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Why We Need The Domain Aftermarket

Labeled as opinion in Domain Industry News started by Bob Hawkes, Nov 7, 2018.

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  1. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    Over the last few days I have developed the case for why the domain aftermarket is a good thing for end users. While it is partly a response to the recent Verisign post, the justification for domain investing comes up from time to time in other contexts. Here are some of the key points and a few quotes, but the complete post just went up at NameTalent.

    Rewards and Risks
    Aftermarket prices must have substantial profit to account for the significant risk of the name never selling for profit.
    "Those who hold these domain names have taken substantial risk that the domains will not sell at all, or if they do sell it may be for a loss."
    "The vast majority of domain names never sell. Ever. The price charged for those that do sell has to be large enough to make up."
    Speculators
    While some find negative connotations in the word speculators, all kinds of speculators play critical roles in our society and economy. For example, early funders speculate on which startups have more promise, and in so doing give them the resources to take innovations to market. Most will economically fail, so the rewards from those that succeed must be substantial. The same is true for domain investing. I would say the better analogy is with art collectors, however. They play a key part in the health of the art ecosystem.

    Domains are Created

    Domains (obviously not all types) should be regarded as no different than other creative works in art or literature. As such, domain investors are similar to those that invest in struggling early career artists. Many domain investors are themselves 'domain artists'.
    "Domains are not just any combination of letters or words, but a sequence that meets certain aesthetic and marketing needs. Many of the same principles such as simplicity, elegance, functionality and impact that apply to product design are equally relevant to the design of a strong domain name. Ideally, even a made-up word hints at the nature of the business while not boxing in the future directions. Whether made-up or not, the domain name optimally evokes positive emotions in a memorable way."

    Does the Domain Aftermarket Add Nothing?

    This is the most preposterous claim in the Verisign report. Here are a few quotes from my response.
    "Do they really mean that someone who made a clever brandable name, or put together two words in a creative way, or finds a playful spelling, or that perfect memorable word, or a thousand other domain works of art has contributed nothing?"
    "The domain investor who brought a domain opportunity to a big company that rebranded on that, they contributed nothing at all? The domain broker who had the connections to bring a business leader in touch with the person holding just the right domain name – no value in that at all? Everyone in the domain aftermarket, they add nothing? Seriously, Verisign?"

    Better off with no Domain Aftermarket?

    I point out that if we had a system of no aftermarket that the process of organizations securing domain names would be far less efficient and more complex. Many great digital assets would end up in non-dealing collector hands, and would go unused.

    A Domain Community is Important
    Their post is hurtful.This matters.
    "I think the health of the domain world, more than any other single factor, depends on an engaged community of domain proponents. Domain names will be more effectively used when domain names have advocates who appreciate their worth. The Verisign post, perhaps not deliberately, has dealt a blow to this community,"
    "It is sad that a company entrusted with the most important TLD seems to so incompletely understand domain investing and the passionate, creative, innovative and skilled community that is the domain aftermarket."

    A Collection of Other Points

    A few of the other points made.
    1. The Verisign post seems to miss that prices in most parts of domain aftermarket are set through competition among registrars, marketplaces and available domain names.
    2. They claim that the cap price has zero influence on prices end users will pay. I suggest it is about $100 increase for each $1 increase in wholesale costs if that makes sense.
    3. I show that while yes there are occasionally high prices, they are not the norm. 1.2% of .com prices in the last year were $10,000 or more.
    4. While not disputing that some do very well, I point out that overall the domain aftermarket is near to break even.
    5. I point out that their figure for the excess cost to end users requires at least a market that is 18x the .com sales that are NameBio reported. However, even this includes the drop catches, auctions, etc. where domainers buy domain names as though those are sales to end users, so really you have to assume something like 25x factor to get their unreferenced number.
    6. Lower margins coupled with a higher probability of sale would be better for both end users and domain investors. Verisign should ask how they can contribute to that, rather than say the entire aftermarket add no value.
    7. I ask them to withdraw their post and apologize.
    I welcome corrections and suggestions for improvements, as well as general discussion around the topic.

    Here is the link again to the full article.
    https://nametalent.com/2018/11/why-we-need-the-domain-aftermarket/

    Thank you for reading!

    Bob
     
    The views expressed on this page by users and staff are their own, not those of NamePros.
  2. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    While I started this as a new thread, since a justification of the domain business is much more general than just a response to Verisign, here are links to the NPs threads related to Verisign post

    https://www.namepros.com/threads/verisign-blog-calls-us-all-domain-scalpers.1107971/

    https://www.namepros.com/threads/ve...eir-minuscule-rate-increase-93-new-y.1108119/

    Here is a link to the actual Verisign post

    https://blog.verisign.com/domain-na...om-price-caps-were-passed-along-to-consumers/

    And to Andrew's original article breaking the story at DomainNameWire

    https://domainnamewire.com/2018/11/...ut-domain-scalpers-and-its-biggest-customers/
     
  3. karmaco

    karmaco Active Member VIP

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    I don’t know why we need defending at all. People buy and create all kinds of things to resell in the digital and physical world and don’t need to justify anything. It’s one form of free market capitalism . I have something you want to have and you pay me for it. Simple.

