Rapid changes in exchange rates affecting domain name transactions.
The value of the U.S. dollar has soared in recent months compared to the Canadian Dollar, British Pound, Euro, and several other currencies. There are winners and losers.
How much has the value of the dollar changed?
Two months ago a Euro would buy about $1.60 USD. Now it buys $1.25 USD. That’s down 22%.
Two months ago a British pound would buy almost $2.00 USD. Now it buys $1.56. That’s also down 22%.
Two months ago a Canadian dollar would buy about $1.00 USD. Now it buys $.78 USD. Again, down 22%.
Two months ago an Australian dollar would buy $.96 USD. Now it buys only $.61 USD. That’s down a whopping 36%.
Emerging market currencies are down even more compared to the dollar. The Japanese Yen has held its own against the dollar.
Who wins?
Buyers in the United States win if they buy domain names from people in most countries using other currencies (save for the yen). A domain that sold for 10,000 Euros 3 months ago would have cost $16,000 USD. Now it will cost $12,500 USD.
Sellers in other countries can win when selling to U.S. citizens who’s currency now goes a lot further.
Dark Blue Sea wins big. The Australian company pays its employees in Australian dollars but earns money in mostly U.S. dollars (most of it from Google). The company had currency hedges in place, but still the company has languished as the dollar melted over the past few years. Hopefully some of that trend will be reversed.
Who loses?
Buyers outside the U.S. who were taking advantage of a weak dollar to buy domains from U.S. domain investors.
United States sellers who were more than happy to sell domains to friends in Europe.
Andrew Naylor says
That’s funny that we both wrote about the affect of exchange rates on domain name within an hour or so. I totally agree that Dark Blue Sea will be one of the biggest winners. In addition to getting paid in the stronger dollar, I think they can do more modeling and systematic investing because of the size of their portfolio. If they were selling 1% of their portfolio every year, and those sales prices are now up 36%, they can afford to carry more languishing inventory.
Acro says
Very nice analysis of the FOREX market with regards to domains. The bottom line is, people want to pay in their local currency and it’s all a matter of numbers; e.g. a seller asking for 5,000 euro still gets the same money while offering a potential buyer that pays in dollars a sizable cut.
Mike says
It’s definitely a good time to go shopping for us:)