extensions:
pizza*accountant
pizza*horse
pizza*broker
pizza*win
pizza*gold
pizza*repair
pizza*restaurant
Now, it is of course matter of discussion and of personal taste, but from a semantical point of view, many people will probably agree that pizza*restaurant makes sense, while the others not.
Main differences between broad and narrow gTLD extensions
While in broad extension once can register almost any English keyword and have a domain name which makes sense, in narrow extensions number of keywords which make great sense in combination with extensions is much more limited. It depends on the nature of particular narrow extension how many good, investment-worthy keywords one can create in this extension: in some narrow extension there can be still hundreds or thousands of relevant keywords (mainly geo keywords can extend this number), while there are other narrow extensions where literally only a few dozens of keywords are investment-worthy.
Why this is important:
if you are a company which owns and operates the extension, it is clear that you want to maximize the profit from it. That means, that particularly in cases of narrow extensions, it is almost inevitable to have different prices for different keywords. If your extension is very narrow, the most usual strategy is to price you best keywords with higher prices (so-called premiums, or premium renewals) and rest of your domains with a standard price tag for your extension (so-called standard renewals). Saying that we see lot of premium pricing in broad extensions too, mainly for very generic keywords, vanity keywords and keywords with great parameters (will be discussed below in more detail what those parameters are)
Are there more broad or narrow gTLD extensions, and can we somehow compare them?
There are only a few truly broad extensions, most of them (several hundred) are narrow extensions.
As for comparison among them, the number of long-term registrations in narrow extension will always be much much smaller the in broad extensions.
I emphasise word "long-term", as actual numbers can be distorted by various promotions, etc. But logically, in long term, we can not really compare numbers of registrations in narrow and broad extensions and make conclusions just based on that. Therefore, if you read some threads or comments saying "particular new gTLD extension is dying because it has only XXXX registrations" be very careful what to think of it and take it with a pretty large pinch of salt. A lower number of registrations does not mean particular extension is dying - authors of such statements completely ignore why we have narrow extensions in first place. They were introduced to enhance end-user experience and choice in domain space, and it is a fact that their primary purpose is not to serve for domainers. Many of the narrow extensions have higher standard renewals, so only a few registrations can (and will in many cases) pay their annual holding costs (fees to ICANN, and operational/human resource costs). It is also a case that certain registries operate several narrow extensions, thus more successful extensions can support less successful ones in financial terms, as they all belong to one company.
After brief clarification about two main categories of gTLD extensions lets now discuss particular domain names.
When do we speak of "reasonable" new gTLD investment?
Broadly speaking, we should be interested mainly in following 3 factors:
1) End-user pool: for each domain name, we should be asking ourselves how many end users are there for the domain name (end user in this context is a company or individual, who buys a domain from us, usually for purpose of development. It is not another domain investor). Sometimes we refer to this criterion also by asking "how large is a pool of end users for a specific domain name".
2) Cost: what is the purchase price of the domain and what is the renewal price of the domain
3) Projected profit: what is the estimation of the selling price of the domain, minus all costs
End-user pool
As for the end-user pool, it is clear that the larger this is, the better our chances of a sale. A very usual mistake is to register a nice domain name, but suitable only for a very small group of end users. If this is the case, the probability of sale is tiny, and therefore such names are usually not very good investments. Remember this: new gTLDs are here only from 2014. Many end users are still unaware of them. Therefore, particularly in new gTLD investments, it is very important to try to get names with large end user pools. Our aim should be basically to get names where the pool of end users is as large as possible.
For example, domain name BestPragueSushi*Restaurant (word1word2word3.gTLD form name) sounds nice and can serve its purpose very well, but how large is the pool of end users here? There are about 20 sushi restaurants in Prague, and the probability that any of them will want EXACTLY this name so much, that they are going to pay a significant money to domainer holding the name, is extremely small. The name can not be used by sushi restaurants in Budapest or London, and cannot be used by other than sushi restaurants. Therefore the pool of end users here is very small and as an investment, it would not perform well. In addition, potential buyers can find out that they can register plenty of alternatives, just by changing the first word. They can go for example for:
TopPragueSushi*Restaurant
MyPragueSushi*Restaurant
ThePragueSushi*Restaurant
etc.
Now, let's consider names like Top*Restaurant or Best*Restaurant (word1.gTLD form names) - not only they sound very authoritative, but the pool of end-users here is very large. It can be basically every restaurant in the world, no matter where it is located, or what type of food it serves.
Other examples of names with a very small pool of end users:
JaneandMarryhappyChristmas*shop
BestDallasTaxPlanning*accountant
SweetAndSourCakeChicago*gifts
Sure, if you are making sweet and sour cakes gifts in Chicago, the name SweetAndSourCakeChicago*gifts can be perfect for you. But as an investment, this is not going to function well.