    As far as Verisign, they want to be the ones selling the names in the aftermarket or taking some cut so thus the smear domaining campaign.

    As you mentioned this is a tough business and many domains never sell. What they don’t seem to admit or realize is we keep their business going by buying and renewing more than they would ever sell in a year if we all fell away and dropped all our names.

    They are biting the hand that feeds them for no other reason than greed.
     
    Last edited: Nov 7, 2018
  4. werty

    werty Established Member

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    Not to mention, most people lose money with domain names. The ones that are profitable, basically turn over a mere 1-2% of inventory a year. "Domainers" are giving them a lot of volume and business that wouldn't otherwise exist.
     
  5. biggie

    biggie Top Member VIP ★★★★★★★★★★

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    in the end, what does it all mean for you, the individual domainer?


    reg fee cost goes up, so resell prices will go up
    new registrations will decrease, while renewals of keepers get extended
    more pigeon turds will drop faster, and money makers will increase in value.

    basically....


    imo...
     
  6. WhyAreYouSoGreedy

    WhyAreYouSoGreedy Restricted

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    Nobody need "aftermarket".... You.have..zero logic.

    why the domain aftermarket is a good thing for end users?
    Aftermarket prices must have substantial profit to account for the significant risk of the name never selling for profit.

    zero logic

    why the domain aftermarket is a good thing for end users?
    Domains are Created
    Domains (obviously not all types) should be regarded as no different than other creative works in art or literature. As such, domain investors are similar to those that invest in struggling early career artists.

    THIS IS SO SILLY IT IS NOT EVEN WORTH RESPONDING TO....

    The domain investor who brought a domain opportunity to a big company that rebranded on that, they contributed nothing at all? The domain broker who had the connections to bring a business leader in touch with the person holding just the right domain name – no value in that at all?


    VERY RARE, THEY USUALLY HAVE REAL BRANDING STRATEGIST WHO KNOW WHAT THEY ARE TALKING ABOUT. OR THEY CHOOSE A BRAND ON THEIR OWN. ALL THE DOMAINER DOES IS LIST FOR SALE.
    GOOD BROKER ALSO RARE. ALL THE DOMAINER DOES IS LIST FOR SALE. NO VALUE IN HIM EXISTING.

    Many great digital assets would end up in non-dealing collector hands, and would go unused.


    NO, MOST DO NOT OWN "GREAT DIGITAL ASSETS", THEY OWN SOMETHING MAYBE TWO PEOPLE WOULD WANT. IF THAT SOMETHING WAS TAKEN, THEY COULD GO ASK THE OWNER IF THEY WOULD BE KIND ENOUGH TO LET IT GO, MAYBE FOR A SMALL GIFT OR FEE. THIS IS HOW MANY STARTUP FIND GOOD DOMAIN, THEY DEAL WITH REASONABLE PEOPLE AND IGNORE THE GREEDY DOMAINER.

    GREEDY DOMAINER ALWAYS TRY TO FIND YOUR AMOUNT OF FUNDING OR YOUR PERSONAL INCOME TO DETERMINE HIS PRICE.
     
    Last edited: Nov 8, 2018
  7. otismo

    otismo Established Member

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    TUMBLR

    FLICKR

    I started buying domains because I wanted to get into web development as a hobby and play the game of drop ship me china thru the goal posts of the web - I have a goal mind.....
    I started looking for something decent and AFFORDABLE ( which for me means CHEAP ) and spent hours days weeks months years looking thru endless lists of GARBAGE at GoDaddy Auctions - after about a year of looking, I found foxeo.com and then godpa.com and then onfav.net ( have YET to make something out of them ) I owned wemop.com let it expire and evidently hugedomains.com picked it up and wants over $1600 for it. Also my two traffic domains supr.info and athebest.com were also picked up. I also let atno.net go.
    I am learning my lesson - I think.....
    I bot fav.uno and fav.host to simultaneously develop with onfav.net. Free email @ fav.uno, free subdomain @ onfav.net, and free trial hosting @ fav.host - only I let fav.host expire, and - you guessed it - it got picked up ( still learning...)
    I own almost 600 domains now and would like to consider myself an investor.
    But we are still a long ways away from being able to buy domains in a 401k or an ira.
    Domains have to go thru a legitimatization process as an asset class.
    Considering bitcoin etc I feel domains are superior for MANY REASONS.
    ( quantum computing hacks them all - except for those with superior quantum encryption )
    My basic problem is that I can conceptualize faster than I am able to implement.
    Naturally I am in hog heaven with all the new generic extensions.
    If I don't watch it I will be buried by reg fees -
    HELP !

    just my not-so-humble opinion - fwiw

    ;)
     
  8. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    Oh well, I guess all opinions are what make the world, interesting.:xf.wink:

    I mean really there are people who believe, like the all caps poster, those involved in the domain industry are just greedy. That is why I wanted to spend the time to respond in such depth to the Verisign post. I hope it will help in a tiny way to promote a more positive and accurate view of domaining.

