How has the domaining market changed over the past 5 years? Where's it going?

[JimmyDomain]

Hi guys,

I feel like I'm a bit of an imposter, because I'm actually an Aussie domainer (no convict jokes please), but I do a fair bit of hanging out here on AD because it's a great place to learn and there aren't really any comparable forums of any size in Australia yet. Our biggest domaining forum has a grand total of 268 registered users (compared to AD's 8000+), with maybe 20 members that actually post on a semi-regular basis.

This is due to two main factors imo - the relative 'slowness' of Australians at adopting new technology (at least compared to the US and UK), and really draconian legislative restrcitions. Some of them still remain in place (currently only Aussies can own Australian domains), while others have thankfully been relaxed - up until a couple of years ago it was actually illegal to sell a domain name, so our secondary market is really still in its infancy.

While it means that there's a whole lot less money to be made at the moment, this does of course have its upsides - in a sense I have access to a 'time machine' when I check out places like AcornDomains. The UK and Australia are culturally and economically (per capita) very similar, so I feel like you guys are a very good indication of where our market will be in 5 years.

Anyway, my question is in twofold. The first part is really directed at the veterans on here, I'm curious about where the UK market was 5 years ago. Were things very different? How much have prices changed? What has the general growth rate been like? How much has the 'domaining' community expanded?

The second part is for everyone - how much growth is left in the UK market? What will it look like in 5 years? Will there be more domainers around? Will good quality domains be worth significantly more, or have things plataeued?

Cheers guys.

 

[Edwin]

There were a lot more decent names dropping, and a lot fewer people chasing them, 5 years ago. Also, it was a great deal easier to buy names on the aftermarket for what now looks like peanuts.

5 years from now the drops will look like a desert by comparison to today. Simply put, none of the major "players" are dropping names, nor does it seem likely that they will suddenly start doing so in future. After all, why should they if parking/sales covers renewals with cash to spare? So every time they catch a generic name, it's gone for ever (if it sells, it's to an end-user - who is also unlikely to drop it since they just spent a wad of cash on it). Since the universe of commercially decent generics is large but still finite, that means that inevitably the quality of drops will keep going down as a long-term trend.

With the expansion of the .co.uk market has come an unfortunate undercurrent of "get rich quick" mentality amongst some of the "newbies" to the domain scene, something that is already endemic in .com (and which has completely changed the vibe on some of the large domain forums). So long as people can register a name for a few pounds and sell it for thousands/more then I don't see that changing (and the kind of people who seem most affected by get-rich-quick-itis seem inherently incapable of seeing the logical flaw that just because SOMEBODY is able to make that sort of profit on domains it doesn't mean THEY can!)

In general, domain values (for good domains) have risen (junk domains are still worth... nothing at all!), especially compared to 5 years ago (though they may have stagnated a bit the last couple of years, at least based on reported sales, because of the economic downturn). Once the economy picks up, it's off to the races again - the online advertising sector is particularly robust in the UK.

The net result of all the above is that probably in 5 years there will be many more people chasing much fewer names, and the "vibe" on this board (and in the industry) will be less friendly and more "desperate" than now (again, just look at the big global domain forums and the tone of recent vs historic posts - the trend is all too clear). At the same time, those with good names will be making more money than now - those sitting on junk will STILL own names worth nothing.

(Relevant aside: the biggest fallacy in the domain industry is probably the "a rising tide floats all boats" concept that, because domain values in general are going up, this raises the value of EVERY domain name. What some people fail to realise is that no amount of tide will raise a shipwreck i.e. even if the average value of a commercially decent domain goes up 100-fold, JUNK IS STILL JUNK)

 

[JimmyDomain]

Great reply Edwin, thanks.

Not sure if anyone's particularly interested, but being as that the UK market is like looking into the future from my perspective, the AU market ought to be like looking into the past from your perspective, so here's a bit more information on the state of affairs downunder for nostalgia's sake

- Our first dropcatcher really only came on the scene a little over a year ago. In that time, two others have opened their doors, and the drops are now considerably more competitive than they were only several months ago (and they seem to be getting tougher every day).

Having said that, it seems like there's at least one semi-premium domain dropping every month or two. A few weeks ago, some poor sap let Forex.com.au drop and it was picked up for $30,000 (bit under 15,000 pounds). Heaps of money by Australian standards - in fact, I believe it was the highest amount any Aussie domain has ever publicly been sold for. Don't think the new owner will be letting that one drop any time soon!

- Our version of Nominet is called Auda, and in the past they have been known to take a very heavy handed approach towards anyone who was thought to be speculating. As a result, everyone keeps their portfolio under wraps, and whenever I publicly ask for a domain valuation, I always make sure to start the post with 'of course I plan to develop this, but...'

As I mentioned in my previous post, it was illegal to sell domains up until very recently. It was also illegal to register names unless they had a DIRECT connection to your business. It wasn't enough to simply say that you were in internet marketing or web development. The only way you could get product/service.com.au was if you had a company that had said product or service in its title.