Now let's see some examples of new gTLD domain names with a huge pool of end users:
perfume*store
car*shop
life*insurance
real*estate
The idea of subdomains:
It is not only that above examples are extremely authoritative and powerful, they have other advantages too. One of them is a possibility of subdomains, which can be used if you want to operate different sites for different geo areas, or different products, etc. Owning name like real*estate, you can create an unlimited number of subdomains and sites (btw, all for no additional cost) like in the following example:
Dallas*Real*Estate, NYC*Real*Estate, Chicago*Real*Estate, USA*Real*Estate, etc..
The same is valid for the rest of those domain names (more detailed description and examples of other advantages of such names can be found in my book).
Conclusion regarding importance of end-user pool
From above examples we see, that keyword1.gTLD domain names have usually much broader end-user pool comparing to domain names in keyword1keyword2.gTLD or keyword1keyword2keyword3.gTLD form. In other words, for best results, do not unnecessarily limit your end user pool when registering your domain names. There are of course lot of exceptions from this rule, as there are some actual products which must be registered in keyword1keyword2.gTLD form, to make sense, but in most cases keyword1.gTLD names are the most valuable, and most profitable.
Of course, ONLY if you can get them for a reasonable price, which brings us to next topic.
Purchase and maintenance costs
It is clear that everybody would like to get short and meaningful domain names with a large end user pool. In new gTLD extensions, such quality names usually have higher purchase prices, and higher renewal costs as well. But "usually" does not mean always. Here is why:
In 2014, when first new gTLD extensions went live, everything was, to put it simply, fresh and new. And it was fresh and new not only for domain investors but also for registries. They were facing many technical, legal, marketing and other challenges. One of those other challenges was, of course, pricing.
Imagine this scenario: you are running a company which is a registry for a particular extension. You have some projections, but in reality, you have no idea how your extension will be accepted, how many domain names will be registered, etc. You have some mathematical models, you can use consultants with years of (.com) experience, but still..no idea really, until the rollout of your extension. Then, after few weeks and months, you start to finally get some data as of where your names are registered, who registered them, what types of names are prevalent in those registrations, etc. Based on those data you get a feedback from the market telling you where the value of your extension is, in which types of names. But this is an alive process - so even largest registries run by most experienced people are constantly evaluating their pricing models. There are basically 2 main approaches you, as a registry operator, can take when starting with new extension:
Approach 1 (straightforward) - if you have some clear ideas about pricing, price all of your names with standard renewals, except some name you think, feel or know are valuable. For those valuable names set higher (premium) prices (and in many cases also renewals), and see what the market feedback after the launch.
Approach 2 (wait and see) - if you are not so sure about how some names should be priced, withhold some of your best names from general availability (you can put them to status "registry reserved") and wait. Once you see how the market reacts to your extension (and what names domain investors register, and how they price them in selling venues like Sedo, Afternic or Flippa), you can release your withhold names back to general availability, with prices which reflects more accurately the current market.
And this is what happened in many cases in real life: some of the registries took a straightforward approach from the very start - their analysts, hired consultants and various software tools identified keywords which they thought are valuable and have set premium prices for them. Rest of the domain names they left for standard renewals. Here it was possible for domain investors to get many of great names for standard renewals, as of course, it was pretty impossible for registries to identify ALL valuable domain names (and another thing to keep in mind is that pricing is kind of art - one can use various software tools to measure certain characteristic - this is a base for appraisal engines - but the human analysis and valuation is still irreplaceable here)
Some registries took "wait and see" approach - here it was quite difficult to get a good domain name for standard renewal, as those registries really priced almost all more valuable domain names with premium renewals. Still, there were lots of gaps. In some cases though, I would rather think of those as not gaps, but a domainer-friendly pricing. There are huge differences how different registries are treating domain investors - many (I would say almost all of them) recognize the importance of domain investors for their business, and are very domainer friendly. There are few registries though in my opinion, which (at least reading their TOS - terms of service document, and seeing how they price their domain names) seem to really aim for a pure end-user use of their domains (to put it very lightly).
read (not just skip) TOS:
So, I would really recommend new gTLD domain investors to read (really read, not just skip) TOS, particularly if you decide to invest massively into certain extension. Registrars, btw, are usually doing pretty good job in identifying additional requirements and notifying their users about them before the domain registration is made, but you should do your proper due diligence before investing anyway.
Projected profit
There will be the detailed analysis of new gTLD sale prices so far (years 2014-2017) in my book. I will also note there best resources where it is possible to quickly check recorded sale prices. It will be therefore not discussed here and we go straight to few examples from my investment portfolio in this, and also in next article.
Examples of what can be good new gTLD investment (and why).