    I think that ultimately both domain users and the domain investing community will be better served when the role of the aftermarket is better understood by all, and that each of us individually always represent the domain community with professionalism.

    Anyway, have a good night everyone. I just made $1 on an auction on NPs, so my greedy mind will be dreaming of how I can spend it! :xf.cool:

    Bob
     
  9. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    It is an interesting question I have pondered too, @otismo. In a way they are a commodity, but unlike most there is not general agreement about valuations, and therefore it is hard to conceive of say exchange traded funds (ETFs) or products (ETPs) that hold domain names, or mutual funds that include stocks of domain related companies and a portfolio of domain names. I think, maybe, we might get there. At some point I am planning to write a post on the topic.

    Oh I so know that feeling! Yes, one of the tricks is to have the right size portfolio to match the amount of time you have to put into promoting and maintaining it. It is hard to resist growing a portfolio, though.

    Thanks for your contributions.

    Bob
     
  10. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    I agree to some degree @WhyAreYouSoGreedy that domainers must always be professional and reasonable people . While honest opinions vary extensively on the worth of these digital assets, everyone is best served when the prices asked can be supported in terms of the value added for the business or organization from having the name. Are some of the one million people and companies involved in domaining sometimes greedy and unreasonable. No doubt. Are most unreasonable and greedy. Definitely not!

    I am not sure if you read the post fully on the parts showing how unspectacular most prices actually are, and that overall the domain investing community probably barely breaks even, if it does even achieve that.

    Anyway, I respect your right to express your opinion, even so forcefully.

    Have a nice evening.

    Bob
     
  11. Ntmt

    Ntmt Established Member

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    If it was true that Domainers are useless than no one bought names at aftermarket.
    We see that some domains are selling for great price not because seller is greedy but because buyer see corresponding value for given domain name. Otherwise sale cannot happen.
     
  12. HotKey

    HotKey Made in Canada VIP

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    It won't matter, Bob. Anyone joining NP and creating a username like that has but only one agenda: MAKE TROUBLE. Their mind is already set, no matter what valid arguments are presented to said person. Just another Premiums/Platinums/KingOf../Baloney Sandwich etc

    Although, if anyone can turn em', I think you're the man for the job :)

    Thanks again for another quality discussion. We absolutely need the aftermarket. Not only does it give bigger eyes to otherwise perhaps unknown names, it brings trust and accountability to the buying and selling platforms.
     
  13. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    You have eloquently precisely the key arguments @HotKey!
    Why can''t I write something like that without using 2000+ words.:-/
    I think the whole controversy can help our community better define what value we bring, and think about ways in which we can add even more value. And that is good for both end users and domain investors!
    Bob
     
  14. Grego85

    Grego85 Quality.Domains VIP

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    lmao, I laughed pretty hard at that all caps part!


    When people try to call me a squatter or similar names I just let them know that I'm realistic and I always have fair BIN prices on all of my domains. My real goal is to create a value in the vast domain world. I then let them know that the name would not have just been sitting there available to reg no matter what universe they live in. I always end with letting them know that in a way I've been holding the name just for them the whole time, so one of their competitors or even worse some dingleberry doesnt get it and use it against them or just waste it completely.

    If they continue to bitch, my fav line is.. Hey, you should have been on top of it yourself, then you would own it instead of me. I mean the name is in YOUR industry right? You Snooze you LOSE!
     
    Last edited: Nov 11, 2018
  15. nydomain

    nydomain Upgraded Member Gold Account

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    Seems Verisign is trying to take advantage of .com's historic popularity to raise prices of registrations/renewals to multiply their own profits. And perhaps, taking it a step further. Are they trying to exert more control over the aftermarket also???

    Forgive my ignorance, but wasn't .com the most popular extension prior to Network Solutions taking control of it? .com, .net and .org are not xyz. A lot of the new registries took a business risk, paid a lot of $$ to reserve the tld with the intent to be profitable selling domains on it, while Verisign was handed the most succesful tld by far. Or am I mistaken here?
     
