discuss Riding the tsunami wave with your domains (upcoming economy crisis)

[twiki]

I'm saying "upcoming" because we ain't seen much of it yet. Anyway.

A month ago in a post I was saying I expect a good year in domain sales. Then April came and .... poof! I was wrong - the downtrend came suddenly and much sooner than I expected.

Although some sellers here still have had a great April, some had their best month ever. And my own April sales? They were normal, because in the first week I sold enough names for the whole month. But then, for 4 weeks (last 3 weeks of April and first week of May), I've had almost silence. Occasional lower value sales I don't count much.

( Edit: I still have some sales here and there in May so it ain't all that bleak for me personally. Plus I have other opportunities as well so I can't complain, overall I am on to a normal month as well )

But I wasn't entirely wrong. And this is what this post is about. Plus, what to do next.

Was just watching Bloomberg and I saw Larry Summers saying that "the tech companies are still going to be the biggest ones during this crisis" - not an exact quote, but anyway. I don't like the guy (at all) but on this, he's right.

I mean, what do we expect to come in here and replace the tech zone as the biggest purchaser of domains (what interests us)? Mom and pop shops? Big pharma? etc - No, the tech is still going to be here. And tech / finance related domains will still continue to sell, albeit at a lower level.

The problem is, though, that fewer names will likely sell. That is already here. Since NASDAQ is already -25% YTD, we can expect that to reflect in most of our sales. Now the question is, what to do about it. Here's what i thought:

- The problem we have is, math will not work out anymore for many domainers. Solution for this is? Get better names, even if pricier. Improve the overall quality of your domains.

Especially those of you guys with lower margins (Edit: and lower value names - I've been there, and got out of that). The higher your % overall profit margin is, the lesser the chance you will go underwater. I know, it might sound counter-intuitive in this market to buy higher priced names; but the less renewal cost pressure you have, the better off you will be.

- Don't renew your questionables. Those of which you aren't 100% sure they will be sold someday for a lump sum. If they don't sell before renewal, let them drop. Chances are you will still find them appearing out on the drops market.

- Don't steep reduce prices. And don't panic. If you decrease your prices right now, you will likely lose overall. The market is used with these price levels and the problem is not one of affordability, but one of demand. Demand will be less (Edit: because tech founders are panicking and will postpone their investment, everyone says hold to your cash right now which is both a safe and dumb advice as we all drive the crisis further with that holding) - but good names still sell for high $$$.

If you reduce your prices a lot, chances are right now you will still sell the same names but for less over the next months etc. So don't do that.

I've reduced some of my prices from say $2988 to $2488 - where they were high anyway - but otherwise nope. Also I've tested sheer discounts and yeah, doesn't work - as expected. So I would still hold to that pricing if I were you.

Besides, if we all start panicking and selling for cheap we will achieve nothing else but drag the whole domain market down.

You can try clearing your expiring ones here on NP though - nothing bad in trying that.

- Stay tuned to what happens and watch the NASDAQ index (and other factors). Including crypto - even if you don't have crypto names, chances are the better bitcoin will be, the better our names will sell as well. Because it's all in the tech bubble that started to burst. And yeah, we have bubble after bubble about to burst next - unfortunately. But it was all expected and predicted in the last years. They say right now, the biggest financial in human history might be happening next. Can't comment on that, but guys like Robert Kiyosaki etc have said it.

- Reduce your buying. This is the worst time to hoard domains. Cut from the list all those that are questionable and stick only to the top ones. Same applies to what you renew - only renew your top ones. The less junk you have, the better off you will be.

And some things that might happen, but we will have to see it first:

- Great names might be dropping and become available for catching or at auctions. Chances are auctions might end with much lower numbers on good names that are worth holding on long term.

- Domain name registration and renewal prices might fall down. I know this hasn't happened (ever?) but at least to me, it is expected to happen. (Edit: the opposite would be a dumb move for the registries)

If ICANN keeps these prices they will soon realize that a lot of their business will go down - and domain investors play a big role in that, we roll like half of their revenue through our portfolios. Decreasing prices will allow us to get more names and still continue to drive revenue not only to the registry but also to the registrars, including through their cut of domain sales etc.

My plans are: I wont' renew half of my portfolio (the questionables), but won't reduce price nor clear for dirt cheap on NP (not worth the hassle for me). Whoever really wants the domain will buy it in the last 2 days or desperately email me after they expired, to make sure they can still get it and not have the name ending in DC public auction - seen that lots of times.

That's it for now, if there is more I remember right now I'll post that. Thanks!

Edit: If you have any such due diligence tips for hard times ahead, don't be shy, please share them as well below. We all NP members here would be glad to learn from you.