Before we start, let me note that there is really no agreement between new gTLD domain investors as of what makes good investments in new gTLDs. I am sure there will be some consensus in 5-10-15-20 years period, as there will be enough data of recorded sales publicly available. But for now, most of the investors are still testing what works and what does not, and new extensions are still rolling out as we speak. And as I have described in the article no. 3, there are various types of investors, with totally different approaches. I am investment type no. 3 investor (builder), so I will show you examples from this perspective while in my book, I will discuss also some examples which in my opinion have good chances to be profitable for type 1 investors (big guys) and type 2 investors (flippers).
Besides main criteria mentioned above a) end-user pool, b) purchase and maintenance costs and c) projected selling price, there are also some very helpful additional criteria.
Additional criteria
In addition to basic criteria, many investors with large new gTLD portfolios who are doing well also use following additional criteria:
- non availability in other extensions: this means that "keyword + gTLD" string is registered in legacy extensions and, if possible, in some reasonable ccTLDs (.com, .net, .org, .info, .eu, .co.uk, and so on)
- traffic - domain name gets some traffic (it will get some visitors daily)
- Google search: the domain name has a decent volume in Google search
- higher CPC (cost per click)
- no trademarks
Of course, it can not be expected that domain investors are guaranteed to get a domain name which satisfies all those criteria for standard renewal, as registries are using those criteria naturally too, so usually, those names will be offered for premium prices at 2017. In 2014 and 2015 when registries were less experienced and had less overall confidence, such opportunities were much more frequent and available.
Trademarks
Btw, be really careful with trademarked names. Always make a brief check whether there is any trademark which could be associated with your domain name. If you find something, it does not automatically imply that you can not register the domain name, but unless you have a good understanding of this area of international law and can be sure you do not cross the line, I would simply suggest refraining from such registrations. There are so many opportunities in new gTLDs, so why to complicate your life? If the domain name can be deemed as affected by trademarks, it will be very difficult to make any profit from it. In addition, it can be a very costly experience for a domain investor in case a lawsuit comes from the affected trademark holder.
Examples: it is a very bad idea to try to register names like Nissan*Car or Gucci*Store or Apple*Computer
Although it seems obvious, one is still surprised how many new investors are registering names in this pattern. So let's emphasize this once again: this is not going to be profitable and can bring you into big legal and financial troubles. Even if you are in a country where probabilities of lawsuits are smaller, you still will not be able to resell such domain to anyone who is sane. So the advice here is to stay clear from obvious trademarks and make sure you are checking also your other names (where trademarks are not that obvious).
And now finally examples from my portfolio - I will put in this and next article only a few examples, but I am dedicating the whole chapter in my book to list and comment on specific examples. Of course, these examples are highly debatable - but so is every new gTLD domain name and its price - someone likes it, someone not. Still, I will risk it, as the purpose of this exercise is to show you the thinking process behind the registration, using criteria discussed above. I will only discuss basic criteria here, some more advanced analysis including CPC and traffic can be again found in the book, as the article here would get too long and too complicated.
Example 1 of a new gTLD investment which makes sense: highest*faith
- end user pool: hundreds of millions religious people on the planet. Great name for a site about religion, faith, but also for a personal site or a personal blog.
- purchase and maintenance cost: the name has a standard renewal for .faith. It was registered for less than $1 (registrar can be seen via who is). At the time of registration, there was renewal promotion ongoing, where renewal cost of the domain name was less than $1/year. I have therefore renewed the domain until 2026, so in total, the cost is (purchase + 9-year renewal) approximately $10. (Learn more about renewal promotions and why to use them here)
Examples of pricing of some similar domains in this extension:
check what are the actual prices for keywords: high, higher, my, good, new, top, best ...
- projected profit: anything this domain can sell for in next 10 years, minus $10
Remark: many people (usually legacy extension holders and investors) claim that new gTLD names are very expensive to hold. It is simply not true in so many cases. Would I not use the promotion to register my domain, and to renew my domain in years in advance, I would pay (for those 10 years) 10 times its standard renewal fee, which is at the moment in average $25. It would then cost me $250 in total, and the projected profit would be anything I can sell this domain name in next 10 years, minus $250. Still not bad in my calculations, but of course - if we can reduce acquisition and holding costs, it is a must to do it.
Some of the additional criteria:
- Non-availability of whole string in other extensions: the string is available in all extensions..this gives this domain name some pretty serious negative points from my point of view. For example, domain names highestfaith*com or highestfaith*net are available at the moment.
- Google search: only 26 500 results for "highest faith" -> not impressive
Conclusion: the end-user pool is large and the name sounds good. String "highestfaith" is however not registered in other extensions, which indicates that there was no interest in it. For a total cost of $10 for next 10 years, this, however, does not bother me really - although it is not guaranteed, my bet is that I can sell the name for more than $10 within this time period.
