Much like in the stock market, the time to buy in the domain market is when domains are “on sale.”
Fear. Worry. Panic.
Those are common words to describe the U.S. stock market these days. And it’s becoming the word of the day in the domain name market.
Over the past few weeks I’ve shifted much of my cash into the stock market, even as my current stock holdings have had massive losses. After all, why would I buy into the Dow at 14,000 if I wouldn’t at 11,500? I like to buy things when they’re “on sale”.
To be sure, the stock market may continue to go down. This may not (and probably isn’t) the bottom. The U.S. is going to experience quite a hangover from excess credit and government debt. Oh yeah, and that little “oil” and “inflation” thing (very much related). But I think it will eventually turn around. Right now you have a lot of people who are tired of seeing their stocks drop, so they’re selling at the bottom. That’s not exactly “buy low, sell high”.
You’ll see the same thing in the domain name market. Many of the people that got rich in the domain business (e.g. Frank Schilling) did it when other people were getting out. As others panic, it’s your chance to get domain names cheap.
Just this week I received a call from someone whom I tried to buy a domain from in the past. He wouldn’t sell. Now he’s trying to cover some bad bets he made and needs cash. You’re going to see a lot of people in this same situation. They need cash and they’re holding relatively illiquid assets. That means you can get them cheap, they can sell them, and both people are happy.
If you have the stomach for it, now is the time to invest.
John says
I agree that NOW is a great time for deep discounts. If you have some spending money, a recession or economic crisis is a great opportunity to close on some great investments.
“Long live the Internet & the dot com it’s on.”
Jeff says
> Many of the people that got rich in the
> domain business (e.g. Frank Schilling) did
> it when other people were getting out.
Agree completely. But I don’t see people yet running for the exits. Wait another few months and this will likely happen. When people are screaming that there is no way to make money as a domainer, then it’s the best time to buy.
Andrew says
Jeff – you bet. That’s why you should “dollar cost average” your domain purchases. I don’t buy $25,000 worth of stocks at a time; I’ll pay $5,000 every couple weeks. I think now is the time to find those domain owners that need cash, and then be patient for any mass exodus. Certainly don’t want to run out of cash before that happens!
Frank ( not Frank Schilling) says
Andrew, you have mail.
As far as buying when everyone else doesn’t want to buy, that’s an iffy suggestion.
If you had bought the nasdaq as it was falling in 2001, you’re still in the red. The same can be stated for the Nikkei and many other markets. The nikkei is still at it’s bottom after over 10 years. And it ain’t going anywhere either but lower.
As for US stock market, I think sideways for many years, but first it goes lower.
There are so many reasons for this, but here are a few. First the baby boomers are all retiring and they’ll be selling to free up cash for retirement expenses. The next few generations after the baby boomers are not savers with positive net worth, they are mostly net negative net worth, they don’t own much stock. Then factor in the inflation and loss of manufacturing jobs, and now loss of higher end R&D to the Asian economies. Except for a few stocks, the majority of US stocks will move lower then sideways at best.
As for the domain industry, honestly I think the best days are behind us. I really missed the boat, but that’s life. The days of parking and making a living on the PPC are done. Soon the days of monetizing mini sites via adsense will be over also.
As the general economy shrinks ( for a very long time ) and energy and food costs go even higher, even fewer people will make online purchases.
As the economy slows and housing market gets even worse, states will need to find new ways to cover the tax short-falls. As states begin to tax internet sales, even fewer people will buy online. NYC has began taxing internet sales shipped to NYC and Amazon sales to NYC have dropped .
So we have slower economy. less online purchases. online taxation, no online purchases.
Then on the other side of the coin, we have the massive click fraud. Google has began to remove parking DNS from its spidering, guys like click forensics privately state PPC fraud could be as high as 40 to 50%. There is also the click-fraud that comes from mini-sites based on adsense, google has yet to acknowledge this.
I think in the next year or so, large advertisers will begin payouts only on conversion. Click-forensics is now mature enough for large advertisers to accurately rate PPC conversions. the natural progression is then to tie ad payouts to google with the quality of conversion. Remeber, at the end of the day, the cheques google mails out actually comes from advertisers pockets.
Google stock paints a clear picture where the industry is headed. After doing my own research, I’ve come to the conclusion that domaining is a dying game….for the little guy, it’s already a dead game. parking with PPC? it’s done. Mini-sites on Adsense? on the way out, very soon. Affiliate marketing? watch what happens when the states begin to tax online sales.