 

[twiki]

Here's an interesting read.


https://techcrunch.com/2022/05/19/yc-advises-founders-to-plan-for-the-worst/?guccounter=2

1. No one can predict how bad the economy will get, but things don’t look good.
2. The safe move is to plan for the worst. If the current situation is as bad as the last two economic downturns, the best way to prepare is to cut costs and extend your runway within the next 30 days. Your goal should be to get to Default Alive.
3. If you don’t have the runway to reach default alive and your existing investors or new investors are willing to give you more money right now (even on the same terms as your last round) you should strongly consider taking it.
4. Regardless of your ability to fundraise, it’s your responsibility to ensure your company will survive if you cannot raise money for the next 24 months.
5. Understand that the poor public market performance of tech companies significantly impacts VC investing. VCs will have a much harder time raising money and their LPs will expect more investment discipline.
   As a result, during economic downturns even the top tier VC funds with a lot of money slow down their deployment of capital (lesser funds often stop investing or die). This causes less competition between funds for deals which results in lower valuations, lower round sizes, and many fewer deals completed. In these situations, investors also reserve more capital to backstop their best performing companies, which further reduces the number of new financings. This slow down will have a disproportionate impact on international companies, asset heavy companies, low margin companies, hardtech, and other companies with high burn and long time to revenue.
   Note that the numbers of meetings investors take don’t decrease in proportion to the reduction in total investment. It’s easy to be fooled into thinking a fund is actively investing when it is not.
6. For those of you who have started your company within the last 5 years, question what you believe to be the normal fundraising environment. Your fundraising experience was most likely not normal and future fundraises will be much more difficult.
7. If you are post Series A and pre-product market fit, don’t expect another round to happen at all until you have obviously hit product market fit. If you are pre-series A, the Series A Milestones we publish here might even turn out to be a bit too low.
8. If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan.
9. Remember that many of your competitors will not plan well, maintain high burn, and only figure out they are screwed when they try to raise their next round. You can often pick up significant market share in an economic downturn by just staying alive.
10. For more thoughts watch this video we’ve created: Save Your Startup during an Economic Downturn

Yes but this applies only to VC, investor-funded startups.

Most domainers here probably don't apply (including myself although I'm having 2 startups right now but not looking for investors).

99+% of businesses, either incorporated or self-employed as most domainers aren't probably interested in the above, because it doesnt' apply to them.

Edit: I think this is out of context in the current thread, which refers to us domainers here on NP.

 

[zomainhacks]

Yes but this applies only to VC, investor-funded startups.

Most domainers here probably don't apply (including myself although I'm having 2 startups right now but not looking for investors).

99+% of businesses, either incorporated or self-employed as most domainers aren't probably interested in the above, because it doesnt' apply to them.

Edit: I think this is out of context in the current thread, which refers to us domainers here on NP.

It tells us something about domain demand in the near future. That's why it is related

 

[twiki]

It tells us something about domain demand in the near future. That's why it is related

I see. Indirectly but yes you are right, I missed the point initially. Thanks

 

[Real AJ Martin]

I'm saying "upcoming" because we ain't seen much of it yet. Anyway.

A month ago in a post I was saying I expect a good year in domain sales. Then April came and .... poof! I was wrong - the downtrend came suddenly and much sooner than I expected.

Although some sellers here still have had a great April, some had their best month ever. And my own April sales? They were normal, because in the first week I sold enough names for the whole month. But then, for 4 weeks (last 3 weeks of April and first week of May), I've had almost silence. Occasional lower value sales I don't count much.

( Edit: I still have some sales here and there in May so it ain't all that bleak for me personally. Plus I have other opportunities as well so I can't complain, overall I am on to a normal month as well )

But I wasn't entirely wrong. And this is what this post is about. Plus, what to do next.

Was just watching Bloomberg and I saw Larry Summers saying that "the tech companies are still going to be the biggest ones during this crisis" - not an exact quote, but anyway. I don't like the guy (at all) but on this, he's right.

I mean, what do we expect to come in here and replace the tech zone as the biggest purchaser of domains (what interests us)? Mom and pop shops? Big pharma? etc - No, the tech is still going to be here. And tech / finance related domains will still continue to sell, albeit at a lower level.

The problem is, though, that fewer names will likely sell. That is already here. Since NASDAQ is already -25% YTD, we can expect that to reflect in most of our sales. Now the question is, what to do about it. Here's what i thought:

- The problem we have is, math will not work out anymore for many domainers. Solution for this is? Get better names, even if pricier. Improve the overall quality of your domains.

Especially those of you guys with lower margins (Edit: and lower value names - I've been there, and got out of that). The higher your % overall profit margin is, the lesser the chance you will go underwater. I know, it might sound counter-intuitive in this market to buy higher priced names; but the less renewal cost pressure you have, the better off you will be.

- Don't renew your questionables. Those of which you aren't 100% sure they will be sold someday for a lump sum. If they don't sell before renewal, let them drop. Chances are you will still find them appearing out on the drops market.

- Don't steep reduce prices. And don't panic. If you decrease your prices right now, you will likely lose overall. The market is used with these price levels and the problem is not one of affordability, but one of demand. Demand will be less (Edit: because tech founders are panicking and will postpone their investment, everyone says hold to your cash right now which is both a safe and dumb advice as we all drive the crisis further with that holding) - but good names still sell for high $$$.

If you reduce your prices a lot, chances are right now you will still sell the same names but for less over the next months etc. So don't do that.

