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Can the King weather challenges to its throne? 

By Tariq Ghafoor  Archived 11-19-03
Guest Columnist

In the past decade we have witnessed an unprecedented euphoric optimism about anything internet-related, resulting in one of the wildest speculative frenzies mankind has ever seen. This speculation was concentrated on “.com” ventures, including the sale of domain names. 

Unfortunately, most got burnt badly, including the vast majority of the .com domain speculators. However, its quite interesting to see that there are still quite a few out there who continue to hope for rich gains in the .com market. The hard cold fact is that the domain market, just like internet business in general, has changed dramatically over the last couple of years. 

The days when any “exciting idea” would get quickly funded are long gone. Now scarce venture capital funds flow very cautiously and only towards those ventures that are based on practical realities and not “exciting” ideas and dreams. 

Despite that fact, many domainers still have a mindset much like lottery players with dreams of winning the jackpot (making that one/few “BIG” sale(s) out of their portfolio of dozens/hundreds or even thousands of domains).  Even in the heydays of 1999/2000, I don’t recall there being too many examples of “decent” but mediocre domains selling for hefty profits. Yes Business.com sold for $7.5 million and Loans.com fetched $3 million, but how about millions of the domain investments, at $10 to $35 each, that went on to the road to expiry without ever realizing their dream of resale? 

So, what have we learned from all that has gone on in the “.com”-related ventures in general and the domain market in particular? I am afraid that many of us domainers are far behind on the learning curve as compared to general “.com” ventures. Whereas there are clear signs that the latter have drastically altered their approach towards doing business on the web, unfortunately there has not been a whole lot of change in domain buyers’ attitudes, behaviors and strategies. They continue to chase and gleefully display their caught “drops” which for the most part are so mediocre they make one actually feel sad. Domainers also continue with these tendencies in registering  names whether it be in the old or the new TLDs.

So, what, if any practical changes are needed to help make domain speculation more methodical with  real profits for those who continue to find it exciting enough to carry on in it?  My own experience and observations would suggest that probably the most crucial factor is to develop ones ability for critical and objective analysis of not just current trends but also likely future scenarios. The most practical example being to objectively assess the realistic potential for new TLD’s in the context of existing DNS status and likely relevant future events, such as the probability and timing of the release of additional TLD’s.

It seems quite clear that some additional TLD’s (sponsored Top Level Domains) will be released over the next 12-18 months, but indirectly it also means that the future release of any new gTLDs is at least  3-4 years away if not in doubt altogether. This, in my opinion, does lend a crucial time advantage for new TLD’s to establish themselves and gain acceptance with the public and businesses.

What are some of the likely factors in favor of this happening and vice versa? There’s no point even arguing that .com has entrenched itself deep in the minds of web users and has made itself synonymous with the internet itself. So, the million-dollar question is: Is it going to stay this way?

The answer can be found throughout history. Has any status quo lasted for ever? So if change is inevitable, what are the most likely possibilities given what we know today? Some of the key facts are as follows:

  1. No keyword of any appreciable value to businesses, individuals or other entities has been left un-registered in any major TLD (some ccTlds excluded).
     
  2. Despite large numbers of recent expirations, there’s an overwhelming degree of over-registration in older TLD’s, especially .com. Even most conceivable misspellings of every keyword/good word-combo are registered along with loads of defensive registrations like CompanyNameSucks.com, etc.
  3. The majority of small & medium sized businesses and other entities already online have less than desirable domain names – names that are long, convoluted, hyphenated, or mixed with numbers.
     
  4. The number of new businesses and entities wanting to get online is expanding literally by the hour and this phenomenon has continued despite the unprecedented downturn in other technology and internet areas. 

So, even a cursory examination of the above facts would seem to portray quite a promising picture for domain holders. With most of the good domains in every TLD in their hands, additional gTLD’s relatively far away, and an unprecedented growth in new entries to the Web, what more can one ask for in view of the well-established economic  principle of “supply and demand”?

Although the scenario is indeed promising, in my opinion, it does have a big “BUT” in it. And, that “BUT” has to do with the uniqueness and rarity and hence value of the domain name you have to offer. Figuring this out is not that complicated either as it has less to do with feelings and subjective appreciation of the domain and much more with cold, hard, objective facts.

For instance, there’s one only & only one word called “cars”. Unarguably, as a domain the most valuable is Cars.com, but after that comes what may be the real art/science of domain speculation. Will Cars.net be more valuable than Cars.info or Cars.biz? Will UsedCars.com be more valuable than Cars.info or Cars.biz? How about Florida.info vs. MyFlorida.com?  I’d argue that after single keywords, pure functional word-combos that are already part of established vocabulary will command more value than any “add-ons”; example would be “Used Cars” vs. “My Florida” with “My” in the latter being a vanity add-on.

I’d venture further in predicting that in due time this valuation model will hold true for comparative values of .coms versus new TLD’s. For example, I’d argue that UsedCars.info/.biz will command more value than BestCars.com. In short, I feel that there’s still reason for optimism in the domain aftermarket but in order to profit there’s a crucial need to alter one’s perception and strategy just like our brethren have been forced to do in other web-based businesses.  

Some final personal (non-professional) pointers (as of this writing with 2002 drawing to a close):

  1. Be highly selective in picking up “dropped” (.com) names since in reality getting a real good name in these drops is almost like winning a lottery.
     
  2. Refrain from, or be very selective based upon your personal research/knowledge of a specific area, when registering names in new TLD’s. Even here all the names with better than 50% chance of selling at/above low four figures are long gone. The .US may be exception in this regard (but only temporarily as names continue to be taken by the hundreds daily).
     
  3. Stay away from “vanity” names unless you’ve a specific/personal reason for picking one. In the long run, pure, functional word-combos (Used Cars; Vacation Rentals; Alternative Medicine, etc) in new TLD’s are likely to do better than vanity names (Go Shop; Top Buys; Hot Deals, etc) in .com.
     
  4. Try putting some work in the domains even it’s a holding page with some general info about the subject matter related to domain, some relevant links and contact info. This is much more likely to be done if you yourself are convinced of the value of your domain. If you realize deep down that the domain is not worth putting any effort in, how would others find it worthy enough to buy?
     
  5. After doing some homework, consider getting some good solid names in new TLD’s in the aftermarket. It’s much better to get a good quality name for a couple of hundred bucks than registering 20 with no real potential. I continue to see many high-quality (new TLD) names being offered at what I’d call bargain prices. This will not last in my opinion.

  

If you would like to comment on Tariq Ghafoor’s article, write editor@dnjournal.com.

 

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