Premium domains as long term investments

[wb]

This post kind of follows on from Mark's thread, as the following quote reminded me about posting this:

With good generic domain names becoming harder to get hold off (most people seem to have bought them for long term investments and arent willing to part with them unless they are offered hundreds of thousands), many new startups are using unusual names like zoopla, zoosk, moonpig, bing, yahoo etc.

Just wondering what others thoughts are on premium domains (specifically .co.uk) as long term investments? To put this in context, I'm referring to high quality domains which are realistically valued at five, six or even seven figures where the owners have decided not to realise value from them until a substantial offer is received.

Naturally there are some amazing portfolios of premium domains on this forum, and buying up more domains as investments is something I'm personally interested in. However, I'm interested to know different opinions about whether you feel they are high risk or low risk in relation to the future/growth of domain sales (e.g. if an expected offer is never received due to companies 'not getting it' or the domain market changes somehow in future, you could potentially lose on the total value of the asset).

Cheers

 

[Frog]

As far as high risk / high reward goes, its right up there with buying only 1 companies shares, buying a load of gold bars or putting it on a horse or something!

A good domain is illiquid. I'm not talking something worth a few k but something like say money.co.uk, its not like you can just sell it quickly if you want to (outside of a fire sale). It might take you years to sell it for what you think its worth, you might simply never be able to sell it at all.


If it works, it works well - look at Barry buying Gold.co.uk for 40k not so long ago and now seemingly selling it for 100 or so. But you don't hear of all the other people who're trying the same and not getting the sale.

For this to make sense as an investment strategy (rather than a gamble) I think you'd need to be looking at investing £1m across 20 high end domains. Anything less is not really an investment I don't think. Or you could scale it down I guess, but I think the key is to spreading it across a LOT of different domains.

 

[richrf]

This post kind of follows on from Mark's thread, as the following quote reminded me about posting this:



Just wondering what others thoughts are on premium domains (specifically .co.uk) as long term investments? To put this in context, I'm referring to high quality domains which are realistically valued at five, six or even seven figures where the owners have decided not to realise value from them until a substantial offer is received.

Naturally there are some amazing portfolios of premium domains on this forum, and buying up more domains as investments is something I'm personally interested in. However, I'm interested to know different opinions about whether you feel they are high risk or low risk in relation to the future/growth of domain sales (e.g. if an expected offer is never received due to companies 'not getting it' or the domain market changes somehow in future, you could potentially lose on the total value of the asset).

Cheers

I think there are risks associated with holding on to premium domain names, particularly the possibility that domain names may be in general devalued over time as other means of addressing may take their place. Also, the overall economic situation heavily impacts the prices of all assets. There was an overall asset deflation after the 2000 tech bubble burst and after the housing bubble burst. The latest rounds of loose monetary policies by central banks have again inflated markets but it is never clear how long these types of bubbles will exist before they burst.

Any asset, no matter how valuable carries some degree of risk, which I think has to be considered. Here is a good article which I found that describes some of these risks in more detail:

http://domainmart.com/news/Speculation_and_Investment_in_Domain_Names.html

 

[markb]

I would say that buying premium uk domains as long term investments now for large sums of money, say £10K + is very high risk, especially if you have no plans to develop them.

If you regsitered a few premium domains in the late 90's early 2000's for reg fee, and are keeping hold of them, this is obviously not a risk because they cost a minimal amount, so if the price of domains devalue in the future your not losing out. Most people with quality domains asking 6 figure sums for them are usually people who registered them from new.

A better option for new investors would probably be to invest in one or two quality domains and actually develop them rather than just sit on them and hope for the best.

 

[wb]

If you regsitered a few premium domains in the late 90's early 2000's for reg fee, and are keeping hold of them, this is obviously not a risk because they cost a minimal amount, so if the price of domains devalue in the future your not losing out.

That's true, and I guess this thread it more aimed towards people who have bought domains rather than registered from new.

The only difference I would add is that people who registered them from new are still at risk as there is a potential lost 'opportunity cost' (brings back the memories of studying economics) if they don't realise the value from them at the right time. For example it could be worth selling now for £10,000 but in ten years time may be worth £0.

 

[Frog]

If you regsitered a few premium domains in the late 90's early 2000's for reg fee, and are keeping hold of them, this is obviously not a risk because they cost a minimal amount, so if the price of domains devalue in the future your not losing out.

I don't agree with that line of thought at all. If you could have cashed in today for £10k and chose not to, then end up selling next year for £1k at the bottom of the market I'd say you've still lost £9k even if you didn't pay that for it. Just because you bought it for reg fee doesn't mean you should blindly hold them forever, you still need to try and time your exit.