I've reduced some of my prices from say $2988 to $2488 - where they were high anyway - but otherwise nope. Also I've tested sheer discounts and yeah, doesn't work - as expected. So I would still hold to that pricing if I were you.

Besides, if we all start panicking and selling for cheap we will achieve nothing else but drag the whole domain market down.

You can try clearing your expiring ones here on NP though - nothing bad in trying that.

- Stay tuned to what happens and watch the NASDAQ index (and other factors). Including crypto - even if you don't have crypto names, chances are the better bitcoin will be, the better our names will sell as well. Because it's all in the tech bubble that started to burst. And yeah, we have bubble after bubble about to burst next - unfortunately. But it was all expected and predicted in the last years. They say right now, the biggest financial in human history might be happening next. Can't comment on that, but guys like Robert Kiyosaki etc have said it.

- Reduce your buying. This is the worst time to hoard domains. Cut from the list all those that are questionable and stick only to the top ones. Same applies to what you renew - only renew your top ones. The less junk you have, the better off you will be.

And some things that might happen, but we will have to see it first:

- Great names might be dropping and become available for catching or at auctions. Chances are auctions might end with much lower numbers on good names that are worth holding on long term.

- Domain name registration and renewal prices might fall down. I know this hasn't happened (ever?) but at least to me, it is expected to happen. (Edit: the opposite would be a dumb move for the registries)

If ICANN keeps these prices they will soon realize that a lot of their business will go down - and domain investors play a big role in that, we roll like half of their revenue through our portfolios. Decreasing prices will allow us to get more names and still continue to drive revenue not only to the registry but also to the registrars, including through their cut of domain sales etc.

My plans are: I wont' renew half of my portfolio (the questionables), but won't reduce price nor clear for dirt cheap on NP (not worth the hassle for me). Whoever really wants the domain will buy it in the last 2 days or desperately email me after they expired, to make sure they can still get it and not have the name ending in DC public auction - seen that lots of times.

That's it for now, if there is more I remember right now I'll post that. Thanks!

Edit: If you have any such due diligence tips for hard times ahead, don't be shy, please share them as well below. We all NP members here would be glad to learn from you.

slightly contrarian opinion here - i own a lot of lead gen names for service businesses and during the pandemic they all had TOO MUCH business - people had extra cash from not traveling and from Govt handouts so the last thing my clients needed were more leads and damn sure didn't want to invest in raw domain name.

So as business slows down their phones and inboxes aren't flooded and they will need leads and ideas on how to generate more business.

Just another angle to consider.

 

[twiki]

slightly contrarian opinion here - i own a lot of lead gen names for service businesses and during the pandemic they all had TOO MUCH business - people had extra cash from not traveling and from Govt handouts so the last thing my clients needed were more leads and damn sure didn't want to invest in raw domain name.

So as business slows down their phones and inboxes aren't flooded and they will need leads and ideas on how to generate more business.

Just another angle to consider.

This angle is an evergreen one. I basically started with it, at least part of my domains back then were of this kind.

I dont' disagree on what you say in principle - that there will be certain interest for such names.

However the problem is, will likely be difficult to make a living from it as most sales are in XXX range and it will take a lot of outbound hard work in order to be profitable. There will also be price pressure, especially in the SMB area. When economy goes down, the bottom layer is what is hit most.

Also since domain prices are about to stay the same and even increase, I don't see such a tier being profitable in the future, although it has been (I know that well) and it still is if you do the legwork.

It's better to focus on 4 to 5 figs for companies with more cash at hand. Even now, that's what pays my bills (the bottom SMB layer has been dead this year so I'm discarding it (I don't do outbound/legwork, no time for that).

 

[twiki]

Just a quick note:

NASDAQ down almost 30% over the first 5 months of 2022. This is a HUGE drop.

 

[topdom]

Stockmarket is in bubble already. This might be a correction, but we can expect a small and artificial collapse during "Biden presidency", to wake people up.

 

[twiki]

Stockmarket is in bubble already. This might be a correction, but we can expect a small and artificial collapse during "Biden presidency", to wake people up.

This is not what we generally call a correction. It's much deeper, and long overdue.

Key indicators we have today have been met before only once in our history - right before the Great Depression.

 

[zomainhacks]

This is not what we generally call a correction. It's much deeper, and long overdue.

Key indicators we have today have been met before only once in our history - right before the Great Depression.

To what indicators are you referring to?

 

[twiki]

They are so many I can't even count. Haven't saved them. Various things aligned with pre-1929.

edit: deleted, was a bad example

 

[alcy]

your late. most are already in tsunami. except u of course

 

[Mkt Sales Leads]

Sales are down because marketplaces are dishonest, incompetent, or nontransparent/evil (they prefer arbitrage and dropcatching over sales with standard commission). Also because economy is down artificially and intentionally, a little bit (to wake people up, and prepare for the next phase).

You can tell times are not the best economically when some registrars
start competing with domainers/squeezing them dry by:
- hoarding names (esp dropped ones) as 'registry reserved'/premium
- having their own names show up above domainers in marketplace listings
- increasing reg prices and making some names premium renewals
- increasing commissions, esp for names not using their landers

It's now everyone for themselves