Example 2 of a new gTLD investment which makes sense: virtual*fund
- end user pool: virtual*fund can be used for any fund trading with virtual currencies or a startup in virtual reality industry. A number of end users is smaller though, comparing to the previous example (this domain will more likely be purchased by an organisation, while highest*faith can be easily purchased by any individual).
- purchase and maintenance cost: the name has a standard renewal for .fund. It was registered for approx. $20 using registration promotion, and then it was transferred after few months to another registrar (registrar can be seen via who is). There were transfer and renewal promotions ongoing on that new registrar, where renewal cost of the domain name was approx $5/year. I have therefore renewed the domain until 2021, so in total, the cost is (purchase + 5-year renewal) approximately $45 for next 4 years.
- projected profit: anything I can sell this domain name in next 4 years, minus $45
Some of the additional criteria:
- Non-availability of whole string in other extensions: taken in .com, .net, .co, available in some others.
- Google search: only 143 00 results for "virtual fund" -> acceptable
Conclusion: the end-user pool is not super large but is decent, and the name sounds good and authoritative. If it sells, it can sell for the larger amount of money, as it will be probably sold to business/startup. String "virtualfund" is registered in some other extensions, which indicates some interest. Keyword "virtual" is not going to be obsolete anytime soon. So for a total cost of $45 for next 5 years, it seems like a pretty safe investment - although it is not guaranteed, my bet is that I can sell the name for more than $45 within this time period.
Example 3 of a new gTLD investment which makes sense: enjoying*life
- end user pool: literally hundreds of millions of people on the planet. Great name for a personal site or personal blog. Uniqueness and ego factor will play a role too - many of them want to have a personal site or blog, but there only a few names which are so good. In addition, the domain owner can positively tease his surroundings with email addresses like iam@enjoying*life, etc. Great for pr, advertisement, almost unlimited possibilities of use.
- purchase and maintenance cost: this is a rare example of a domain name, which actually has a premium renewal and has a place in my portfolio (which is builder type, not "big guy" type). The reasons are described above. Cost is around $45/year for the name, and because it is a premium name, it is impossible to use (as far as I am aware) transfer or renewal promotions, which are usually designed only for names with standard renewals. Because of that, the name will cost $450 to hold for next 10 years.
- projected profit: anything I can sell this domain name in next 10 years, minus $450.
Some of the additional criteria:
- Non-availability of whole string in other extensions: taken in all relevant extensions where it makes sense.
- Google search: 12 000 000 results for "enjoying life" -> very strong result for non-product type of name
Conclusion: the end-user pool is as large as it can be, the name sounds great and is authoritative. If I decide to sell it, it will sell for the larger amount of money (I got several offers for the name since I bought it here at NamePros for XX - largest offers so far were in XXXX range. I personally think it is XXXXX name in 2017, and its value will increase in future)
For a total cost of $450 for next 10 years, the name seems like a pretty safe investment.
Summary of the article:
- as can be seen from examples above, holding decent names in new gTLDs is not necessarily expensive. It can actually be much cheaper than holding names in many of legacy extensions, and ccTLDs. To get a decent name, one should start systematically applying relevant criteria.
In next article, I will continue with other examples, and will also discuss where in 2017 one can get great new gTLD domain names. It is not a secret that some of the very best names are registered by NamePros members.
Good luck with your investments, and have a prosperous.life
This is the fourth of 10 articles, which, I hope, 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. Articles here are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which will be ready on October 30, 2017, and you will be able to get it here.
Today I will discuss pricing of new gTLD domain names, with some specific examples. I will also show that notion that new gTLD names are more expensive than more traditional legacy names is, in many instances, simply wrong.
If you have not done that yet, you can read the first 3 articles here:
New gTLDs Investment Mistakes and Opportunities (Part 1 - pizza.diamonds & short domains)
New gTLDsInvestment Mistakes and Opportunities (Part 2 - chaotic versus structured portfolios)
New gTLDs Investment Mistakes and Opportunities (Part 3 - big guys, flippers and builders)
Disclaimer:
all ideas here are just my personal opinion. This is not an investment advice of any sort. My opinions 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 cases. You must, therefore, do your own due diligence before making any investment. I am a private investor and I have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
Part 3 - understand the pricing
Are new gTLD domain names more expensive then more traditional legacy names (.com, .net, .org and ccTLDs)?
The answer to this question is, it depends. There are hundreds of new gTLD extensions, and some names can be registered (and renewed) for as much $1, while other names can be registered and renewed for as much as $120 000. Why there are such differences?
