discuss Upcomming 5l prediction

[Flipsbay]

Hello guys,

8 Months ago i was some what predicting 5l is the next big thing at that time some said its idiotic to think like that, some said impossible, some said only pronounceable are worth something. Now 2016 answers all those questions. We are looking even a bigger market than the so loved 4L.com domains

Anyway enough with the intro, what i wanted to know from you guys is what you think the future of 5l.com, both chips and pronounceable ones.

I think :

*** Random 5l chips will have 20$ each value
*** Types like ABAAC, ABACA will be at 70$ each
*** Types like AAABC will have 120$-150$
*** High End like AAAAB,ABAAA will worth 2000$

Yes above statements are purely what i think and has nothing to do with absolute truth, and i am also collecting sales data for some what accurate pricing but for now i think that has to wait another 3 months

Lets see what you guys think

Thanks.

 

[Recons.Com]

Correct me if I am wrong here, but is the basic idea that the current real value of any given domain reflects the cost of 25 years of renewals? That seems to be the way you arrive at a value of negative $90. Is that correct? Just want to be sure I understand it.

Wondering how that idea stands up against the more traditional one that the value of a domain (like a house, or a painting, or whatever) is what the market will pay for it.

No, it is not about 25 years, it is a perpetuity. If you deposit 100$ for perpetuity at 4%, you'll be getting $4/year forever, so $100 now is equivalent of $4/year if 4% return is considered risk free rate. The same way, if you deposit 200$ for perpetuity, you'll be getting 8$ a year forever, so $200 now (present value) is the same as $8/year payments.

Accordingly, formula of getting Present Value for regular cash flow is dividing annual amount by rate of return, in this case $8/4%=200$.

This is how, for example, rental property is evaluated, not based on the lot+construction, but how much annual net income it generates.

 

[DTR Alex]

so how will you calculate value of 5L compared to 4L?

 

[Recons.Com]

so how will you calculate value of 5L compared to 4L?

See please quotes from the previous posts.

LLLL.com chip price $2,000
Number of CHIP letters - 20
Renewal annual cost per name $8, lifetime present value (PV) $200

LLLLL.com price calculated:

(2,000 LLLL.com chip price + $200 PV renewals)/20 - $200 PV renewals = $ -90.

So the fundamentals analysis indicates that the substantiated value of 5L.com is currently negative $90.

Imagine one has $200 to invest. He is offered an investment option of 4% for year as long as he wishes. So, he'll be getting $8/year guaranteed. $200x4%=8$. Reverse of that calculation is $8/4% = $200, which means if you are offered a lifetime of revenue or expense of $8/year, that is equivalent of $200 or its (lifetime) Present Value. Why 4%? The higher the certainty of revenue/expense, the lower % rate associated with it. High certainty -> low rate. Since you are guaranteed to pay at least that, the rate for analysis has to be low.

Now, if someone pays $2000 for 4L.com chip he already factored in (even if he does not realize it) the PV of all renewals. Would he pay $2000 for 4L, if the renewal was $1000/year? Of course, no. And if he knew there is no renewals for 4L.com? He'd pay $2,200.

Now, we use widely accepted in the domain world concept that all the names of the following string should have similar value as one name of the previous string.

As there are 20 chip letters, QWRT.com would have the same value as all 20 QWRT+L.com names. But people forget here doing the adjustment for renewals.

So I use this method with the adjustment. $2,200/20=$110. That would be value of 5L if there were no renewal fees. But we already calculated that PV of .com renewals is $200. So we deduct $200 from $110 and arrive and negative value of $90.

Hope it helps )

 

[BrandChimp]

I don't know but I won't hold a lot of 5L..
I will stick with ultra premium like AABBB and put my money elsewhere like 4L 5N 6N .com

 

[frank-germany]

Imagine one has $200 to invest. He is offered an investment option of 4% for year as long as he wishes. So, he'll be getting $8/year guaranteed. $200x4%=8$. Reverse of that calculation is $8/4% = $200, which means if you are offered a lifetime of revenue or expense of $8/year, that is equivalent of $200 or its (lifetime) Present Value. Why 4%? The higher the certainty of revenue/expense, the lower % rate associated with it. High certainty -> low rate. Since you are guaranteed to pay at least that, the rate for analysis has to be low.

Now, if someone pays $2000 for 4L.com chip he already factored in (even if he does not realize it) the PV of all renewals. Would he pay $2000 for 4L, if the renewal was $1000/year? Of course, no. And if he knew there is no renewals for 4L.com? He'd pay $2,200.

Now, we use widely accepted in the domain world concept that all the names of the following string should have similar value as one name of the previous string.

As there are 20 chip letters, QWRT.com would have the same value as all 20 QWRT+L.com names. But people forget here doing the adjustment for renewals.

So I use this method with the adjustment. $2,200/20=$110. That would be value of 5L if there were no renewal fees. But we already calculated that PV of .com renewals is $200. So we deduct $200 from $110 and arrive and negative value of $90.

Hope it helps )

looks like I am really stupid
because I honestly think thats complete BS

 

[yogiDomain]

Of course, but still a small % compared to the $2000 value.

