Peak of the Domain Market
I believe we may have seen the peak of the value of the current domain market.
I think the value of the premium domains these days, primarily single word generic dot-com’s, have seen their peak and will begin a steady decline from here.
First, the recession is going to hit this bubble market hard enough. The market was bid up by speculators and while the true bid prices may be within +/- 30% of the current levels, there is not enough size or volume there to support the market.
Second, domains are slowly being antiquated. Direct navigation is slowly disappearing as the URL gets more and more hidden in browsers and as browsers offer search optimized suggestions within the URL drop-down as opposed to alphabetical results. There is also the natural education of Internet users to navigate in a more sophisticated manner, such as a search engine or portal rather than direct navigation.
Third, search engines are becoming smarter and sending more traffic to the best solution to a search. Google is sending traffic to Brands, Wolfram Alpha is supposed to answer you questions, and Bing is trying to combine the two. It is harder for the pikers to drive traffic toward their generic domains just on links, mediocre content, and the search term in the domain name.
Lastly, I believe the Internet is moving in a different direction. I explained this in “Real-Time Web“, but basically, I think there are more applications and methods of finding information coming about (ie. Twitter) that are going to slow the use of domains for Internet information.
I do not think domains are going anywhere anytime soon. Solid sites built on great domain names will continue to thrive. But their natural value, without a solid business behind them, has peaked. Information has slowly begun to move outside of the browser.
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Agree 100%. But I am sure you will get a bunch of people who disagree.
Most monetization methods used by domainers are down dramatically, yet the price of names has yet to drop an equal or greater percentage.
Maybe end users really aren’t that stupid. Take a look at your portfolio and ask yourself, “Why is the Domain King selling his best domains now?”
We are on the same page. I just blogged about bar code scanning eliminating traditional domain navigation. And desktop apps where you click on icons rather then open a browser are where Apple has fundamentally changed the navigation game.
The peak was 2 years ago. You only just figured out it has passed? No idea what the future holds, though historically it has been a very cyclical market (big booms, big busts).
I guess my point is not that we’ve seen the peak recently, but that I don’t see a boom coming again. Begin the long steady decline in value.
The internet is alive and changing daily but every business and individual still needs an easy to remember moniker. Using an ip address or other number doesn’t look good on a business card or email. Relevant keyword domains will have appeal and value for some time. imho.
contact@candy.com is easy to remember.
DNS1.3DCART.COM is not that easy to remember.
You will always need a good place to hang your hat.
Do not think they will disappear, only decline in value with the saturated market.
The problem with these blogs is that it’s domainers writing to domainers about what other domainers have paid. And compared to the money exchanged in the corporate world that’s chump change.
It was never about direct navigation.
It was never about search engines.
It was never about SEO.
It’s always been about branding and that money whirlwind hasn’t happened yet because corporate America is just waking up to what we domainers have known about these names for years. Corporate America has not opened their coffers yet and when they do it you’re going to see record prices. Rick Schwartz just sold Candy.com for $3,000,000+ to a candy company – not a domainer. And guess what? We’re presently working on a deal with a single word generic dotCom (also to a company) that will dwarf Candy.com.
On the other hand, if you’re talking about domainers paying huge money to other domainers, yes, that market peaked in 2006.
But that was never the endgamep.
So I am a new company or an existing company taking myself online today. I have to advertise my online presence. Do I rely on being found in search engines or through Twitter, among hundreds or thousands of other competitors? No, I need a unique, memorable domain name that I can put on a business card, advertise on tv or in newspapers, billboards, etc. There will always be a need to advertise offline to get people to your online site. Search engine results are great but if you’re in a large market you might not get on the first page of results, and beyond the first page you’re lost.
Can’t see how domains are becoming antiquated. For example, if we dropped the whole domain name system today, how would the web function? Scary thought and shows how far we are away from domains ever becoming unnecessary.
And if end users start paying more for quality domains, domainers will pay other domainers more for quality domains because their expected return on a future sale will be higher.
If anything, I am seeing more domains being used in advertising, and especially country code domains in my home country.
Portals and icons work great for existing sites you visit all the time, you can just click a link to get to the site each time, but it doesn’t work great for a site someone tells you about that you’ve never been to, you have to type in the domain the old fashioned way.
Interesting……it is not about direct navigation or the generic benefits within a search engine. There are many people and companies trying to eliminate these benefits (iPhone apps, Twitter, Firefox, Google. etc.).
If it is about branding and the money it takes to build a brand, many times companies are going to look for something catchy. Think Bing.com instead of Search.com or Zappos.com instead of Shoes.com.
Take a look in the Alexa “Top Sites”. I see a few generic names but Apple.com is not selling apples and Amazon.com is not selling trips to the Amazon.
I read this post the other day with interest and decided to to do an informal survey of 10 “average” working people in non tech jobs, all with at least a bachelor’s degree.
10 out of 10 have never heard of Bing.com
10 out of 10 have never used Google Chrome for search.
5 out of 10 have Twitter accounts
3 out of 10 still use dial up connections at home.
A final question was if you wanted to search for a new computer online what would you type in?