So where is the money? The only guys making a mint will be “destination sites” like yours. Domainers have to provide Compelling quality content that compels users to keep on visiting. I think most domainers, mini-site operators and affiliate marketers don’t have what it takes to step up to this level. It takes a lot of time, expertise and most of all, it takes a lot of money to create quality content. I suspect you spend well over 70 hours a week maintaining your content properties. Not many have that luxury of free time to devout to a part time hobby/business.
I already see the Domain forums bursting with sellers, that’s why even after losing an auction today because of obvious blatant fraud on the part of the auction house, I’m glad I didn’t win. Based on emotion, I was already bidding above my maximum. I expect many better domains to be in the market in the next few years. I’m going to begin focusing my money and time on developing quality a few quality sites rather than buying and parking. With the new series of dot xyz coming out, the slump in domain names is just beginning.
And as the fraud that permeates many registrars and some of the auction houses becomes common knowledge, I expect the slump in domaining to be permanent.
Robert Haastrup-Timmi says
“As far as buying when everyone else doesn’t want to buy, that’s an iffy suggestion.
If you had bought the nasdaq as it was falling in 2001, you’re still in the red”…
I think Frank above, takes a rather pessimistic view of the domain industry overall and I’m not quite sure I agree. Yes indeed Frank’s assertions about the stock market on a slippery slope downwards are correct and I’m not sure cost average investing as Andrew points out on the downside is wise for the moment, I’ll hold off for quite a while.
But here is where I think all the gloom in the property market and stock market spells “Big Opportunity” for the domain market:
Today in the Metro Newspaper, a free london tabloid everyone reads on the way home on the tubes, the front page heading reads
“After .com and .uk, are you up for .xxx”
Alluding to the rather irresponsible move of ICANN. Essentially, the paper concluded it will be terribly confusing for consumers and businesses wading through endless and irrelevant domain extensions. However what struck me was this made FRONT PAGE NEWS!! now that is really suprising because, I’m not so sure the average joe blogg gives a damn until now..PUBLICITY for the domain industry. Common sense will prevail and I think a lot of businesses, domain speculators and now “newbies” will use their common sense and realize the original top level domains hold immense value, therefore they are likely to take note and buy more in the aftermarket. But that is just the beginning!
I once suggested in an article I wrote for trendirama.com, that there will come a time when everyone will probably want to own a domain for “Investment” purposes, I think that time may be arriving a lot sooner than I thought. Mostly because, in a severe economic down turn, people naturally look for somewhere else to invest and secondly the timing of this ICANN announcement actually could add impetus as more speculators, novices pour in to buy domains.
Hopefully the clever ones will stick to the top level domains. Finally, it is very unlikely in my opinion that we will return to late 20th century “Full Employment”, typical irrational exuberance in real estate prices and indeed the stock market. Why?.., because the basic fundamentals have now CHANGED!! and perhaps forever!
If anyone here read Business Week on the week of the 4th of June this year, I strongly suggest go read it. The Front page headline was “Oil Crisis” Anyways, on the last page of their oil article, Business Week actually suggested they believe the oil crisis will force businesses to use the internet through video conferencing, do more business online rather than travel, because of high oil prices that are here to stay.
Also, they suggested more and more people will “socialize” online through the likes of facebook etc.. because they couldn’t afford to travel or spend as much to meet friends, again because peak oil changes everything.
They also suggested empty local airports and so on. Also, Steve Balmer of Microsoft just 3 weeks ago suggested most mewspapers and magazines will dissapear and all will be delivered “ONLINE”.
Now, all this means in my opinion, that more people will be forced to spend time online, looking for new business opportunities and online ventures due to long term or permanent layoffs and outsourcing. Those jobs are probably never coming back!
Therefore if you have good “keyword” domains, names that people naturally search for in their daily lives, you are likely to do very well indeed, as people spend more time online doing business or starting new online businesses.
The 21st century of virtual living, driven through “Green Technology” is now just about to begin!
I strongly suggest you hold on to your domains and don’t be scared of the big bad wolf!
Rob Sequin says
Frank,
You slam the domain industry pretty hard there. Interesting coming from someone who says they “missed the boat” on domains.
You say you lost an auction “because of obvious blatant fraud on the part of the auction house”.
Please provide proof before you slander our industry.
Auction house, domain name, proof of shill bidding by the auction house please.
Andrew says
I appreciate everyone’s comments on this. Obviously only time will tell who’s right.
I can see the stock market continuing to drop for a while, and I also agree that we have quite a heavy economic hangover in store.
As for state taxes pushing down internet sales, I disagree. Yes, this may slow growth, but internet sales will continue to climb for the foreseeable future. More and more people are getting online, and sales tax won’t stop them from buying something especially when it’s more convenient and cheaper. Yes, there are shipping charges, but just driving to the local shopping center now costs $5-$10 in gas.