Why Do LLLL.com's Have Value?

[peaches017]

Before you all start flaming me, read the entire post first.

I get that names like:
Sexy.com
Love.com
Golf.com
-- have value for obvious reasons. They represent words, terms, industries, etc. etc.
I also get that name like:
ABCD.com
ECPD.com
RMOP.com
-- have value, they are strong letters that could very possibly have meaning to an end-user.
I also get that names like:
Fole.com
Rade.com
teed.com
-- have value, they are easily pronounceable and as such can be branded and developed on.

HOWEVER:

Why do names like ZXOT.com have value? Because the Zurich Xylophone Orchestra Team might need a new domain name? Please. I get it, there is a minute chance that ANY domain name will have meaning to someone who is willing to pay, but enough to warrant these prices? XKCD.com has bad letters, and look what they did! Great! THEY COULD HAVE MADE THE SAME SITE WITH ANY OTHER LETTERS. Why would your name demand a high price, when they could just go to the next guy who'll sell it to them for $25?

When is the last time someone who owned such a random and bad LLLL.com was approached by an end user? Sure, there are going to be a lucky few who come forward by having been approached by end users, but how much did they sell that name for? $2,000? $5,000? I look at "bad" LLLL.com's as a crap shoot, you have absolutely zero guarantee of ever finding a motivated buyer, and thus must buy in bulk in order to increase your odds of ever finding such a buyer over your portfolio of names.

Names like ZXWY.com make NOTHING in parking revenue, and no, I don't want you lucky few who have stumbled onto names with bad letters that do in fact get traffic to start posting your success stories, maybe they have link traffic, maybe they actually mean something despite the bad letters (Sexy.com has two "crap" letters). And here's the sickest thing: hardly anyone here is going have the balls to tell an end-user that the name isn't for sale: one of the only ways to stay in the drivers seat in negotiations.

It's like all of you are buying FREAKING TULIPS.

99% of the time, you guys are selling amongst each other. I sit at the edge of my seat every day and await the time the optimism fades -- and in our struggling economy it will fade -- and people start selling like mad, afraid to be stuck with their tulips.

LLLL.com's are nothing like LLL.com's. 456,976 vs. 17,576. Can I have some examples of big corporations and groups that use four letters as their initials? They're out there, but certainly in much smaller numbers than those that use two or three letters.

Any corporation with big money is going to have the funds to buy a generic word or LL / LLL. They might buy the LLLL (if they need to) as a backup or a nice thing to have, but they won't rely on it for organic traffic looking for them. Sure, there are going to be names in use such as Wamu.com (Washing Mutual) but don't throw those in my face as if they're the norm: they're not. Because the need is lessened, so will be the price they can demand, and that's why I feel like they're being "traded" at too high of a price.

Let's see if we can agree on a few things:
LLLL's can be representative of words and terms
LLLL's can have great letters that are common in acronyms
LLLL's can be pronounceable and/or brandable

I'm not trying to bash on LLLL.com's without reason, and I don't want to think they're currently a bad investment, but I need reasons as to why my thinking is wrong. I took some time in writing this post, I hope the responses are equally well thought out.

Peter

 

[tristanperry]

Whilst I agree with some of your views (and notice that you do brielfy address LLL.com domains, but in a positive light) I'd like to mention that crappy, non-end user-like LLL.com domains are worth $8k against all logic..

In addition, there aren't too many companies whose name consists of 3 words (1 or 2 is common, although 3 word names aren't that common, nor are 4 word names). Hence, by your logic, there also isn't much point in the majority of LLL.com domains

However, of course, LLL.com domains (all of them) are very valuable. And as you say, many of the LLL.com sales are amongst domainers.

I know this is a debate about LLLL.com domains, however I can't see how people can defend LLL.com domains but attack LLLL.com domains - for me, it should be "both or neither"

 

[NameCharger]

This past week I received an inquiry from an end-user client wishing for me to purchase a semi-premium, all consonant LLLL.com on his behalf.