To understand it more, we need to understand some basic characteristics of new gTLD extensions. One of the most useful characteristics (from domain investing point of view) will be to either categorize new gTLD extension as broad or as narrow. These terms will be explained immediately - I just want to point out that I have not found any consistent terminology yet, so I am inventing them - if someone has, or can suggest better names for those categories of new gTLD extensions, please feel free to comment below
Types of new gTLD extensions (broad vs narrow)
broad gTLD extensions
In further text, we will call new gTLD extension a broad one, in case it does not semantically alter the meaning of the keyword or keywords which is (are) put on the left side of the dot (or this alteration is just very small).
Few examples of such new gTLD extensions are: .online, .xyz, .site, .website
(Also .com, or .net can be seen as examples of broad extensions in this sense - as they are not new gTLDs, I am not discussing them in further text).
This also means that one can create following domains, and they all make sense - an extension does not influence the keyword (extension is basically neutral). Let's take keyword "pizza" as an example (in rest of this article I will always put character "*" instead of character "."):
pizza*online, pizza*xyz, pizza*site, pizza*website
All makes sense. If you want to have a website about pizza, you can choose any of them.
narrow gTLD extensions
In further text, we will call new gTLD extension a narrow one, in case it does semantically alter or complement the meaning of the keyword or keywords which is (are) put on the left side of the dot.
Examples of such new gTLD extensions are: .accountant, .horse, .broker, .win, .gold, .repair, .restaurant
(Also .org can be seen an example of, kind of, narrow extensions in this sense, but as it is not a new gTLD, I am not discussing it in further text).
Because the extension influences the keyword semantically, some combinations of extensions and specific keyword make great sense, while others do not. Let's take our keyword "pizza" again as an example and let's insert it in front of our examples of narrow extensions:
pizza*accountant
pizza*horse
pizza*broker
pizza*win
pizza*gold
pizza*repair
pizza*restaurant
Now, it is of course matter of discussion and of personal taste, but from a semantical point of view, many people will probably agree that pizza*restaurant makes sense, while the others not.
Main differences between broad and narrow gTLD extensions
While in broad extension once can register almost any English keyword and have a domain name which makes sense, in narrow extensions number of keywords which make great sense in combination with extensions is much more limited. It depends on the nature of particular narrow extension how many good, investment-worthy keywords one can create in this extension: in some narrow extension there can be still hundreds or thousands of relevant keywords (mainly geo keywords can extend this number), while there are other narrow extensions where literally only a few dozens of keywords are investment-worthy.
Why this is important:
if you are a company which owns and operates the extension, it is clear that you want to maximize the profit from it. That means, that particularly in cases of narrow extensions, it is almost inevitable to have different prices for different keywords. If your extension is very narrow, the most usual strategy is to price you best keywords with higher prices (so-called premiums, or premium renewals) and rest of your domains with a standard price tag for your extension (so-called standard renewals). Saying that we see lot of premium pricing in broad extensions too, mainly for very generic keywords, vanity keywords and keywords with great parameters (will be discussed below in more detail what those parameters are)
Are there more broad or narrow gTLD extensions, and can we somehow compare them?
There are only a few truly broad extensions, most of them (several hundred) are narrow extensions.
As for comparison among them, the number of long-term registrations in narrow extension will always be much much smaller the in broad extensions.
I emphasise word "long-term", as actual numbers can be distorted by various promotions, etc. But logically, in long term, we can not really compare numbers of registrations in narrow and broad extensions and make conclusions just based on that. Therefore, if you read some threads or comments saying "particular new gTLD extension is dying because it has only XXXX registrations" be very careful what to think of it and take it with a pretty large pinch of salt. A lower number of registrations does not mean particular extension is dying - authors of such statements completely ignore why we have narrow extensions in first place. They were introduced to enhance end-user experience and choice in domain space, and it is a fact that their primary purpose is not to serve for domainers. Many of the narrow extensions have higher standard renewals, so only a few registrations can (and will in many cases) pay their annual holding costs (fees to ICANN, and operational/human resource costs). It is also a case that certain registries operate several narrow extensions, thus more successful extensions can support less successful ones in financial terms, as they all belong to one company.
After brief clarification about two main categories of gTLD extensions lets now discuss particular domain names.
When do we speak of "reasonable" new gTLD investment?
Broadly speaking, we should be interested mainly in following 3 factors:
1) End-user pool: for each domain name, we should be asking ourselves how many end users are there for the domain name (end user in this context is a company or individual, who buys a domain from us, usually for purpose of development. It is not another domain investor). Sometimes we refer to this criterion also by asking "how large is a pool of end users for a specific domain name".
2) Cost: what is the purchase price of the domain and what is the renewal price of the domain
3) Projected profit: what is the estimation of the selling price of the domain, minus all costs
End-user pool
As for the end-user pool, it is clear that the larger this is, the better our chances of a sale. A very usual mistake is to register a nice domain name, but suitable only for a very small group of end users. If this is the case, the probability of sale is tiny, and therefore such names are usually not very good investments. Remember this: new gTLDs are here only from 2014. Many end users are still unaware of them. Therefore, particularly in new gTLD investments, it is very important to try to get names with large end user pools. Our aim should be basically to get names where the pool of end users is as large as possible.
