discuss Why do people insist that 99% of domain investors are losing money?

[wormfood]

Many people often repeat this here, and I don't understand why.
Sure, maybe they are just exaggerating, but even 80 to 90% seems high. Most of you have probably seen these threads:

https://www.namepros.com/threads/are-you-making-money-losing-money-dont-know.945592/
https://www.namepros.com/threads/how-much-do-you-earn-from-domaining-per-month.958903/

which show that maybe 50 to 70% are making money. These results are probably skewed by non-response and some people not doing their numbers right, but at least there is some evidence there.

Where is the evidence that 99% of people are losing money?
If you are looking at namepros auctions and thinking "people who own that junk cannot be making money," well that is why they are selling it here at $1 start. To get rid of it.
I think people are trying to give newcomers realistic expectations, but they are going to an extreme. They continue to say things like "most people do not make money in the first few years" when nobody could actually know that.

 

[tiawalling]

Some were born to do it.
Some tries and fail.

But domaining is a long term project. Those who persevere through trials and errors will surely succeed.
Just keep pushing on....

 

[Red.tape2]

Judging from what I've seen on Flippa, there are many people who've spent hundreds of dollars trying to promote their domains, and end up selling it for less than a quarter of the amount if they're lucky. On the other hand, I've also seen those who make some amazing profits. In my opinion it's a combination of good marketing, hard work and luck.

 

[joro001]

99% seems about right to me. If you asked me I would say for sure over 95% fail/are losing money. I have no doubt that the real stats of all members of this forum would vindicate this.

People have no idea how hard it is to make money in domaining in the long run.
Yes you can make some nice sales here and there but to make ROI worth talking about year after year is incredibly challenging with even the better portfolios and as others have mentioned renewals eat you up, never mind acquisition costs.

I get offers on my domains from real end users quite a lot and in many cases the domain/s they are inquiring about would be a real upgrade for them. Most will not spend over $500 on a domain, even if they approach me direct and have a real need for it. I've made some really good end user sales, but definitely do not rely on it month by month.

People mostly don't care about domains, they see it like web hosting, just an expense that is necessary to incur but don't want to pay for. Those that generally do get it are going for the top domains that are in the hands of old time investors like Berkens (before he sold many of his domains), Nat Cohen and others that were around from the old days. People like me that were too young to even know what a domain was, can't just jump in and make it big now, it's too late.

People heard about the success of some of these investors hoping to replicate it, but the reality is that boat has sailed long ago. Same with SEO where you used to be able to rank for car insurance, payday loans and other terms for next to nothing. Now you can only enter competitive markets with big budgets and have serious marketing spends ready, again only the top 1% can compete.

Yes there are exceptions to the rule from those that entered in recent years and made it big and do so every single year (this is the key) but the numbers are few and far between.

My opinion only.

 

[Dominic Belley]

I don't think that 99% of domain investors lose money.

I think that a lot of people wake up one day and decide to try selling domains. Yes 99% of them fail and quit within the first months losing a few hundred bucks. They were just trying another way of making money online like affiliate marketing or dropshipping or other stuff they tried before and always failing.

But they never were domain investors.

 

[carob]

Just to try putting really rough overall figures on it, say there are 130m .com registrations, with 80% held by speculators renewing each at $10/year. That makes a speculator spend of $1,040,000,000 per year.

Does anyone really think that .com aftermarket sales were anywhere near that figure last year? Huge sums are wasted on domains.

Want numbers?

1)
Look at the total pool of domain registrations.
Subtract those actively used for sites or forwarding to sites.
Subtract those defensively held by companies.
Guess that 80% to 95% of the remaining domains are held by speculators
Estimate annual renewal costs.
Add known costs of sales to speculators on dropcatch platforms.
= total annual speculator spend

2)
Total known public aftermarket sales figures for a year
Multiply that by figure for known privacy rate - Sedo say 80% of sales are private.
Estimate parking income at close to zero, maybe $.00000001 USD/domain
= total annual speculator income

3)
Subtract 1) from 2) to get speculator profit or loss

Currently 334.6m domains are registered.
http://www.businesswire.com/news/ho...ws-334.6-Million-Domain-Registrations-Quarter

Maybe IoT devices with unique URLs will drive growth.

 

[Kate]

Some of you mentioned that domain investing is a hobby for a lot of people. (ok, you wouldn't call it investing because some people's domains are so bad, and maybe you don't want to be lumped in with them)
But is it really true? I had this argument with some other people before, and they were saying that a hobby is something that you would continue to do even if there was no chance of making money.

It's an addiction too. Just like some people are gamblers and just can't stop because they keep hoping.