The official reason for these brutal restrictions was that they would prevent speculation (i.e. domaining), but things completely backfired - one clever/devious guy (not me, sadly) found a loophole by registering hundreds of companies with the sole purpose of acquiring the generic domain names associated with them. So for example, he registered something like 'Credit Cards Pty Ltd' and thus was entitled to register CreditCards.com.au. This guy now owns literally thousands of the best, most premium generic .com.au's out there and is sitting on a portfolio that will probably be worth tens if not hundreds of millions of dollars in several years time.

I find it highly ironic that one of the most highly regulated ccTLD's out there has been largely monopolised by a single individual.

Anyway, I wont blather on about the history Australian market anymore as it is probably boring everyone.

To get back to your reply Edwin:

I know exactly what you mean about the 'get rich quick' mentality being endemic in the US community. This is why I prefer AD, because the tone is nowhere near as soulless and impersonal as on the big US boards. I think one of the primary ways one can gauge what stage a market is at is by looking at the quality of the names showing up in the 'domain appraisal' sections. As a market decays, the number of actually valuable domains gets consolidated into fewer and fewer hands reducing the number of valuation requests for 'good' domains, while the influx of a clueless get rich quick crowd increases the number of valuation requests for 'bad' domains.

On the other hand, it's a fair call that an influx of new domainers is definitely beneficial for existing players, right? It improves the liquidity of the market, and assuming the newbies take the time to educate themselves about 'exact' search volume, ultimately increases demand for the very limited supply of 'valuable' domains.

Actually this leads me to another question for the veterans - most of you probably built the foundation of your portfolios by acquiring a swathe of fairly decent free to reg domains, right? The types of names that were in abundance when you started, but are now likely to fetch a few thousand pounds each. Do you think the capital requirements for being a successful domainer in the UK market have changed? In other words, do you now need to spend serious money to make serious money?

Has all of the 'low hanging fruit' been plucked?

 

[Edwin]

On the other hand, it's a fair call that an influx of new domainers is definitely beneficial for existing players, right? It improves the liquidity of the market, and assuming the newbies take the time to educate themselves about 'exact' search volume, ultimately increases demand for the very limited supply of 'valuable' domains.

No, I don't think that holds true at all. There's a limited amount of money to be made by reselling inside the industry i.e. to "other domainers". And unless the newcomers have serious money to invest, it makes no odds if they come into the market or not. If you look at the threads in the sales forum, very few are for xxxx or higher - most of the domainer-to-domainer sales seem to be at the xx and xxx level.

Of course, some will go on to make a go of it - I am not advocating that those who want to try their hand at it should be locked out - but again going by the other forums and .com (which is ahead of .co.uk in market development just like .co.uk is ahead of .com.au) that will be less and less the case. And the more that people come in, buy a few thousand pounds worth of junk, and get disillusioned and badmouth domaining, domains and domainers to everyone around them, the more damage it will do the industry.

What will expand the market is more widespread knowledge of the merits of a decent domain name (i.e. reaching the attention of end-users) and a grudging acceptance by the majority of media outlets that buying and selling domains is as legitimate a business as buying and selling property. All of this takes time, and we will never completely shake the shock value "cybersquatter" tag in the more sensationalist news pieces, but hopefully the message is, and will continue to, slowly sink in.

Do you think the capital requirements for being a successful domainer in the UK market have changed? In other words, do you now need to spend serious money to make serious money? Has all of the 'low hanging fruit' been plucked?

No, there's still a lot around. Especially in the business-to-business space. But the capital requirements will be prohibitive unless you know what you're doing. For example, if you can pick 500 "winners" then it's only going to cost you 3,000 pounds to build up a nice little portfolio for resale. But if you show the judgement of the average newbie on most of the public forums, it's going to cost you 3,000 pounds to get maybe 5-20 decent names out of those 500. And will you have the internal fortitude to drop the other 480-495 come renewal time?

So if you're willing to put in the time to mine deep into niche keywords and you have a good eye for names, you can still put together a portfolio that is going to make you nice money over time. But both ingredients are necessary: the time AND the good eye.

 

[retired_member12]

Great reply Edwin, thanks...

...Our first dropcatcher really only came on the scene a little over a year ago. In that time, two others have opened their doors, and the drops are now considerably more competitive than they were only several months ago (and they seem to be getting tougher every day).

...Our version of Nominet is called Auda, and in the past they have been known to take a very heavy handed approach towards anyone who was thought to be speculating. As a result, everyone keeps their portfolio under wraps, and whenever I publicly ask for a domain valuation, I always make sure to start the post with 'of course I plan to develop this, but...'

...As I mentioned in my previous post, it was illegal to sell domains up until very recently. It was also illegal to register names unless they had a DIRECT connection to your business. It wasn't enough to simply say that you were in internet marketing or web development. The only way you could get product/service.com.au was if you had a company that had said product or service in its title...