For example, domain name BestPragueSushi*Restaurant (word1word2word3.gTLD form name) sounds nice and can serve its purpose very well, but how large is the pool of end users here? There are about 20 sushi restaurants in Prague, and the probability that any of them will want EXACTLY this name so much, that they are going to pay a significant money to domainer holding the name, is extremely small. The name can not be used by sushi restaurants in Budapest or London, and cannot be used by other than sushi restaurants. Therefore the pool of end users here is very small and as an investment, it would not perform well. In addition, potential buyers can find out that they can register plenty of alternatives, just by changing the first word. They can go for example for:
TopPragueSushi*Restaurant
MyPragueSushi*Restaurant
ThePragueSushi*Restaurant
etc.
Now, let's consider names like Top*Restaurant or Best*Restaurant (word1.gTLD form names) - not only they sound very authoritative, but the pool of end-users here is very large. It can be basically every restaurant in the world, no matter where it is located, or what type of food it serves.
Other examples of names with a very small pool of end users:
JaneandMarryhappyChristmas*shop
BestDallasTaxPlanning*accountant
SweetAndSourCakeChicago*gifts
Sure, if you are making sweet and sour cakes gifts in Chicago, the name SweetAndSourCakeChicago*gifts can be perfect for you. But as an investment, this is not going to function well.
Now let's see some examples of new gTLD domain names with a huge pool of end users:
perfume*store
car*shop
life*insurance
real*estate
The idea of subdomains:
It is not only that above examples are extremely authoritative and powerful, they have other advantages too. One of them is a possibility of subdomains, which can be used if you want to operate different sites for different geo areas, or different products, etc. Owning name like real*estate, you can create an unlimited number of subdomains and sites (btw, all for no additional cost) like in the following example:
Dallas*Real*Estate, NYC*Real*Estate, Chicago*Real*Estate, USA*Real*Estate, etc..
The same is valid for the rest of those domain names (more detailed description and examples of other advantages of such names can be found in my book).
Conclusion regarding importance of end-user pool
From above examples we see, that keyword1.gTLD domain names have usually much broader end-user pool comparing to domain names in keyword1keyword2.gTLD or keyword1keyword2keyword3.gTLD form. In other words, for best results, do not unnecessarily limit your end user pool when registering your domain names. There are of course lot of exceptions from this rule, as there are some actual products which must be registered in keyword1keyword2.gTLD form, to make sense, but in most cases keyword1.gTLD names are the most valuable, and most profitable.
Of course, ONLY if you can get them for a reasonable price, which brings us to next topic.
Purchase and maintenance costs
It is clear that everybody would like to get short and meaningful domain names with a large end user pool. In new gTLD extensions, such quality names usually have higher purchase prices, and higher renewal costs as well. But "usually" does not mean always. Here is why:
In 2014, when first new gTLD extensions went live, everything was, to put it simply, fresh and new. And it was fresh and new not only for domain investors but also for registries. They were facing many technical, legal, marketing and other challenges. One of those other challenges was, of course, pricing.
Imagine this scenario: you are running a company which is a registry for a particular extension. You have some projections, but in reality, you have no idea how your extension will be accepted, how many domain names will be registered, etc. You have some mathematical models, you can use consultants with years of (.com) experience, but still..no idea really, until the rollout of your extension. Then, after few weeks and months, you start to finally get some data as of where your names are registered, who registered them, what types of names are prevalent in those registrations, etc. Based on those data you get a feedback from the market telling you where the value of your extension is, in which types of names. But this is an alive process - so even largest registries run by most experienced people are constantly evaluating their pricing models. There are basically 2 main approaches you, as a registry operator, can take when starting with new extension:
Approach 1 (straightforward) - if you have some clear ideas about pricing, price all of your names with standard renewals, except some name you think, feel or know are valuable. For those valuable names set higher (premium) prices (and in many cases also renewals), and see what the market feedback after the launch.
Approach 2 (wait and see) - if you are not so sure about how some names should be priced, withhold some of your best names from general availability (you can put them to status "registry reserved") and wait. Once you see how the market reacts to your extension (and what names domain investors register, and how they price them in selling venues like Sedo, Afternic or Flippa), you can release your withhold names back to general availability, with prices which reflects more accurately the current market.