Going by current exchange prices/standards, this domain sucks and you wouldn't be able to fetch more than $150 for it on a good day so I figured I could pick it up rather easily but that's not going to happen because the current registrant is a really, really, really big dog.

.com was the only registered gTLD, so the letter pattern isn't that desirable but yet the really, really, really big dog had the foresight to register it many moons ago.

Bottom line: LLLL.com's have and will continue to have value as end-users realize the benefit of short domains that are perfect acronyms for their entities rather than JustSomeCrappyDomainThatWasAvailable.com

 

[Semtex]

You have a point Peter, but it's also the domainers that help make the prices rise and fall. If you were to take domainers that have 100+ 4 letter domains, and they were to all sell thousands of them in a one week time period. You would definitely drive prices down by 50%. But, there would be a few domainers and even businesses with big pockets, that would spend thousands to buy up all of these names at a "bargain".

Today you can buy "crap" 4 letters for $25-$30 a piece. But there was once a day when you could buy crap 3 letters for $250. The same reason that makes XKQ.com worth $6000 is the same reason why XKQZ.com will be worth $100 2 years from now. They are short and simple and people collect them just like they collect old crappy Pete Rose cards. One man's junk is another man's treasure.

Granted, the premium letters will always sell for a premium, but what happens 10 years from now when the internet has doubled in size. I would be willing to bet that even crappy 4 letters will be worth $500 10 years from now. And all it cost me to register that crappy 4 letter will have been $90 including interest.

 

[CHILLY]

HOWEVER:

Why do names like ZXOT.com have value?

http://zxot.net/index.cfm or http://zxot.com/ One possible answer.

Xot.com may cost too much for a small start up company so perhaps (speculation) they may like to opt for zxot and make a fancy Z logo and pay say $150.00 for it as apposed to 10K.

I get it, there is a minute chance that ANY domain name will have meaning to someone who is willing to pay, but enough to warrant these prices?

What prices?

Names like ZXWY.com make NOTHING in parking revenue,

http://zxwy.com/

And here's the sickest thing: hardly anyone here is going have the balls to tell an end-user that the name isn't for sale: one of the only ways to stay in the drivers seat in negotiations.

If i had alot of these types of LLLL's, I would know it's not like owning boats.com or newyork.com ect.. So I don't think trying to apply that type of bargaining makes sense. They are not Premium in that sense where they would command that type of attention. But as I see a few domainers do is buy many domain names and flip them for some amount of profit be it $5.00 or $500.00 ect.. the way I see it is that's all that's being done (or trying-speculating) for the most part with these LLLL's.

I'm not an LLLL fanatic or big investor I'm just replying through logic and proofs for further conversation sake.

99% of the time, you guys are selling amongst each other. I sit at the edge of my seat every day and await the time the optimism fades -- and in our struggling economy it will fade -- and people start selling like mad, afraid to be stuck with their tulips

There are many who are sitting at the edge of their seat for exactly this time, and when the time strikes will be buying up whatever they can and this includes the whole market of domain names not just the LLLL's.

I'm not trying to bash on LLLL.com's without reason, and I don't want to think they're currently a bad investment, but I need reasons as to why my thinking is wrong. I took some time in writing this post, I hope the responses are equally well thought out.

Some types of LLLL's may be a bad investment currently, One thing I've noticed with LLLL's of all qualities is that alot of the people on forums who hold many very good & premium LLLL's are selling selling selling and have been selling for awhile despite any talk about their values increasing with time. It looks to me that prices are deceasing somewhat and as speculated will continue to do so. It is also speculated that they will slowly began to increase down the road and then it should be a steady increase although slower than what was witnessed for the last few months. Some are holding until that time, while others are waiting and will buy back into the market during or a little before that time. I don't think those holding "So called bad LLLL's" are looking for a million dollar end user sales, just some type of roi. I bought LLLL's at reg fee and sold them from $35.00 to to maybe $80.00 a few months back, that's no success story but a simple roi. Others have done much much better. If you simplify it, that's all it is. I don't think it's meant to compete with top level generics. There are many LLL and generics that are not in end user hand either.