  16. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    I have not done a detailed history, but I am pretty sure you are right @nydomain , and some of the commentators online have stressed that Verisign are caretakers of the extension and not owners in the sense of a ngTLD registry that came up with the idea, bid to become the owners of it, and then had the job of building a market for it.

    I wish we knew what the overall plan for Verisign is - they did say they would be offering simple and effective solutions to get around the high costs they see introduced by the aftermarket. I am wondering if they are wanting to lobby for premium .com domains and the right to sell them directly to end users (or one of the other of those).

    Bob
     
  17. HotKey

    HotKey Made in Canada VIP

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    We need it for our "yardstick", an indicator of value. While not an absolute, data gleaned from the public aftermarket is essential to gauge appraisals, potential, viability and growth. Where would namebio, one of our essential yardsticks, be without the aftermarket?

    End users looking to a long-term commitment with their investment would simply be left scratching their heads without a healthy, thriving aftermarket option to turn to for their naming needs.

    What the registries fail to understand, is it can never be them that will determine the needs of buyers. They do not have their nose to the grindstone, their finger on the pulse. Automated software is light-years away from separating reality from virtual. Stick to the knitting; rent your damn domains to us, we will determine its value.
     
  18. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    Developers have the delusional idea that if it were not for domainers, they could just pick up any domain they wanted for a project for reg fee while they charge their clients five to six figures for a project. Yes, the developer who turns a vacant lot into a high-rise condo is going to make good money but they cannot expect to pick up a prime real estate location for $100. And yet even in downtown West Palm where there have been some recent and continuing condo projects, there are still a few vacant lots available - presumably the owners want more than any developer is willing to pay (despite the generous rental rates in that area)
     
  19. Addison

    Addison Established Member

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    Superbly written!

    I will add to your list:
    1. Availability: Domain investors increase the availability of domains, contrary to what ignorant antagonists believe. If we didn't register these domains and make them available for resale at reasonable prices, then the domains would be taken by wannabe/amateur developers with dreams of building a company/project that they will either never start or never succeed at, thus tying up the domain indefinitely ("not for sale!") on the back of their failed dreams that they're too blindly attached to to ever let go of. You're welcome, ignorant antagonists.

    2. Marketing and education: Domain investors, akin to GoDaddy's Super Bowl commercials, help the uninitiated people understand the value of a good domain name and how it can help them in their endeavors. Without us, there'd be more people being taken advantage of by companies like Facebook, Twitter, and LinkedIn that try to convince them they don't need to own their identity online, which we all know is not true and billions of dollars have been poured down the drain due to people falling victim to that notion. Not only do those companies make you pay to get followers, they make you pay to reach them after they've followed you. The only true way to connect with your customers and to have control of your destiny online is with a domain name, and domain investors teach that to more people than anyone else. You're welcome, Verisign, you ungrateful...

    3. Guidance and concierge: Buying a domain name, regardless of where (registrar or secondary market), can be a complicated and scary process for people the first time. There are new concepts, technologies, and processes that first-time buyers have to learn, and it can be overwhelmingly stressful for a new buyer. Domain investors (sellers) work as a concierge service for buyers and help them navigate these uncharted waters through answering their questions, providing step-by-step instructions, and explaining options and how things work. If anything, those that benefit in perpetuity from these transactions (*cough* *cough* ICANN) should be paying us a service fee for the guidance we provide. You're welcome to all beneficiaries including buyers, registrars, registries (Verisign!), and ICANN.

    I could go on, but even just one of these points should suffice and open the eyes of the uninitiated.

    Kudos to @Bob Hawkes for this crucial discussion.

    (y)
     
  20. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    Thank you @Addison for superbly making the case! While as stated we are already as a community daily serving end users in these ways, I think there is room for us all to focus even more on a service and education role. I hope the positive aspect from the unfortunate Verisign post will be this growth.
    Bob
     
  21. Haykay2005

    Haykay2005 Active Member VIP

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    Whoever needs your domain won't bother about verisign whatever
     
  22. JudgeMind

    JudgeMind BrandstartDomains.com PRO VIP Trusted Contest Holder

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    Do automobile owners stop driving their vehicle because the cost of insurance, fuel or vehicle itself goes up?
     
  23. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    If what you are saying is the 31% increase over 6 years will have only a small effect on domain ownership I totally agree.

    I think the serious but nebulous so far part is the Verisign post seems to be saying long range aim is to do away with domain aftermarket, in a way not clear, yet.
     
  24. Zak Muscovitch

    Zak Muscovitch Active Member ICA Member VIP ★★★★★★★★★★

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    Bob, great job with this insightful analysis. And thank you for your efforts which you have made on behalf of the domain name investing community.
     
  25. Donmarick

    Donmarick New Member

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    Little portion of nice information thx :)
     

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