And this is what happened in many cases in real life: some of the registries took a straightforward approach from the very start - their analysts, hired consultants and various software tools identified keywords which they thought are valuable and have set premium prices for them. Rest of the domain names they left for standard renewals. Here it was possible for domain investors to get many of great names for standard renewals, as of course, it was pretty impossible for registries to identify ALL valuable domain names (and another thing to keep in mind is that pricing is kind of art - one can use various software tools to measure certain characteristic - this is a base for appraisal engines - but the human analysis and valuation is still irreplaceable here)
Some registries took "wait and see" approach - here it was quite difficult to get a good domain name for standard renewal, as those registries really priced almost all more valuable domain names with premium renewals. Still, there were lots of gaps. In some cases though, I would rather think of those as not gaps, but a domainer-friendly pricing. There are huge differences how different registries are treating domain investors - many (I would say almost all of them) recognize the importance of domain investors for their business, and are very domainer friendly. There are few registries though in my opinion, which (at least reading their TOS - terms of service document, and seeing how they price their domain names) seem to really aim for a pure end-user use of their domains (to put it very lightly).
read (not just skip) TOS:
So, I would really recommend new gTLD domain investors to read (really read, not just skip) TOS, particularly if you decide to invest massively into certain extension. Registrars, btw, are usually doing pretty good job in identifying additional requirements and notifying their users about them before the domain registration is made, but you should do your proper due diligence before investing anyway.
Projected profit
There will be the detailed analysis of new gTLD sale prices so far (years 2014-2017) in my book. I will also note there best resources where it is possible to quickly check recorded sale prices. It will be therefore not discussed here and we go straight to few examples from my investment portfolio in this, and also in next article.
Examples of what can be good new gTLD investment (and why).
Before we start, let me note that there is really no agreement between new gTLD domain investors as of what makes good investments in new gTLDs. I am sure there will be some consensus in 5-10-15-20 years period, as there will be enough data of recorded sales publicly available. But for now, most of the investors are still testing what works and what does not, and new extensions are still rolling out as we speak. And as I have described in the article no. 3, there are various types of investors, with totally different approaches. I am investment type no. 3 investor (builder), so I will show you examples from this perspective while in my book, I will discuss also some examples which in my opinion have good chances to be profitable for type 1 investors (big guys) and type 2 investors (flippers).
Besides main criteria mentioned above a) end-user pool, b) purchase and maintenance costs and c) projected selling price, there are also some very helpful additional criteria.
Additional criteria
In addition to basic criteria, many investors with large new gTLD portfolios who are doing well also use following additional criteria:
- non availability in other extensions: this means that "keyword + gTLD" string is registered in legacy extensions and, if possible, in some reasonable ccTLDs (.com, .net, .org, .info, .eu, .co.uk, and so on)
- traffic - domain name gets some traffic (it will get some visitors daily)
- Google search: the domain name has a decent volume in Google search
- higher CPC (cost per click)
- no trademarks
Of course, it can not be expected that domain investors are guaranteed to get a domain name which satisfies all those criteria for standard renewal, as registries are using those criteria naturally too, so usually, those names will be offered for premium prices at 2017. In 2014 and 2015 when registries were less experienced and had less overall confidence, such opportunities were much more frequent and available.
Trademarks
Btw, be really careful with trademarked names. Always make a brief check whether there is any trademark which could be associated with your domain name. If you find something, it does not automatically imply that you can not register the domain name, but unless you have a good understanding of this area of international law and can be sure you do not cross the line, I would simply suggest refraining from such registrations. There are so many opportunities in new gTLDs, so why to complicate your life? If the domain name can be deemed as affected by trademarks, it will be very difficult to make any profit from it. In addition, it can be a very costly experience for a domain investor in case a lawsuit comes from the affected trademark holder.
Examples: it is a very bad idea to try to register names like Nissan*Car or Gucci*Store or Apple*Computer
Although it seems obvious, one is still surprised how many new investors are registering names in this pattern. So let's emphasize this once again: this is not going to be profitable and can bring you into big legal and financial troubles. Even if you are in a country where probabilities of lawsuits are smaller, you still will not be able to resell such domain to anyone who is sane. So the advice here is to stay clear from obvious trademarks and make sure you are checking also your other names (where trademarks are not that obvious).
And now finally examples from my portfolio - I will put in this and next article only a few examples, but I am dedicating the whole chapter in my book to list and comment on specific examples. Of course, these examples are highly debatable - but so is every new gTLD domain name and its price - someone likes it, someone not. Still, I will risk it, as the purpose of this exercise is to show you the thinking process behind the registration, using criteria discussed above. I will only discuss basic criteria here, some more advanced analysis including CPC and traffic can be again found in the book, as the article here would get too long and too complicated.
Example 1 of a new gTLD investment which makes sense: highest*faith
- end user pool: hundreds of millions religious people on the planet. Great name for a site about religion, faith, but also for a personal site or a personal blog.