A better option for new investors would probably be to invest in one or two quality domains and actually develop them rather than just sit on them and hope for the best.

Since I can't afford to "do a Barry" and sit on hugely valuable domains in the offchance of an end user coming along, that has been my strategy

But you start blurring the lines between an investment and a full time job. I work on my sites all day, every day. I do kinda see them as an investment as I have one eye on the final cash in and walk away date, but there are not many normal investments that take 70hrs a week of your time! It also requires a fair amount of skill so its definitely not an investment option even open to a lot of people.

Get it right and you'll make a shitload of money - look at some of the sites forum members are building from nothing that are doing really well like Doug with discountvouchers.co.uk, Russ with his travel sites and my searchengineoptimisation.org (just trying to pick a few examples that people have posted the urls of themselves in other posts!).

But then on the other side of that equation you've got other ones a lot of us have built that have turned into absolute stinkers. Buy a domain for £5k, then spend £5k on content, £10k on coding and £5k promoting it and fail within a year and you've spent £25k to have an asset worth £5k at best (the domain base price), before you even take into account all the time you wasted... maybe thats one for another thread, "your most idiotic site builds". I've certainly got a few I could list

 

[markb]

That's true, and I guess this thread it more aimed towards people who have bought domains rather than registered from new.

The only difference I would add is that people who registered them from new are still at risk as there is a potential lost 'opportunity cost' (brings back the memories of studying economics) if they don't realise the value from them at the right time. For example it could be worth selling now for £10,000 but in ten years time may be worth £0.

I think some people who are holding out for that 6 or 7 figure offer on their domains may lose out. In my opinion in you had a domain which you valued at that amount, then why on earth would you still have a landing page or no website what so ever on it? Even if your not a developer, you could borrow or spend £30k and get a top quality website designed which would earn money.

 

[binny]

I know it's what no-one here wants to hear but I'd reckon that the popularity of Apps is going to put domain value at serious risk in the next 3-5 years. A step change in the method that the masses use to access information on the web is just around the corner, it won't kill domains but it'll be a royal kick in the nads.

 

[Frog]

Too many people think every single domain needs to go up and up in value...

Look at all the people who loading up on .mobi domains to have their investments destroyed by the launch of the iphone.

I would be very careful over choosing long term investment domains. Even the phrases people use for things can change over time, devaluing your domain. Or products themselves can become regulated (or outright banned) which would be horrible if you're the one holding the exact match .co.uk

I've already ate that loss once on mephedrone.net (which was a profitable website so not an actual cash loss, but a huge loss of a valuable asset overnight).

I enquired about paydayloans.co.uk a year ago and he told me "6 figures". He'll be lucky to get 5 if the government limit the APR on payday loans.

If you bought what appeared to be a premium domain to do with self certified mortgages I think you'd already have lost your shirt (or about to, don't keep very up to date with UK finance news now) as they were getting banned I believe...

If PDAs end up replaced completely by androids and iphones, then that is another one where someone misses the boat in getting out at the right time.

So loads of hurdles you'd need to get past as a long term investment.

 

[BREWSTERS]

It depends on the timescale. The fact there will only be so many (true) premium generic names means that they will continue to rise in value. The only risk being a change in the domain system.

Every top name is worth more now than 5 years ago, likewise 5 years before that etc. Couple that to more awareness and demand for top names - I'd say they are one of the best investments you can make.

Also, I'd say that top names are more liquid than poor names.

 

[wb]

Agree with you there Frog. I think one of the main points of a strong premium domain holding its value will include how many potential uses it can have (the more the better).

 

[Bailey]

It's a good discussion to have but as to asking it as a question - in all honesty it's not one that many are equiped to answer.

Domains as a market are no different to any other short to medium term investment. There are soo many different facets in play - that if you really don't have a thorough understanding of all the basics, your likely to end up loosing you shirt.

Would I want to be entering the market today ? - I would say yes - If your equipped and financed correctly, it's probably as good a time as any. Those of us that invested quite heavily 10+ years ago have reaped quite well ( but even in the nineties I was preaching to a totally unconvinced audience) It's quite funny to hear all the reasons at the family get-togethers, as to why they each wasn't willing to follow my advice.

But, lets be honest guys, even with a fair amount of foresight - don't we all look back and think "If Only" and remember the 3,000 domains that got away.

And at times It can be quite distressing to read someones pitch (belief system) behind a certain domain listed for sale - Knowing full well that this type of illogical thinking is probaly being perpetuated a hundred times over in their own mind.

Looking at the drop game - certainly seems to be the no-brainer at the moment for a new entrant. I recently found myself in a tight situation - totally my fault, i counted on a couple of sales that never happened in Nov/dec. Now i'm getting offers to pick-up my drops prior to deletion, and i don't mean just one or two. i had a funny discusion with my account manager the other day (well lets just say he laughed a-lot) as i explained the reason for a sudden spurt in redemption payments from me.