2 people said “look for new computers”
1 person said Shopzilla
4 people said “new computers”
1 person said “Consumer Reports”
2 people said “computer deals”
Not one person mentioned “Apple”, “Dell”, “Amazon”, “Hewlett Packard” or any other of the obvious major brands.
Now, I know this is a infinitesimally small research sample so take it however you will. I for one believe that domainers have a myopic view of retail market because we are so focused on our own profit and loss statements in a shattered economy. If you have the time money and resources to build a recognized brand like Zappo’s, Amazon, Google etc…good for you. But I for one do not think they will ever erase the value of a good direct navigation domain.
Has domain values, PPC revenue etc come down in recent years? Of course. But so have car and house sales. It doesn’t mean home values won’t eventually start to go back up, it doesn’t mean people will never buy cars again. I believe domain values will go back up. But it also means, like the auto industry, we have to change how we do things. Build better developed sites, make a stronger effort to sell to end users instead of recycling domains amongst ourselves and domain values will be just fine for the future.
The sky is falling yet? Is the end nigh? Have you repented for investing in domains?
I call it hambug. Like Castello said, the world of commerce is not revolving around domainers who want to make cents from PPC. It’s about brands and their sustainability. ICANN is about to unleash the open TLD beast, how can one talk about an end of days?
Get back to your doomsday manuals, they need rewriting.
@robb
Your first paragraph is spot on.
IMO, if a consumer needs to find you through a search engine you’re not branded.
I thought I would add that a domainer friend of mine was speaking to a Escrow.com transfer agent the other day who is the head, or one of the heads of the domain transfer dept., and she said that there are tons of seven figure domain sales happening all of a sudden in the last year. These do not include sites.
She said it is happening at an accelerated pace and it is almost all .com’s and that the price of .coms will only go up from here, according to what she is seeing.
End users are coming in force, but they almost always use non-disclosure agreements she said.
I thought it was pretty insightful.
Domain names are becoming more important. Facebook just came out with the idea of Vanity URLs; Facebook.com/YourName in an article I just read.
Why? Because they realize that they and MySpace have become incubator social networks, educating masses of newcomers that are growing in their needs. Needs that arise from people looking to find new ways to reach out to others for social interaction and potential business connections. The next step from a “vanity URL” is a true domain name that one can own and build their future identity on. This is all an education is process and it takes time.
I also noticed that “BigCompanies”.com are heavily using their domain names in their million dollar advertisements and are now using sub-domains? Anyone else notive this? asia.cnn.com and others are popping up on TV commercials. This is very interesting to me. There may be a potential for better SEO placement if the keyword is to the left of the dot com.
I believe premium domain names are a couple of years away from reaching the pinnacle of their potential. I see greater movement toward major companies trying to acquire top domain names like toys.com going to Toys R Us.
Everyone has their beliefs and I could be wrong but I have enough time under my belt to feel very good about the state of premium domain names at this point in time. David and I see more advertising on our developed sites and as and example Daycare.com is getting slammed on daycare kits being sold through the site. It appears many mothers and fathers may be getting laid off of their jobs and thinking about keeping the kids at home and starting their own daycare businesses. So we don’t share the idea that we are losing money with our sites or names. We are being offered more money and getting more requests for our names. Maybe it is because they are premium names but the secondary domain names will be the next to bounce once the premiums have found their place and development.
David and I will be speaking more about this subject in Washington DC at the Domain Roundtable. If anyone would like to chat more about the current state of this market we would be happy to clarify further on our thoughts.
I think the domainer-to-domainer sales levels and prices have been severely impacted by PPC revenues. But in terms of prices for one word category killer names, the highest prices have almost exclusively been paid by end-user companies both in the past and now and it will continue into the future.
As the supply and availability of these category killer names dwindles, I think that prices will actaully escalate. One trend I think we will see continue, is domainers being priced out of the market for these prized “park avenue” and “boardwalk” domains by end-users and large development companies.
Times are changing and so is the domain space.
haha, search engines are becoming “smarter”…don’t be silly, if they would produce 20 relevant results on the first page of google for example, then Google would search itself out of business. Why pay for placement if the search engine is so good at sniffing great websites. No, search engines at the best of times will be mediocre as that is their business model. Why produce relevant stuff, unless of course it’s useless trivia, that they are good at, but trivia doesn’t make money.
I hear all the time about generics not being the dominant websites for their category…duh. Of course not, who owns most generics? Domainers of course who own hundreds or thousands of other great domains. Domainers are not developeres and developers are not domainers. Why? Let me explain: A domainer say has 100 domains. They are all his babies and each ones is his treasure and he loves all of them the same more or less. Therefore he has a very difficult time choosing the one domain he will devote all his quality time to. So what does he/she do? Nothing. He’ll sit on his ass paralyzed not being able to pull a “Sophie’s Choice” with his domains. A developer on the other hand has a vision of one single focused business and he’ll be damned if a crappy domain will stop him from developing his business. He’ll fight tooth and nail pushing that crappy domain uphill until he’s found. That is the whole problem. Of course a developer with a great domain and with focus, will have a much easier road ahead. Not easy, but easier.