- purchase and maintenance cost: the name has a standard renewal for .faith. It was registered for less than $1 (registrar can be seen via who is). At the time of registration, there was renewal promotion ongoing, where renewal cost of the domain name was less than $1/year. I have therefore renewed the domain until 2026, so in total, the cost is (purchase + 9-year renewal) approximately $10. (Learn more about renewal promotions and why to use them here)
Examples of pricing of some similar domains in this extension:
check what are the actual prices for keywords: high, higher, my, good, new, top, best ...
- projected profit: anything this domain can sell for in next 10 years, minus $10
Remark: many people (usually legacy extension holders and investors) claim that new gTLD names are very expensive to hold. It is simply not true in so many cases. Would I not use the promotion to register my domain, and to renew my domain in years in advance, I would pay (for those 10 years) 10 times its standard renewal fee, which is at the moment in average $25. It would then cost me $250 in total, and the projected profit would be anything I can sell this domain name in next 10 years, minus $250. Still not bad in my calculations, but of course - if we can reduce acquisition and holding costs, it is a must to do it.
Some of the additional criteria:
- Non-availability of whole string in other extensions: the string is available in all extensions..this gives this domain name some pretty serious negative points from my point of view. For example, domain names highestfaith*com or highestfaith*net are available at the moment.
- Google search: only 26 500 results for "highest faith" -> not impressive
Conclusion: the end-user pool is large and the name sounds good. String "highestfaith" is however not registered in other extensions, which indicates that there was no interest in it. For a total cost of $10 for next 10 years, this, however, does not bother me really - although it is not guaranteed, my bet is that I can sell the name for more than $10 within this time period.
Example 2 of a new gTLD investment which makes sense: virtual*fund
- end user pool: virtual*fund can be used for any fund trading with virtual currencies or a startup in virtual reality industry. A number of end users is smaller though, comparing to the previous example (this domain will more likely be purchased by an organisation, while highest*faith can be easily purchased by any individual).
- purchase and maintenance cost: the name has a standard renewal for .fund. It was registered for approx. $20 using registration promotion, and then it was transferred after few months to another registrar (registrar can be seen via who is). There were transfer and renewal promotions ongoing on that new registrar, where renewal cost of the domain name was approx $5/year. I have therefore renewed the domain until 2021, so in total, the cost is (purchase + 5-year renewal) approximately $45 for next 4 years.
- projected profit: anything I can sell this domain name in next 4 years, minus $45
Some of the additional criteria:
- Non-availability of whole string in other extensions: taken in .com, .net, .co, available in some others.
- Google search: only 143 00 results for "virtual fund" -> acceptable
Conclusion: the end-user pool is not super large but is decent, and the name sounds good and authoritative. If it sells, it can sell for the larger amount of money, as it will be probably sold to business/startup. String "virtualfund" is registered in some other extensions, which indicates some interest. Keyword "virtual" is not going to be obsolete anytime soon. So for a total cost of $45 for next 5 years, it seems like a pretty safe investment - although it is not guaranteed, my bet is that I can sell the name for more than $45 within this time period.
Example 3 of a new gTLD investment which makes sense: enjoying*life
- end user pool: literally hundreds of millions of people on the planet. Great name for a personal site or personal blog. Uniqueness and ego factor will play a role too - many of them want to have a personal site or blog, but there only a few names which are so good. In addition, the domain owner can positively tease his surroundings with email addresses like iam@enjoying*life, etc. Great for pr, advertisement, almost unlimited possibilities of use.
- purchase and maintenance cost: this is a rare example of a domain name, which actually has a premium renewal and has a place in my portfolio (which is builder type, not "big guy" type). The reasons are described above. Cost is around $45/year for the name, and because it is a premium name, it is impossible to use (as far as I am aware) transfer or renewal promotions, which are usually designed only for names with standard renewals. Because of that, the name will cost $450 to hold for next 10 years.
- projected profit: anything I can sell this domain name in next 10 years, minus $450.
Some of the additional criteria:
- Non-availability of whole string in other extensions: taken in all relevant extensions where it makes sense.
- Google search: 12 000 000 results for "enjoying life" -> very strong result for non-product type of name
Conclusion: the end-user pool is as large as it can be, the name sounds great and is authoritative. If I decide to sell it, it will sell for the larger amount of money (I got several offers for the name since I bought it here at NamePros for XX - largest offers so far were in XXXX range. I personally think it is XXXXX name in 2017, and its value will increase in future)
For a total cost of $450 for next 10 years, the name seems like a pretty safe investment.
Summary of the article:
- as can be seen from examples above, holding decent names in new gTLDs is not necessarily expensive. It can actually be much cheaper than holding names in many of legacy extensions, and ccTLDs. To get a decent name, one should start systematically applying relevant criteria.
In next article, I will continue with other examples, and will also discuss where in 2017 one can get great new gTLD domain names. It is not a secret that some of the very best names are registered by NamePros members.
Good luck with your investments, and have a prosperous.life
