Why I think the Domain Market is Undervalued.

[sashas]

I've seen several discussions both here and DNF about some average names going for huge amounts at Snapnames/Pool.

The reason many gave for the grossly inflated sales were that the domain market is still undervalued, and once the big resellers hoard up all the good names, the consumers will be forced to pay more. I don't really approve of this practice (a grocery store hoarding up its goods would face a severe backlash/lawsuits), it does make business sense.

Now I was talking to my girlfriend the other day, and I was trying to explain to her why Sex.com is worth 25 million dollars. She couldn't really understand it; for her, it was just a name and nothing else. Mind you, she's not exactly a complete noob at computing. She knows how the internet works, is a member of some social networks...she's pretty much your average internet user.

But if the average internet user does not realize the value of domain names, then how can domain name buyers (who are pretty much average internet users too. You can't really expect your local Chinese restaurant owner to know a lot about domains).

So to me, the reasons why domains are undervalued are:

1.) The average user does not know the value of domains. Heck, most of them don't even know what domains are (they just know 'websites').

2.) I don't have any statistics, but a majority of the domainers are people like me - young and without too much money. We're more than happy to sell a potential $1000 domain to a reseller for $100 (and make a profit of $90 on a $10 reg), than wait for an end user to show up. The big domainers who actually have such deep pockets can afford to wait for years for the right end user. I'm pretty sure that many at Namepros dread losing a potential buyer by counter-offering with too high a value for their names. Big domainers can afford to lose buyers without much problems.

3.) A majority of the domainers are part timers (again, no stats to prove this. Just a notion). They don't have the time and the resources to actively seek end users, email hundreds of potential clients everyday, etc. Result? They have to sell to resellers at resale prices, rather than to end users.


So for me, its only when the average user realizes the value of domains, and the small domainers mature into bigger players, will the true value of domains be realized...

 

[AussieDomainer]

I would thoroughly agree with you there and would put myself in the groups you have stated.

 

[SharonTucci]

There have been countless threads where the same thing has been said repeatedly. Premium domains are grossly undervalued.

 

[VURG]

I agree that the market has a lot of room for growth.

There is over half a billion spent on registration fees each year now. That's a lot! Across the world people are spending huge amounts on domains. I think that a large percentage of domainers have a lot of expenses and many of them are forced to sell their gems for whatever they can get. Because there are so many alternatives to any one domain, many of them just don't have the value that we would like to believe they have.

In the right hands, Vodka.com is worth more than $3 million but most people wouldn't touch it for $1 million. Some domains never end up in the right hands.

 

[.jd.]

Now your seeing the next wave.. You will see that more people are begging to make businesses,corporations.. There out there making money. There are a lot of teens on this forum. We all know lots about domaining, the prices etc.. Most of us are entreprenuers. I for instant am setting up my first company.. I do plan in the future to start buying generic domains. Once I have the funding and VC for it. You will see prices skyrocket eventually.

 

[-REECE-]

I hoard all my names

Actually, I've never sold a single name in 9 years of domaining. I've traded a few for "upgrades" here and there, but really have no interest in selling names that are making me consistent money. With the market going up each year, I really wouldn't ever be interested in selling my names (other than speculative purchases like .mobi) unless I had a financial crisis, met a really generous enduser, or could get an absolute steal and needed to free up some cash. Other than that, I finance purchases with interest earned on RL investments and finance reg fees on parked income.

No doubt in my mind that companies and large investors will own the large majority of gems within a few years. They won't have mine though