 

[martinisky]

Oh man that ZXWY.com intro music makes that domain priceless! Anti premium domain? Pssssh.... not with music like that.

 

[VURG]

Liquidity

Unlike many other types of domain names, there is a ready market to buy your unwanted LLLL.com every day. It is therefore a lot easier to have a back out clause for your domain name investing than other domains

 

[whitebark]

I have a number of directories and I see LLLL domains being used on websites all the time. Today there were two - one had a 'q' and a 'v', and the other was for an American trucking company containing a 'w'. I point out the letters because some people love to push that silly notion of premium letters.

 

[filter]

[...] XKCD.com has bad letters, and look what they did! Great! THEY COULD HAVE MADE THE SAME SITE WITH ANY OTHER LETTERS. Why would your name demand a high price, when they could just go to the next guy who'll sell it to them for $25? [...]

That's the situation today. But what will the market look like 10 years from now? Long-term speculators on the low end ("random bad letters") may be looking at likelihood of eventually more and more "XKCD.com" sites already developed, and less and less folks willing to let go of their one and only 4-letter .com domain name for less than a good price.

Question may be - when to buy in? Are there better opportunities for long-term growth at the moment?

If I buy something like QXYV.com for $25 today, and register it for 10 years, that's about $100 out of pocket right now that won't available for alternative (better?) investments.

Ten years from now, what are the chances I can sell it for at least $200? (ROI equivalent to 7% compounded annually for 10 years ...)

$260? (roughly 10% compounded)
$400? (roughly 15% compounded)
$620? (roughly 20% compounded)
$930? (roughly 25% compounded)
$1380? (roughly 30% compounded)

(Considering that the price of a low-end CCC.com today is close to $200 ... the 7% per year minimum ROI may be a "not unreasonable" minimum expectation for LLLL.com.)

But most domainers probably aren't too excited about a rate of return really not all that much higher than a 10-year certificate of deposit (with much higher risk).

The "$400 in 10 years" possibility may be closer to the minimum rate of return to attract speculators - but the market psychology is not currently so inclined to be optimistic.

While right now may be a nice buying opportunity for the brave, some may be interested but also expecting good possibility for better ROI by holding off on purchases right now - waiting for a definitive turnaround in the downward trend.

For example, if a year from now prices have bounced back just a bit, and QXYV.com can be acquired for $35 (which would be a 40% increase from $25 if ignoring renewal fee ... but factor in another $7 then it's closer to 9.3% increase) ... Then add another 9 years of renewal fees ... call total acquisition cost $103 instead of $100 (ie $10 more for the domain, but $7 less for renewals).

ie, to achieve 15% ROI (compounded annually over 9 years) ->

with acquisition+renewal cost of $103 a year from now, I would need to be able to sell @ just $362

with acquistion+renewal cost of $100 right now, I would need to be able to sell @ $404

But that's assuming prices for low-end LLLL.com don't increase more than about 9% over the next year.

I doubt many domainers are calculating odds and risk-reward and compound ROI etc etc so explicitly - when the random factors of an unknown future vastly outweigh so many finer points. But I do think that more than a few market players may be tuned in to some "precognitive" analysis along these lines. Or even just following the trader's rule of thumb: "the trend is your friend - until the bend at the end!"

well ... to sum up: value of low-end LLLL.com is expectation of long-term rarity (limited and slowly decreasing supply vs. slowly increasing demand), maybe comparable to how CCC.com are traded today. Current prices seem to be just on the cusp of being attractive to speculators who may start to become interested in chance of annual ROI around 15%, but not so much for anything less than that. At this point, there is no strong argument for prices to go up in the near future - so many buyers are more comfortable holding off deciding "now is the time to buy" - and prices can certainly continue to go down in the meantime.

ps. QXYV.com is one of my own prize "uber anti-premium" collectables. I bought it because I like it - and it's not for sale now or ever (for any sane price at least)

 

[-REECE-]

LLLL.coms and tulip mania have little in common and to be honest the tulip analogy is used way too often on this board by people who understand little of what transpired back then. Some would argue most LLLL.coms have little intrinsic value -- I would say the same can be said about generics which are sold with little revenue/traffic. We've already seen that bubble burst once and I think we're going to see it burst again sometime soon. Only a fool thinks they can buy a name like Pets.com and instantaneously become more successful than established brands -- that was 1990s mentality and the hypers owning many of these premium generics are confusing new little domainers into believing that once again.