I make a distinction between gambling and investing. Investing is taking a calculated risk after due diligence (research, self-education). Gambling is buying without doing research. Many domainers clearly don't do enough research thus belong to group #2. The lottery mentality is very much prevalent, you know: you just need to make one sale to break even. But making that one sale is painfully difficult with an adverse portfolio.

What I am saying is a sweeping statement, it's based on my own observation. But I can't see how domaining is not a money-losing venture by default.
Millions of domains have been registered just in the last few months alone. How many have sold in the meantime ? Again the math is very approximate but easy to figure out. [Edit: Carob beat me to it]

 

[wormfood]

Just to try putting really rough overall figures on it, say there are 130m .com registrations, with 80% held by speculators renewing each at $10/year. That makes a speculator spend of $1,040,000,000 per year.

Does anyone really think that .com aftermarket sales were anywhere near that figure last year? Huge sums are wasted on domains.




Currently 334.6m domains are registered.
http://www.businesswire.com/news/ho...ws-334.6-Million-Domain-Registrations-Quarter

Maybe IoT devices with unique URLs will drive growth.

I appreciate what you're saying, but 80% held by speculators seems crazy high.

DomainTools says there are about 225k domains with Bodis nameservers, 134k with Voodoo nameservers, 490k with Uniregistry Market nameservers, and.. I reached my lookup limit for the day :P Maybe someone else can check the other popular places.
I'll look on expireddomains.net.. 982,044 Domains under GoDaddy Make Offer. 486,045 Domains under GoDaddy Buy Now. 211,945 Domains under Sedo Fixed Price. But many are listed at both Sedo and GoDaddy, I guess.

How many more speculative domains do you think there are beyond these couple million?
2 million * 9 per year is 18 million in renewals. Edit: oh wait, that's just the .com renewal :P
Edit 2: and of course, those uniregistry/bodis/voodoo ones overlap with godaddy/sedo..

https://cdn.sedo.com/fileadmin/documents/pressdownload/Sedo_Infographic_2013_Q1-Q4_UK.jpg
Sedo says they did $70 million in sales in 2013..

We don't have all the sales data, but I think someone like @jmcc who keeps track of this stuff might know roughly how many speculative registrations there are.
Anyway, you're probably still right.
Even if profit was made in the domain market as a whole, that doesn't mean most individual domainers aren't failing.

 

[Asfas1000]

99% is insanely high. I would be surprised if the percenatge is out of the 20%-80% range (as you can guess, I am not convinced that more than 50% of domainers are in the red, without counting their time of course).

Just to try putting really rough overall figures on it, say there are 130m .com registrations, with 80% held by speculators renewing each at $10/year. That makes a speculator spend of $1,040,000,000 per year.

Does anyone really think that .com aftermarket sales were anywhere near that figure last year? Huge sums are wasted on domains.

I don't agree with your calculations, because they imply a uniform distribution of domains among domainers. For instance, if 1000 domains are held by 3 specualtors, it is possible that one of them is holding 990 and losing big money and the other 2 are holding 5 domains each and making money. In this case 2 out of 3 domainers are making money.

 

[aditya agrawal]

Many people often repeat this here, and I don't understand why.
Sure, maybe they are just exaggerating, but even 80 to 90% seems high. Most of you have probably seen these threads:

https://www.namepros.com/threads/are-you-making-money-losing-money-dont-know.945592/
https://www.namepros.com/threads/how-much-do-you-earn-from-domaining-per-month.958903/

which show that maybe 50 to 70% are making money. These results are probably skewed by non-response and some people not doing their numbers right, but at least there is some evidence there.

Where is the evidence that 99% of people are losing money?
If you are looking at namepros auctions and thinking "people who own that junk cannot be making money," well that is why they are selling it here at $1 start. To get rid of it.
I think people are trying to give newcomers realistic expectations, but they are going to an extreme. They continue to say things like "most people do not make money in the first few years" when nobody could actually know that.

In every Business which is not brick and mortar, 95-99% people loose money. Stock markets, forex trading, gambling, that is the truth one must know before entering these businesses.

 

[jmcc]

Just to try putting really rough overall figures on it, say there are 130m .com registrations, with 80% held by speculators renewing each at $10/year. That makes a speculator spend of $1,040,000,000 per year.

Does anyone really think that .com aftermarket sales were anywhere near that figure last year? Huge sums are wasted on domains.

I would not put speculative registrations at that level in .COM. While there are just over 127M .COM domains in the zone (about 130M including domains in the deletion process), there are about 2.3 million domains deleted each month and approximately 2.5 million new registrations each month.

