A New Era of Growth, Liquidity and Recognition?
I'm continually amazed to see how many new domainers are joining the industry every month. Let's face it: Domaining is the perfect business, and word is spreading quickly around the world. There are no barriers to entry, there's a thriving wholesale and growing retail market, and you don't have to be a superstar to make a nice income.
Of course, if you really go for it, the sky is the limit and you could become the next domain millionaire with his own blog, after just a few years of hard work. (Just kidding about the blog. 
)
All things put together, achieving success in domaining might be even easier today than it used to be thanks to the massive growth, increased liquidity and widespread recognition the market is experiencing.
Growth? Liquidity? Recognition? Aren't some domain bloggers musing about a perceived slowdown or even plateau the domain market is supposed to have reached after two recent domain auctions (at DomainFest and T.R.A.F.F.I.C.) produced "only" $10 million in sales?
Well, it's obviously true that some domain sellers are asking for way too much money to readily find a buyer. That's what happens when we're told over and over again by our industry leaders how valuable our domains are and that we shouldn't sell them for less than their real value.
However, look at how far we have come. Prices for the most premium domains have increased ten-fold over the past few years. And while there are natural consolidation periods, many new domainers have been entering the market. Some are already well-funded while others work their way up from LLLL domains to LLL domains to traffic domains and generics.
Actually, there seems to be something about February. Last year, there was talk of the domain market being due for an "asset repricing". Many domainers believed that the sky was falling. It never happened, even though PPC revenues have continued to slowly decline.
What did happen was an increase in sales volume as well as average prices. According to Ron Jackson of DNJournal, reported domain sales grew from $71 million in 2006 to $121 million in 2007 (a 70.42% increase). Q1/2008 is expected to finish at around $25 million - a jump of almost 20% over Q1/2007. Additionally, the Daily Domainer's analysis of 2007 sales data showed that the top 100 median sales price increased from $124,000 in 2006 to $197,500 in 2007, an upsurge of 59.27%.
Finally, last month the domain market as entered a new era of mainstream recognition with CNN's $750,000 purchase of iReport.com from Rick Schwartz.
So does the domaining industry of early 2008 experience growth, liquidity and recognition? Yes, it does. Is there a temporary stalemate between some buyers and some sellers? Absolutely. But if it costs you only $7 a year to hold an asset, many sellers figure that they can wait until they really do achieve the highest possible price for their domains.
Eventually, sellers will give in and lower their prices, or buyers will offer more. It almost always happens that way, so let's enjoy the ride and allow the free market to work things out.
Great article - Thanks
Very nice article but what happens when the whole world turns into domainers?
Only the one with decent generic domains will survive -
@Gene Downs - Methinks that keyword phrase domains will become extremely valuable as retailers start to realize that having "RJ45connectors.com" will sell a particular product as well as deliver direct hit customers.
The future is bright indeed.
Think: "Real Estate". That's where domaining is going; has gone. Probably cyclicle in nature, with most of the same characteristics as the real estate marketplace. Look at vodka.com, etc.
My take,
Michael
Any slowdown is only natural in a market that has exponential growth. Domains clearly have a great future ahead, however there are a number of things that need to happen before they become ubiquitous as an asset class in comparison to stocks, shares and real estate. If you want to see if you agree with my futuristic perspective, then you can read my article on why domains are the best investment for your future on trendirama.com or simply click above.
The only problem I have with this domain market is that the main players unfortunately lack the foresight to build a Domain Stock Market, it is the only way a sustainable market with over 140 million domains registered can survive over the long term. People forget that wall street started under a wallnut tree by traders who were like domainers in the 1800's hence the ubiquitous stock market today.
Anything short of a domain stock market that helps build ubiquity and leverages growth, could lead to a slow death of the domain investor industry. I hope I'm wrong…but there is still time before the likes og google cannabilizes our market!
$50 million domain sales growth from 2006 to 2007? that is good news for the industry. i like your confidence "Domaining is the perfect business"
Having a keyword-rich domain name is a quite important factor of SEO. Do a few searches in Google and you will find keyword-rich domains in the top of the SERPs. But upon closer inspection, you will notice that the same keywords are also in the Title tags of those sites. Title tags are very important to gain top positon in the SERPs. Many see the keyword-rich domain name, and assume that the domian name is the reason for the high ranking. I think it is much more likely that the high ranking is a direct result of the Title tag and the body text.
With a recession around the corner, domainers with disposable income will be able to purchase domains from many companies that are going bankrupt… once the recession is over, time to sell!
I still think there are so many more sellers than buyers. And when I wander through the secondary marketplaces and see what is for sale, it seems like 95% of domain names up for sale are just terrible, awful domain names. Since the generic market has been bought up, new entrants try to come with creative names that you know will never sell. It's the registry companies that seem to be making the most money. This is clearly a business with some big players who have the money to buy the more profitable domains and lots and lots of small players who may or may not make back the cost of their investment. I suppose you can get rich but this is an inherently risky business based on speculation of a domain name someone might want at a future date.
It is true. The Domaining business is very speculative. That is why if you check all the possible variations of a root word, nearly all the good ones are taken and just parked somewhere hoping for some typed-in keyword user clicks an advertisement!
This is a huge problem for legitimate end-users, because in the future, they need to pay for some astronomical price tag just to get a domain name they want for their business. Anytime in-between, domainers are just passing the domain name from each other - pumping the price tag further in the process.
And with annual renewal costs for a domain so cheap, a company engaged in the domaining business can hold a good domain name for decades, until a Prince from Saudi Arabia comes in and pay a billion dollars for the domain.
We also need to remember that many of those buying domains in the aftermarket, are simply hoping that they could sell the same domain to some sucker in the future. If you are THAT sucker buying the domain with no business intention of using it for yourself, it is increasingly more important now to pursue a legitimate business use for the domain by sprucing it up with valuable content so it can pay-off the annual registration costs without having to depend on pathetic domain parking pay-per-clicks.
What sustains the domain flipping business is keeping the selling price low. If people keep flipping domains at insane prices, the last guy holding the bag will find it increasingly difficult to find a buyer for him to breakeven. The perfect valid excuse is that there is always some stupid flipper out there in the world who will buy it off from you. You would just hope he buys it sooner, to save you from renewal costs.