There really is very little logic in much of the domain world and aftermarket...

Why the heck would someone pay as much for an LLL.biz as an LLLL.com? Why would someone pay more for an LLL.mobi than an LLLL.com?

Why do people invest in extensions like .asia?

We can question logic, we can pretend we know the answers, or we can just accept that things are the way they are.

As many of you know, I've always been a strong advocate of "either LLLL.coms are underpriced or CCC.coms are grossly overpriced", as is Italiandragon, and I'm sure many others here. Someone explain that one to me...

Phil gave a perfect example of why I like investing in short domains -- Liquidity. Someone can pretend Pizza.com is worth 2.6 Million any day of the week but when someone offers me $25 on my low quality LLLL.coms, I know they aren't screwing around. LLLL.coms (especially at min wholesales in the well established categories) have very understood values which are both relatively easy to track and relatively easy to keep up with.

Someone with no experience in the domain name market could quickly find out that an LLLL.com for $15 or a quad premium for $150 in example represent an excellent buying opportunity. What about Pizza.com at say, $1.3 Million?

Liquidity. Simplicity. Rarity. Collectibility.

There's a lot going for the 4 letter market and there are various obvious reasons why people choose to invest in it. These 4 reasons work for me.

Liquidity - I like knowing that if I ever get hard up for cash I can get near full market value for most of my LLLL.coms almost instantly. Again, outside the short domain world, try that with just about anything and you'll realize how valuable and unheard of this very well is.

Simplicity - As stated above, prices are very easy to track. While a new LLLL.com investor may not be able to readily differentiate between a $300 quad premium and a $500 quad premium, all LLLL.com investors know that a regular quad premium for much under $300 is a good deal and much over $500 likely not a good deal. How many markets are that easy to follow?

Rarity & Collectibility - These 2 market driving forces play into each other. Something which is rare is generally collectible and likewise, something which is collectible is oftentimes rare. You can collect LLLL.coms according to certain letter sequences (eg. RX, CA, MD, DR, UK, ...), patterns (CVCV, VCVC, AABB, AAAB, BAAA, CVVC, VCCV, ...), quality (quad premium, triple premium, double premium, ...),...

I could go on but I think I've made my point.

At the end of the day one thing remains apparent -- regardless of quality, brandability, memorability, and sheer enduser potential, most domains remain incestuously bought, sold, and resold among domain name investors. This is not an observance limited to the 4 letter market but one which describes domaining as a whole. Why have so many top generics and "premium keyword combinations" not found endusers?

Short answer: Many times, if not most times, domainers are the enduser. Whether that's because you put your asking price that far into the stratosphere with your delusions of grandeur or because there just aren't endusers out there for every "top generic and premium keyword combination" is anyone's guess. I'm inclined to believe it's a combination of both factors. Once reality sinks in, perhaps more investors who invest in shoddy keyword domains will open up to the LLLL.com market and understand that like any market in the domain world, domainers play a starring role.

 

[peaches017]

Thanks for the response Reece, and it made me realize a few things.

Liquidity is huge, and I'm totally with you on that.

But here's my problem:
Why are these LLLL.com's given such clear cut values in your book? Based on statistical analyses of past sale prices? I'm sure this hasn't been your intention, but one source of frustration for me is the 3character.com's and 4letternoob.com price guide's of the world. You do a good job, and are a smart guy, and even if it's not your intention, I'm sure your guide can "confuse new little domainers into believing the hype."

The people that have posted in this thread have done a good job, been eloquent, and made good points. But I think that a huge number of the people investing heavily into low-level LLLL.com's don't see the overarching value in low-level 4L.com's (I'm not sold that there is any) and do buy/sell them like tulips.