...The official reason for these brutal restrictions was that they would prevent speculation (i.e. domaining), but things completely backfired - one clever/devious guy (not me, sadly) found a loophole by registering hundreds of companies with the sole purpose of acquiring the generic domain names associated with them. So for example, he registered something like 'Credit Cards Pty Ltd' and thus was entitled to register CreditCards.com.au. This guy now owns literally thousands of the best, most premium generic .com.au's out there and is sitting on a portfolio that will probably be worth tens if not hundreds of millions of dollars in several years time...

Great entire post there Jimmy, interesting perspective on things over your side. I wasn't aware 'domaining' was seen as that bad over there. In fact, i recall listening to a web cast Edwin did at one time, and i'm fairly sure it was conducted by someone in Aus who was in the game, or maybe my grey matter is playing tricks on me. Anyway, I wonder if he is one of the guys you refer to?

 

[Edwin]

Great entire post there Jimmy, interesting perspective on things over your side. I wasn't aware 'domaining' was seen as that bad over there. In fact, i recall listening to a web cast Edwin did at one time, and i'm fairly sure it was conducted by someone in Aus who was in the game, or maybe my grey matter is playing tricks on me. Anyway, I wonder if he is one of the guys you refer to?

Here's the podcast you mean...
http://www.ozdomainer.com/domain-names-podcast-episode-12-with-edwin-hayward-memorabledomains-co-uk/

 

[retired_member12]

Here's the podcast you mean...
http://www.ozdomainer.com/domain-names-podcast-episode-12-with-edwin-hayward-memorabledomains-co-uk/

Cheers Edwin, i'm not loosing my marbles then, that was the one!

 

[foz]

UK and AU ccTLD's have major differences:

.UK
Low registration costs
Large population
Liberal policies

.AU
Medium-High registration costs
Medium-low population
Restrictive policies

So to think the .au will catch up to .uk overtime I don't think will occur. Both countries have similar economic climates but the population base will always win out in favour of the .uk.

 

[JimmyDomain]

I'm not saying that DomainX.com.au will ever be worth as much as DomainX.co.uk because obviously the UK has roughly 3 times the population of Australia.

But will Australian domains be worth as much as their UK counterparts, proportionally speaking? Sure, why not?

Every domain market started with high registration costs and restrictive legislation, and these issues are being rapidly swept away in the Australian namespace to bring us into line with other markets.

Anyway, you can now get .com.au's for around $11 / year if you know where to look, which is really not all that different to costs in the UK.

Edwin and DT: Appreciate the feedback. I actually know Ed (ozdomainer), he's a great guy but not one of the lucky few who got in super early. I checked out the podcast, was really great. I found the ending particularly pertinent, and have started development on some of my more premium domains so that I can really build out the best 3 or 4 in a year or so.

 

[foz]

But will Australian domains be worth as much as their UK counterparts, proportionally speaking? Sure, why not?

Every domain market started with high registration costs and restrictive legislation, and these issues are being rapidly swept away in the Australian namespace to bring us into line with other markets.

Anyway, you can now get .com.au's for around $11 / year if you know where to look, which is really not all that different to costs in the UK.

Possibly, will partly be dependent on AUDA policy towards foreigners. If foreigners where allowed in, money would flow.

I think AUDA would view that differently. Have you got a link to the org.au's cancellations? It wasn't picked up by the domain news channels rather the local media such as smh.com.au?

Do tell.....

 

[JimmyDomain]

Possibly, will partly be dependent on AUDA policy towards foreigners. If foreigners where allowed in, money would flow.

I think that definitely has some truth to it - I do expect this regulation to go eventually (in fact there are certain loopholes non AU citizens can use already), but it will probably stick around for a few years yet. I also don't know how much of an imepiment this will be to value - how many of the big ticket .co.uk's go to non UK buyers anyway

Have you got a link to the org.au's cancellations?

Not sure what you mean by this?

 

[foz]

Big ticket sales aren't common in ccTLD's (e.g. six figures). Volume selling in the $1K-$10K range is.

Org.au's being cancelled, brought it up in this thread - http://www.acorndomains.co.uk/general-board/66378-org-uk-domains-legally-o-k-use.html

 

[JimmyDomain]

I wouldn't be surprised if there are quite a few high 5 / low 6 figure UK sales that go down 'off the record' every year.

I see what you mean about the org.uk thing - that won't happen in AU any time soon (if ever). The reason is that we already have a deregulated (by Australian standards) alternative to .com.au in the form of .net.au. That is to say, these days any Australian individual or business is free to register any .com.au or .net.au they wish, provided they are not infringing on a trademark.

.Org.au's are officially only for non profit organizations, and if you try to register one for other purposes, the registrar should deny your application. I see no problem with this, and I don't think that this state of affairs continuing will have a negative impact on the value of Australian domains.