The renewal rate for one year new registrations is actually a better metric for measuring speculation in a gTLD. The one year renewal rate for .COM is in the region of 50% according to Verisign. It actually varies on a monthly basis as there are various discounting promotions that are large enough to have a visible effect on renewal rates the following year.

The renewal rate for a heavily speculated gTLD can be as low as about 10%. The 2014 renewal rate for .XYZ was 10.71% but it rose to about 14.41% for its first full year of operation. The first few years of any new TLD are exceptional in terms of registration patterns.

The .COM is unusual as it is considered a global bluechip TLD. People might actively use their local ccTLD domain name but will also register that domain if it is available in .COM. The .COM domain may be undeveloped or pointed to the local ccTLD website.

The one year renewal rate in some of the new gTLDs is actually close to that of some ccTLDs (>73%). However the ones where there is heavy speculation have nothing like this kind of renewal level.

There is a major speculative exposure in .COM due to the Chip domains from Q3/Q4 2015. The problem with these registrations (approximatey 3.68 million) is that they are on hosters/registrars that have traditionally lower renewal rates than Western market hosters and registrars. The worst case scenario is that none of these Chip registrations will renew. It could be, based on historical renewal patterns, between 20% and 35% of these Chip registrations will be renewed.

The danger with classifying domains as speculative registrations based purely on domain counts is that it doesn't really define what is a speculative registration. The numbers of domain names that go straight on to sale sites or pop up with a "for sale" sign after registration is actually very small compared to the ones that go straight to PPC or into use.

Regards...jmcc

 

[james haw]

But if one day they were told there was no way they would ever be allowed to make money, would they still buy and collect domains? Probably not, because most of the domains they buy are meant to sell to end users. They aren't just hobby collecting.

But a hobby is about doing something for enjoyment, and they all generally cost money, whether it's train sets, a new fishing rod, or buying domains. Gambling is also a hobby. Whether you lose your rent and cause problems or not is another matter, and can be done with any over spending - clothes, food, or domain names.
None of this stops them being "hobbies" in that it's not a job or business, even if part of the hobby aspect is buying and selling domains, and making a profit.

If you need a sale or a return, perhaps to pay bills or buy clothes etc, then you are arguably less of a hobbyist and more a "non-serious domainer", "non-pro domainer", or "part time domainer". It's a second income.

A collector buys things to keep on the mantle piece, including domain names, so a return or sale is not necessary. Maybe some sell occasionally to buy more prized names.

 

[james haw]

Statistics of such magnitude, such as global domain sales and profit, can be legitimately calculated using various methods with different end results, and depending on the angle or scenario observed from can give a very different point of view. So give 10 people the same data and their articles could very easily produce an entirely different view of domaining.

That's just data and view point, without factoring in their wanting to put a "juicy" slant on it to attract visitors.

Most reports and articles don't go deep enough into all aspects to give an accurate overall picture, or even a reasonably accurate view of the single angle they're trying to depict. It's not possible to get a really accurate representation of how everyone is doing, so decent articles just dig at the data and info we do have (and is all we can do). I agree though, the ones which make outrageously inaccurate claims are really annoying - though that's not limited to domaining at all. Heck, large corps and politicians who should know better do that in their marketing campaigns.


So it's not just about the data available, but what angle you view it from.
Do you use "total sales ever"? Or some specific period where prices and sales could be drastically affected by things not present in other years?

Do you calculate for every single domain "registered vs sold", if so how do you factor in many millions of legitimate data for "non sold" names which were purchases with no intention to sell (so not a "non sale")?

There will also be many millions of names sold in the last 10 years which are not recorded anywhere. Some domainer PMs another in a forum and sells a name for $35 they hand regged a few months ago.

Impossible to get enough data that means anything "in the grand scheme" of things, or that could show if it's a viable means of income.

I bet many make (at least) a second income of a few hundred $$ a month to buy those extras or save up etc. Especially as it's a global market and a $20 sale being a major loss to one person is part of a decent income to someone else in another country. How do you factor all that in to an over all view of "is it worth it"?

Heck there'll be massive gaps in taxes with people not declaring, so even that's not solid data.

All we can look at are the sellers at the top and what they make, and average Joe's in the middle and what a likely "living" or rough return per "ok" domain is going to bring. And avoid articles written about an over all picture, and instead read the good ones which focus on a specific area where data can be analysed and intelligent conclusions can be drawn.

And that's my rant for the evening

 

[Doron Vermaat]

To be successful in today's market as a new investor you need to be creative, a good sales(wo)man, understand marketing, naming and branding, have some decent starting capital and to top that all up you need a healthy dose of patience, passion and perseverance..