No disrespect at all towards you Reece, you gave prices based on statistical data, but I don't think that one can ever give a "simple" price for a domain name. Pizza.com being worth $2.6m, $1.3m, or whatever. No one really knows, and its when people start accepting a price as fact, that's where I get annoyed.

Peter

 

[-REECE-]

With short domain names there are very understood "price floors".

Regardless of one's belief in 3character.com, put an LLL.com on Namepros for much under Zesty's quoted price and watch how quickly it sells.

This is all I was hoping to achieve with my guide but unfortunately it is often taken the wrong way. A guide is supposed to offer guidance. There is far too little contained in my price guide or in Zesty's to accurately suggest much about any domain sight unseen other than what floor prices likely are based on past sales data.

If you ask me how much your LLLL.com is worth without telling me what the domain is, it's impossible to accurately suggest a valuation, BUT I can tell you certain information known from analyzing past sales, such as it is reasonable to assume that regardless of the letters you should be able to get $20+ for it or that if it contains only premium letters you should be able to get $250+, etc. It's impossible to determine what the "average LLLL.com" is worth, one can only quote what sales have gone for in the past and this in itself may be inaccurate because past sales may not be representative of the domainer sentiment at this time.

Taking the guide as more than "a buyer's guide to not getting ripped off" is taking the guide as something it was never intended to be. I'm usually pretty good about getting people free appraisals, as are many people on here provided the number of domains they're asking for appraisals on isn't more than a couple... Asking a knowledgeable domainer who knows what the exact domain name is will always be a better solution than a guide, regardless of who writes the guide.

Thanks for the response Reece, and it made me realize a few things.

Liquidity is huge, and I'm totally with you on that.

But here's my problem:
Why are these LLLL.com's given such clear cut values in your book? Based on statistical analyses of past sale prices? I'm sure this hasn't been your intention, but one source of frustration for me is the 3character.com's and 4letternoob.com price guide's of the world. You do a good job, and are a smart guy, and even if it's not your intention, I'm sure your guide can "confuse new little domainers into believing the hype."

The people that have posted in this thread have done a good job, been eloquent, and made good points. But I think that a huge number of the people investing heavily into low-level LLLL.com's don't see the overarching value in low-level 4L.com's (I'm not sold that there is any) and do buy/sell them like tulips.

No disrespect at all towards you Reece, you gave prices based on statistical data, but I don't think that one can ever give a "simple" price for a domain name. Pizza.com being worth $2.6m, $1.3m, or whatever. No one really knows, and its when people start accepting a price as fact, that's where I get annoyed.

Peter

 

[bmugford]

Why does anything have value? Because people are willing to pay it.

Would Gold be worth $850+ an ounce if no one wanted it?

I think a better argument can be made for the bottom LLL.com being overpriced.
Let's say you are a small company named QYZ Company. Why would you go after QYZ.com for $8K, when you could get QYZC.com (QYZ Company) or QYZO (QYZ Online) for under $100.

Brad

 

[VURG]

But I think that a huge number of the people investing heavily into low-level LLLL.com's don't see the overarching value in low-level 4L.com's (I'm not sold that there is any) and do buy/sell them like tulips.

I once saw a comment in DNJournal about how not everyone wants the the Rolls Royce domains but with the evolving internet, others want the ford and the toyota domains as well. Well the internet now has over 100 million domains now and there is a market for the skateboard and bicycle quality domains too. These 4 letter domains are rubbish to a lot of long term domainers who want high traffic, high probability of an enduser, etc...

The fact of the matter is that there is over $3million spent on annual reg fees a year. Most domain names have been selling for over $25 on the aftermarket for more than 6 months straight. I'm not buying the lower level domains but I don't think the buyers who are buying them are stupid. They have had more than enough time to think over their purchases and stop competing in future auctions. I believe that the buyers know that they aren't sitting on Rolls Royce domains.

