Some Perspective – A Look Back at 2007

Here’s a video example of some of the kinds of segments that the media was producing about domain names in 2007.

The presenters talk about the huge numbers and the fact that people are doing deals for large sums of money. Nothing new, just that, in 2007 there seems to have been some focus on this because mainstream people were begining to, or going though another phase of realising the value proposition.

Two years later? Recently, with general market realities hitting home across all sectors in business there have still been some large numbers flying around.

This following video is still what goes on when some larger than usual amounts of money are at stake at a domain auction:

In that video Divyank Turakhia (of Skenzo.com) is seen bidding to USD $ 1.4 Million for Ad.com – inarguably, a top end of the spectrum domain name. A two letter .com by itself is going to be quite a big-ticket item, this one has some direct (Directi?) synergy for the company.

I don’t attempt to draw any conclusions for anyone or force a view.

I would like to kick off this new round of blogging on Casual Domainer by asking you – what value do domains have in this economic climate?

Here’s a quick summary of my basic outlook, I wonder if your ideas agree:

Valuable domain names will always maintain their top end value in comparison to lesser names? If so, the goal is to trade up to those names. This alone creates, or validates a real market where those with the balance sheets to enter the market will do so. This competition to reach the goal of achieving a substantial portfolio is inevitable in a free market system.

Although 2009 is less than a stellar year for business in general and there’s no doubt more to come along those lines, domains have been trading now for well over ten years. Let me say that it is my genuine opinion that some particular ‘curve’ in the long-tail to premium end of domains are still undervalued by a large margin. In 2007 new private and corporate end-user interest was shown and prices did reach some highs. In 2009, we’re still seeing some great prices for premium names sold – but less overall sales, if I’m reading things correctly.

At a time when huge missing chunks of Wall Street are being pumped back up by bail-out programs, we are in for interesting times no matter how we make a living. The coming years will offer us all a great many new challenges. Anyone with a budget for savings or investment will likely be tossing around options they would never have imagined in 2007.

I have heard many stories of massive losses of savings and investments on various traditional market investments, even so-called ‘stable’ packaged retirement funds cut in half or worse, houses valued at less than the mortgage – more times than I’d like of course. There are people who own domain names doing much the same thing – complaining about sales being down or revenue from their efforts lower than 2007.

There are always a few here and there who will tell you the opposite too. Same as anything. Catching any fish? “Nope” – “Tons!”. Some will say no, because they don’t want you coming here to fish. Some will say yes because they won’t be there tomorrow to hear your gripe about no fish in this spot. Truth is, fish move around of course.

The point is, we can’t lose perspective. We have to get with reality and understand that the markets everywhere are in very dangerous situations. Something that goes great for one country one day may cause currency problems the following week when some large sell down of assets (treasuries etc) happens, the needle draws a red line lower etc. Somewhere else they’re popping corks while some team of grey-suited bankers run around writing new bond agreements, an enquiry is held etc etc.

Here’s the main point I want to make: I believe good domain names, not throw-away names, are going to be quite stable compared to many other markets. There are bear investors (I nearly reg’d BearInvestors.com last year knowing crash was coming at some point in coming years) who are shorting daily on huge positions while the markets are air-lifted to impossible heights by plunge protection systems. I don’t know what you think about that, but to me, that’s going against fundamentals.

What happened to VW shares a few years ago: a huge bearish position was taken, the “attempts” to force the shares lower was outrageously successful. Ah but when all the bear positions were so successful on a single day, automatic buying back on the next day after the plunge, sent the shares rocketing. A lot of bears got burned because although MANY knew the stock would break down, there were so many of them making that play that when their lower price became a “buy” all those automatic buys (for technical reasons, the type of short they ordered) kicked in – you guessed it, buy orders on the following days forced the price way higher than the short price. Long paragraph, again the point being – perhaps it sometimes best to get thinking outside of those boxes.

With the delicious sense of being outside of the flow of the downward trends, and not playing a sucker’s game – you may still make mistakes as bad or worse of course – even if you think you’re smarter than the crowd.

I suppose it boils down to having an open mind to all possibilities and do what you feel appropriate and what you are comfortable with. My position is that the downturn in the general world-wide economy has made me drop some domain names certainly. Probably for the best. I never want to be hyping some kind of buy buy buy mantra here. I will laugh at blunders, cheer at successes and trade friendship with anyone interested in domains, but my opinion is LONG on domains.

Not long on every or any type of domain. I’m interested in short generic domains, preferably .com – however, I do like .net .org and some specific sub-sets of domains like geos and country specific names (co.uk .com.au .in). Impossible to write out a readable piece in this post.

The domain space is maturing slowly but surely. There has been a quantum fall down the stairs since 2007 in the general world financial markets – not such a big drop for quality domain prices.

What will this mean to the casual domainer? It will probably mean there will be a lot of people dropping more than 50% of their portfolios – large and small. I would love to be a cashed up investor looking to hoover up the best of those drops. That being said, and I do think it probably needs to be said, many of those dropped names should be tagged and never hauled in again without a warning. Use DomainTools.com to check the age of some domains. Not all tools accurately tell you everything, but you can get a picture. If someone dropped MyMortgageBestQuoter.net (made up name) there may be a reason; being worth little may be but one amongst many.

This brings me back to the original reason for this post:

How do YOU value your domains? This will be the first thing you need to seriously address when looking at your holdings. If you’re having trouble with renewals, think seriously about it, perhaps drop what’s not earning, not valuable or “liquid” enough to sell. If you’re not pressed to drop, double check your bets on future earning/value etc. I’d still suggest most casual domainers might suffer (like I do) from holding some domains that we know are not really worth holding, but for sentimental or other reasons. Hold ‘em if you like ‘em and can do so but if in a hard place, you can do worse than to let some go.

I used to worry that “yes, but someone else will back-order it, and I won’t ever get it back if it drops”. If you feel like that about a domain, then it obviously has some value to you, even though it may have no value to anyone else. (incurable optimists my be shocked to find out that yes, that is not only possible but highly probable if underexposed to domains). If it’s the difference between eating this week or keeping 15 dud names – they should probably drop. Keep to your comfort zone, budget wise – maybe give up some luxury or skimp on something if keeping them is important. But I’d suggest thinking of them like you’d think about anything else. Need or not?

Habit has it that I write long posts sometimes. Hope you found that it was worth the read. I’ll be kind of running threads between posts, the next one may be more specifically about valuation of domain names. There’s a lot of variance in perspectives on that topic. However, I think the new financial odd-world we find ourselves in demand that this issue be addressed often.