The thing is, if you have all or most of those qualities you might be better off (financially) commiting your free time to something else than domaining.

For me domaining is just too much fun. I consider myself lucky to have a hobby that makes me money.

 

[joro001]

To be successful in today's market as a new investor you need to be creative, a good sales(wo)man, understand marketing, naming and branding, have some decent starting capital and to top that all up you need a healthy dose of patience, passion and perseverance..

The thing is, if you have all or most of those qualities you might be better off (financially) commiting your free time to something else than domaining.

For me domaining is just too much fun. I consider myself lucky to have a hobby that makes me money.

I agree 100% with your post.

Despite some members on this forum constantly talking domaining up, it is incredibly hard to make ROI year after year (this is the key, not a few months of nice sales but doing it over and over year after year). I personally have had a great year in domaining just doing it part time, but will happily acknowledge just how hard it really is to make serious money with it. The guru worshipping in this industry is something that makes me particularly nauseous but that's a different discussion entirely.

It would be easy for me to talk it down if I wasn't making a cent like most people in domaining but as I say it's been a great year for me and I still stand strong by my comments above, it is much harder then most people think to make money month by month and put bread on the table for you and a family when consistency is crucial. If you're a single guy living in your mom's basement the pressure is off but anyone with a family will know what i'm saying.

I think the SEO analogy above sums it up perfectly. 3/4 years ago you could rank in the most competitive markets for a few hundred $ a month (I know because I did it before all the Google updates). You simply can't do it anymore, only the top 1% of companies can compete in the big niches, like loans, insurance etc.
In domains the best domains are owned by people that on the whole have been in domaining for a decade plus when you could get great names for far less than you can today. Yes I know some have done well in the last 4/5 years and built up from very little, but % wise it's tiny numbers.

To get started today and succeed you need serious capital, patience, marketing skills and as you say perseverance. Most fail in domaining, no question at all about it. Mind you most fail in any business, nothing new there IMO.

 

[HKIBC]

Allow me to inject a little optimism into this bleak discussion

IMHO, investing wise, domaining is a miniscule niche that has yet to take off. No real liquidity yet. Just bid your time and wait. Wait for really big money to take notice of it. There are some prerequisites for this to happen. This will take time. A couple of years or more. The odd good deal aside, this is not yet time to regularly make serious money on domains. This is time to build your inventory, guys!

This thread has been very interesting read indeed. Thanks all for some of the numbers and analyses here. Eye openers and good food for thought and scheming new domaining angles and projects (which happens to be my job)

 

[bobbarato]

Eye openers and good food for thought and scheming new domaining angles and projects (which happens to be my job)

What if I were to say the golden age of domaining has already passed and we are past peak dotcom?

 

[frank-germany]

to me the answer is simple:

99% is a made up number

nobody knows

but ask yourself
how long are you going to lose money in a business?

I don't kow - but not long - thats for sure

so the conclusion is obvious:
99% of the domainers make money

otherwise they won't do it

sell junk
and dropping junk
doesn't tell a different story
its just natural

 

[HKIBC]

What if I were to say the golden age of domaining has already passed and we are past peak dotcom?

I'd have to reply that I couln't disagree more! C'mon! Can't you smell it coming?

On the one hand, autonomic technology coming of age. M2M in its infancy, with billions of devices to come online in the years to come. Robots and autonomic cars coming but a few years down the road. How do you think all those real-life autobots will be addressed?

On the investment front, negative interest rates - read: banks and other institutional investors paying for others to borrow their money!! Most banks on the verge of collapse, sharpening their knives for bail-ins - read: using people's deposits to save themselves! Real estate market bubbles in most of the developed world. Where to invest all that capital once it's ready for flight...?

Allright! Note to self: enough shooting up / optimism for one day!

 

[kemjika11]

I also agree 99% dont lose money on domaining, but maybe close to that loses cash. you might be cash down but MONEY up(aka value of your domains). Guess for me it all boils down to one thing- are the names you've bought worth more than what you paid for now? if you keep buying names that lose or have no value then you are surely cash and money poor. But once you give good names some time, they prove you're up on the money.

 

[Kate]

I appreciate what you're saying, but 80% held by speculators seems crazy high.

It depends from one extension to another. Some TLDs, especially new gTLDs have more than 50% parked domains. Plus those that are on a registrar placeholder page, many of which were bought for speculation and will never be used.
But even 10% speculation is still millions of domains. We know for a fact that sales are few and far between. Even assuming that reported sales are only 10% of the total sales volume, the ratio of registered names vs sales is tiny.