I just don't get how an asset can be -$90 net value, when it costs $8...at worst you bought something useless and you're out $8.

Nice observation

I dont get the point when people can buy domain at $8 why would they pay you double or 100$ for the same worthless 5L.

 

[BrandChimp]

Nice observation

I dont get the point when people can buy domain at $8 why would they pay you double or 100$ for the same worthless 5L.

Supply and demand.

If someone register every 5L .com left, people will want to buy from investor before prices rise..

Great patterns will be more valuable, of course, because there's less supply and they make you feel you own a >trophie>

 

[hollywood]

PV is based on regular cash flow, and in my experience the cash flow from domaining is not regular.

So to me the problem here is that present value analysis does not apply to domaining particularly well.

 

[DTR Alex]

Any extension that is already bough-tout, is selling at lower than the registration fee?

 

[Lionel Cohen]

PV is based on regular cash flow, and in my experience the cash flow from domaining is not regular.

So to me the problem here is that present value analysis does not apply to domaining particularly well.

I agree on that. The point of investing in domains is cashing out on an exit. The same way people invest in start ups that loose money for many years in order to grab/create their market and then being bought out at far superior multiple. Domains are not bonds, period.

 

[wurdd]

I prefer the first mover advantage analogy myself.

 

[namerav]

Same analogy applies to 5L as it applied to 4L few years back.

 

[BrandChimp]

Same analogy applies to 5L as it applied to 4L few years back.

Yeah, but there's far less 4L to be bought than 5L

 

[Lionel Cohen]

Yes, and same thing between 3L and 4L i guess everything i relative to how much the market can absorb...is 3.2M a lot or not at all...

 

[deez007]

I think your prediction is very very likely.... maybe the prices would end up being even a little higher too.

 

[Recons.Com]

PV is based on regular cash flow, and in my experience the cash flow from domaining is not regular.

So to me the problem here is that present value analysis does not apply to domaining particularly well.

No, not true.

PV can be analysed on ANY cash flow, not just regular.

And even if it were, renewal fees ARE regular cash flow and they are negative cash flow that can be valuated.

It is Finance 101. Annuity divided by required (or risk free for almost guaranteed returns) rate of return equals Present Value.

That is how, for example, people can analyze if they should buy the office building or rent it.

 

[hollywood]

No, not true.

PV can be analysed on ANY cash flow, not just regular.

And even if it were, renewal fees ARE regular cash flow and they are negative cash flow that can be valuated.

It is Finance 101. Annuity divided by required (or risk free for almost guaranteed returns) rate of return equals Present Value.

That is how, for example, people can analyze if they should buy the office building or rent it.

I can appreciate the PV calculation, it is very useful as you say. Thanks for bringing it up. But I would respectfully say that just because one can, does not mean one should.

I'm just saying, and the analogy that comes to mind is, that some measuring jobs require a yardstick, and some require a measuring tape. Who had the current chinese LLLL boom foreseen in their "yield" models (and the derived PV calcs) five years ago?

But even if some did nail it with their assumptions, then that begs the question of whose PV model was right? With PV someone always loses, don't they? It's not like game theory, for example, which I happen to think is much more applicable to analyzing domaining payoffs at lower scale e.g. less than say 200 names.

 

[artstar]

ok whos got a headache after reading only 3 pages of posts??

 

[Recons.Com]

I can appreciate the PV calculation, it is very useful as you say. Thanks for bringing it up. But I would respectfully say that just because one can, does not mean one should.

I'm just saying, and the analogy that comes to mind is, that some measuring jobs require a yardstick, and some require a measuring tape. Who had the current chinese LLLL boom foreseen in their "yield" models (and the derived PV calcs) five years ago?

But even if some did nail it with their assumptions, then that begs the question of whose PV model was right? With PV someone always loses, don't they? It's not like game theory, for example, which I happen to think is much more applicable to analyzing domaining payoffs at lower scale e.g. less than say 200 names.

I have an mba in finance from a top US school and I am sorry, but have no clue what you said above.

I am not discussing price fluctuations, sales etc.

This is about comparables and inserting a fixed cost associated with renewing 20 names vs renewing 1 name into consideration. Has nothing to do with the sales. Perhaps, if people would have clue about quantifying those costs, market pricing would have been different.

 

[hollywood]

I have an mba in finance from a top US school and I am sorry, but have no clue what you said above.

I am not discussing price fluctuations, sales etc.

This is about comparables and inserting a fixed cost associated with renewing 20 names vs renewing 1 name into consideration. Has nothing to do with the sales. Perhaps, if people would have clue about quantifying those costs, market pricing would have been different.

What I was trying to say was that you MBA-MS-Excel warriors over-analyze the sh!t out of stuff :D as nicely as I could...but hey I'm just a trash-talking CFA fail who wound up as a buy side fund trader.

But I might be missing valuable context here. Are you investing in 5L like the 4L in your sig, meaning, in quantity? If so then I guess I can understand that domain reg fees are a big line item in your expense sheet and worthy of PV analysis. Or maybe you are keen about different gTLDs and the deep differential in reg fees?