Price guides have their weaknesses but the quality of the guides keep improving as the stats keep growing. Thousands of public sales over $25 for LLLL.com says something significant has happenned since last year. Nobody can accurately give a value of a price of a domain or a house but you can use previous statistics to give a good guess.

I got into 4 letter domains because they were easy to sell. I've made many costly mistakes with domaining but I don't consider my 4 letter domain purchases to be one of them.

 

[accent]

Sales online were up 20% last Christmas season year over year - while sales in physical stores were down. The number of profitable websites is growing - probably at that 20% rate, or faster. Supply is shrinking as more domains (high quality generics and LLLL.coms) move to end-user hands. For about five years domains showed an average price gain of 30% - 40%. These fundamentals have been trumped by the lousy US economy, but as soon as the economy picks up the overall domain market will, I strongly believe, continue where it left off.

Like land - housing and business use dictate value, but much land is idle in investor's hands.

For me the joker in the deck is mobile. With their small keyboards mobile phones are more susceptible to typos than PCs. Predictions I have heard are that eventually mobile internet use will become a larger business than the PC internet - which will continue to grow. There really are only two worldwide domain extensions for the mobile web, and .com is one of them. {Dodged that one, eh?} I believe that there will be massive use of four letter .coms on the mobile web.

 

[-REECE-]

You and me have been sharing this vision for awhile now

Agree completely.

Sales online were up 20% last Christmas season year over year - while sales in physical stores were down. The number of profitable websites is growing - probably at that 20% rate, or faster. Supply is shrinking as more domains (high quality generics and LLLL.coms) move to end-user hands. For about five years domains showed an average price gain of 30% - 40%. These fundamentals have been trumped by the lousy US economy, but as soon as the economy picks up the overall domain market will, I strongly believe, continue where it left off.

Like land - housing and business use dictate value, but much land is idle in investor's hands.

For me the joker in the deck is mobile. With their small keyboards mobile phones are more susceptible to typos than PCs. Predictions I have heard are that eventually mobile internet use will become a larger business than the PC internet - which will continue to grow. There really are only two worldwide domain extensions for the mobile web, and .com is one of them. {Dodged that one, eh?} I believe that there will be massive use of four letter .coms on the mobile web.

 

[peaches017]

You and me have been sharing this vision for awhile now

Agree completely.

Sales online were up 20% last Christmas season year over year - while sales in physical stores were down. The number of profitable websites is growing - probably at that 20% rate, or faster. Supply is shrinking as more domains (high quality generics and LLLL.coms) move to end-user hands. For about five years domains showed an average price gain of 30% - 40%. These fundamentals have been trumped by the lousy US economy, but as soon as the economy picks up the overall domain market will, I strongly believe, continue where it left off.

Like land - housing and business use dictate value, but much land is idle in investor's hands.

For me the joker in the deck is mobile. With their small keyboards mobile phones are more susceptible to typos than PCs. Predictions I have heard are that eventually mobile internet use will become a larger business than the PC internet - which will continue to grow. There really are only two worldwide domain extensions for the mobile web, and .com is one of them. {Dodged that one, eh?} I believe that there will be massive use of four letter .coms on the mobile web.

I see your guys thinking, and I'm happy because it basically makes my argument against .mobi. I hate that ext, hehe.

One question though: why do you think that the mobile web will grow to be that huge if the keyboards are so bad you'd typo on anything more than a few characters long?

Peter

 

[-REECE-]

Covenience.

At least at first I don't believe this "mobile internet" will be recognizable to the Internet we know today in many respects.

People will use it to get stock quotes, to check the weather, to book concert tickets and vacations, ...

Essentially, it will enable access to important information whenever, whereever.

As VR (voice recognition) technology and/or other future technologies such as microprojectors, and OLED improve, we should see further use of the mobile web and imho there will one day in the not too distant future be more mobile internet users than desktop/laptop based internet users.

I see your guys thinking, and I'm happy because it basically makes my argument against .mobi. I hate that ext, hehe.

One question though: why do you think that the mobile web will grow to be that huge if the keyboards are so bad you'd typo on anything more than a few characters long?

Peter