So yes - if I was active buyer today thats the market I would be exploiting " the pre drop market"

 

[wb]

So yes - if I was active buyer today thats the market I would be exploiting " the pre drop market"

It's kind of catch twenty two as the more publicity domains get, the more value people will feel they hold. One of the problems is that many domains in the pre-drop market are ones being held with often unrealistic expectations, shame really (I'm referring to domains held by non-domainers).

Equally though there are still plenty of nice buys out there. It's just incredibly difficult to sometimes put a value on available domains yourself when you want to keep your cards close to your chest

 

[Bailey]

The growth and position of the catch-systems - blimey their even renting space the shortest distance from the servers - almost fortold the emergence of the predrop enquiries. I've even used some of the recent contacts/requests made as being a good furtherance to my own knowledge. - never too old to learn.

And the plus point is i've sold a few based on the nature/wording of the request. The old smooth salesman is back ontop again

 

[Bailey]

Equally though there are still plenty of nice buys out there. It's just incredibly difficult to sometimes put a value on available domains yourself when you want to keep your cards close to your chest

Indeed - my position has always been that a recently contrived domain is much more likely to have relevance to a future proposition than anything registered in the 90's. We all get to see - over and over again. the goldmine domains registered in 1995. If you really want a laugh look at the many still held from the same period.

My rules on the domain space are -

No it's not going to be replaced

Garden wall systems as a concept lost their credibility a long time ago and only a few backward thinkers them re-erectable.

Numeric domains are in their infancy

And for all the talk about smartapps - think pre-determined phonebook, Scary

 

[namealot]

A "good" newly registered name today then just left alone would probally bring a better % return than any high value name purchased and left if both were left say 5 years

The vast majority of "aged good portfolios" will remain unsold because the price to re register them is nothing...

How many x,xxx, xx,xxx, xxx,xxx, etc “owner valued” would remain in the same hands, undeveloped or even registered if charged 10 % of “owner valuation as annual renewal fee…Would make you wonder what the true representation of the names real worth was...

Its relatively easy and low cost to make money from domains, internet most people would be better off by developing names themselves (or learning too ) than just buying high cost ones…?

 

[Bailey]

I'm not sure where your coming from 'namealot' (thats bit of a fragmented argument posted) there are no blanket scenario/model answers. Hopefully each of us gets to develop an awarness of the domain market. All things being good you then get to operate within that area of awarness ( I was tempted to say expertise).

 

[wb]

Exactly right, most opinions/strategies will differ and it's great to see them all together.

 

[richrf]

I've owned a premium domain name since 1993. The peak offers occurred around 1998 - 1999. During the next decade, it appeared that interest waned, which mirrored most other assets. Recently, interest has again begun to climb. Despite the ups and downs, compared to other assets, it has probably been the best one that I owned. However, this can not be used as a predictor of future patterns which are highly dependent upon the evolution of technology and the Internet.

 

[brum]

this is why i invest:-

the web is still in it's infancy in terms of the amount of business , consumer transactions that are carried out over it compared to traditional bricks n morter .

therefore there is massive growth potential.... this for me offsets the risk from apps .. which is real and more importantly the risk from facebook lots of companies seem to be directing there customers to facebook rather than their website because they feel it will help spread the message virally .

would you want to build your business in someone else in garden ??? they seem to be happy to do so... only time will tell but it is the elephant in the room.

however saying that i still think that domains will be around maybe they might only account for 30% of business the rest going to facebook and other walled gardens and apps .

but that 30% will be far bigger than it is today... therefore there is growth.

the really high end premium domains i would be very careful about as the risk for me is too high let's take an example .

if i owned rent.co.uk what a great name would be worth a lot of money i guess ??

now if i was rightmove i could go to iccann and pay my 100K and get .rent now i would have to pay a lot to market this and build the domain yes ?

not if i am rightmove i have thousands of estate agents that already use my service i would provide them with a free website eg foxtons.rent as part of the package they already pay me £300 a month for . so they would all be marketing for me ...

and since i have a big enough market share i would be able to get some traction.

i'm not saying it would work but it would make me think if if i was rightmove !!!

for me domains are here to stay they might not be as important in the future as my facebook fan page... but they will still be around and therefore have value.

the real risk comes from the semantic web ... if google finanly figures out how to make it work then rent, let , lease would all be the same value since a search for

rent a house would bring up sites for rent , let and lease . now out of those lease is probably the cheapest yet it could semantically have the same value as rent or let in terms of search results .

lots of risks but hey that's life i still think that the potential outwieghs the risk !!!

happy hunting