And there are more sales in large/established extensions than the exotic ones. Somebody who is buying .vip domains to resell them could as well buy a lottery ticket instead. The odds are clearly stacked against you by default. I shake my head in disbelief at the huge amounts of money wasted in hopeless regs. Failure is the norm, success is the exception.

A collector buys things to keep on the mantle piece, including domain names, so a return or sale is not necessary. Maybe some sell occasionally to buy more prized names.

Some domainers are actually domain collectors, which is a hobby They don't always realize it. It can be an unintended consequence. if you buy domains and you keep renewing them without making sales, you are collecting them (or stockpiling them for future use perhaps).

 

[bobbarato]

Robots and autonomic cars coming but a few years down the road. How do you think all those real-life autobots will be addressed?

Domain names exist as a human friendly/readable layer (base +36) on top of a hybrid numeric addressing system (base 10) which in turn is a layer supported by binary processing. (base 2)

"All your bases are belong to us"

 

[dnk]

In India it is also extremely dangerous to invest in domain names because the iit kharagpur 1993 gold medalist sundar pichai led google will bribe the indian intelligence and security agencies to steal the retirement savings of domain investors without a court order or legally valid reason, to force/blackmail the domain investor to agree to identity theft , give up their resume for the fraud sex partners, relatives and friends of indian government officials
Additionally domain investors, especially single females who are not well connected are used for non consensual human experimentation using wireless technologies like memory reading, voice to skull technologies.
CBI is notorious for defaming, harassing, humiliating female domain investors in India, stealing their resume, the recent "suicide" of the entire family of PK bansal is an indication of how terrible indian intelligence and security agencies are .

No one in India is telling the domain investor that indian domain investors will find that their retirement savings of twenty years will be stolen by indian intelligence and security agencies without a court order or legally valid reason, otherwise no one would invest their money in domain names in India. I can provide legally valid proof of the theft of retirement savings to any person who is questioning the statement

India has some of the most corrupt and dishonest intelligence and security agencies in the world, who ruthlessly defame without proof, cheat, and exploit harmless innocent citizens for personal gain or hatred.

 

[GoKaizen]

Great info John.

http://www.hosterstats.com/blog/2014/09/23/over-160-million-deleted-com-domains/

I would not put speculative registrations at that level in .COM. While there are just over 127M .COM domains in the zone (about 130M including domains in the deletion process), there are about 2.3 million domains deleted each month and approximately 2.5 million new registrations each month.

The renewal rate for one year new registrations is actually a better metric for measuring speculation in a gTLD. The one year renewal rate for .COM is in the region of 50% according to Verisign. It actually varies on a monthly basis as there are various discounting promotions that are large enough to have a visible effect on renewal rates the following year.

The renewal rate for a heavily speculated gTLD can be as low as about 10%. The 2014 renewal rate for .XYZ was 10.71% but it rose to about 14.41% for its first full year of operation. The first few years of any new TLD are exceptional in terms of registration patterns.

The .COM is unusual as it is considered a global bluechip TLD. People might actively use their local ccTLD domain name but will also register that domain if it is available in .COM. The .COM domain may be undeveloped or pointed to the local ccTLD website.

The one year renewal rate in some of the new gTLDs is actually close to that of some ccTLDs (>73%). However the ones where there is heavy speculation have nothing like this kind of renewal level.

There is a major speculative exposure in .COM due to the Chip domains from Q3/Q4 2015. The problem with these registrations (approximatey 3.68 million) is that they are on hosters/registrars that have traditionally lower renewal rates than Western market hosters and registrars. The worst case scenario is that none of these Chip registrations will renew. It could be, based on historical renewal patterns, between 20% and 35% of these Chip registrations will be renewed.

The danger with classifying domains as speculative registrations based purely on domain counts is that it doesn't really define what is a speculative registration. The numbers of domain names that go straight on to sale sites or pop up with a "for sale" sign after registration is actually very small compared to the ones that go straight to PPC or into use.

Regards...jmcc

 

[Promaximus]

If you look at the stock market, commodity, and currency speculators, the percentage of people who lose is about 90% I believe.

Plus, 80% of businesses fail within the first 5 years according to data.

I think that an 80% to 90% figure is accurate for this business for people who lose money.

There are a lot of people who started after the late 90's who are making money by the way.

 

[Fancy.domains]

Try to guess an exact percentage is pointless. But its obvious in markets like these when the cost of entry is very very low it will attract a lot of people with no relevant education and/or experience to understand whats going on and how to profit from it. Some who don't will learn and grow whats needed but most wont, ever. No matter what industry they are in.

You hit the spot my fellow Swede!