There has been a lot of discussion and debate about the quick run up in short letter and number domains. There is a lot of back and forth on Namepros and a great discussion on TheDomains.com.
There is talk of hype, bubbles, unrealistic valuation…There is talk about someone will get left holding the bag. Of course there will be someone left holding the bag, since the beginning of time someone has been left holding the bag, if there was not that would mean an infinite move to the upside with no correction, no innovation rendering the previous obsolete.
If you were running a successful buggy whip company you have plenty of time to make money, if you continued in that business and did not expand into new business, such as the automobile, eventually you were left holding the bag. You became obsolete.
There were plenty of people who opened video rental stores in the 80’s, those who did not embrace the Internet were left holding the bag as no one came in anymore to rent a movie.
I once sold Von Dutch tshirts on Ebay and made a pretty nice R.O.I. then one day Von Dutch went out of style and I was left holding the bag or box in this case of the last order sitting on my living room floor. I made money overall, but the last batch I could not even give away after sitting there in my apartment.
Domaining has changed and maybe it will be temporary and maybe it will last for a decade, people are trading domains like Forex. The metrics like search volume don’t matter, a list of end users doesn’t matter. These things are moving and you need to be paying attention every day, for those who don’t have that kind of time to commit they should probably stay out or make only a small investment they are comfortable with.
Is there going to be someone holding the bag on XQJZ.com at a certain price ? You betcha, that is how markets work. Everyone doesn’t get a trophy or an orange slice, participating is not enough, you need to be smart, lucky and accurate.
There is a flipside to not believing the hype
The flipside of the coin is those who missed out by listening to those that said it was hype. I had someone come to me about a week ago who was on the verge of committing suicide, he owned several 5N.com and 4L.com that he dropped because as he describes it, those who supposedly know more than him told him they were pigeon shit, so he dropped them, at conservative whole prices, he missed out on close to $350,000.
So now he has a wife berating him, asking him how he could be such a failure in life ?
Now don’t get me wrong seems there are other issues there as well, but the money is certainly one part of that, so he missed out on making a big chunk of money because he listened to those that told him “Don’t believe the hype ?” Well that advice cost him a lot of money and probably his marriage.
This is serious business and serious risk if you decide to play domain names as a short term trader, you can make a lot of money and you can lose a lot of money. It is about managing risk, proper bankroll management and knowing ahead of time what you would like your exit strategy to be.
There is always going to be hype, that is not what is important, it is how you read the hype and that you are never over extended financially or emotionally.
Jess says
Fantastic article, love your writing.
Joseph Peterson says
Nice article, Raymond.
I disagree that someone is always left holding the bag.
If I buy a sandwich, the guy who makes my sandwich gets my money; whereas I lose money but gain a sandwich.
If you hand-reg a domain and sell it to me for $150, you make money. If I sell it for $500, I make money. If that guy sells it to an end user for $2500, he makes money. And the end user builds a website on the domain, which is what they want. They get their sandwich.
But in a situation of indefinite trading with no end user, then we’re looking at flip-flip-flip-flip-flip. Unless prices grow forever, somebody in that chain must lose money.
I think that’s an important distinction.
Raymond Hackney says
I was referring to speculation and investment Joseph, not something like buying a sandwich.
Tim says
Is that person Adam Dicker, and that person named Ken O’Brien who spammed me trying to steal my CHIPS lol, nice try kenny
Raymond Hackney says
No it was not Adam Dicker.
JZ says
i am staying out of this whole mess, sure it will probably cost me money but save me in sanity as its just so risky. there will always be end users and that’s what i have always focused on. a lot of people were left holding the bag with .mobi domains. i still remember considering placing a 40k bid on a name but didn’t and am sure glad i never did. i did end up losing about 7-8k though as i believed the hype and didn’t sell during the hype. i was also brand new to domaining at the time but i learned from it.
Domenclature.com says
“There is talk of hype, bubbles, unrealistic valuation…There is talk about someone will get left holding the bag. Of course there will be someone left holding the bag, since the beginning of time someone has been left holding the bag, if there was not that would mean an infinite move to the upside with no correction, no innovation rendering the previous obsolete”. – TLDInvestors
If it was just someone holding the bag, then it will of course amount to natural business risk and reward, and chance taking; however, if it turns out, as we foresee, that one or two make money on the pump, and 99% end up holding the bag, then it’s a totally different scenario. And that’s what most skeptics to the newgtld scheme, and the “Chinese” hyped market is elucidating. It’s all possible that a majority make money, still it makes sense to debate, and scrutinize all these trends.
Raymond Hackney says
I think the debate is good, my point was some think that there should never be someone holding the bag.
I agree if there is one or two people pumping something that is a big concern, but I think we can see there is plenty of Chinese buying not popular domainers hyping. Look at DropCatch, NameJet follow the Chinese markets on Chaomi.cc
Domenclature.com says
I do understand.
I’m not very tuned to the Chinese market, however, by common sense, I expect them to be rational human beings just like any.
It must be lost on us that Domainers, both Chinese, Americans, and indeed all hue of people, operate from China. Therefore, who and who are actually the “Chinese” buyers?
We see that Baidu, the biggest search engine in China uses “Baidu”, and not “Chinese letters”, or Numerics; there’s an “i”, an “a”, and a “u”, in Baidu. The biggest aftermarket in China uses 4.cn, whereas it’s a dreaded number. I’mnot aware of any major Chinese firm that uses the much touted numbers, and “Chinese letters”. So, those who push these trends need to back-up their hypes, NOT attack anyone that asks questions. I don’t consider you as playing any negative role, Hackney. I enjoy reading your opinions, when they are yours, and you’ve often taken on the hot issues after debates, and often find myself on your side.
Matt says
“We see that Baidu, the biggest search engine in China uses “Baidu”, and not “Chinese letters”, or Numerics; there’s an “i”, an “a”, and a “u”, in Baidu.”
Honestly…if you don’t “get it” now, you never will. Just give up.
Baf says
I really like the way you write things. Nice article. Let me just add this: Domain names value and demand is based on rarity, keyword, abbreviation, memorability, pronounceability and search volume. When you see this surge in demand of domain names, irrespective of all the parameters I above mentioned, you can tell that the news spread around the world that there is a way of making a lot of profit that most people never knew before, which is investing just $10 or so in a domain name and sell it 1,2,3 or 4 years after for 100 to 1000 times the price you registered it for, and this is true in many cases, and people jumped into this kind of business/investment without taking so much into account the risks involved, that is because they know there are risks involved in any type of business/investment anyway. this a new type of business, that free, no maintenance cost, beside annual renewal fees, then let’s try it, specially when many in China were disappointed with investments they had in stocks. Just like when hiv/aids just came out. Most people had no idea of what it was even though they may have heard about it. But when people started losing friends and family members to hiv/aids and started talking to one another about it the news spread around so fast that they had to be using condoms. Today, after many decades, almost everybody uses condoms when having sex with a person of unknown hiv status. HIV/AIDS exists and can cause death, it is true. Analogically, there are people who became millionaires investing in domain name business. This is true. The news spread around the world and people want to try this type of business. So there is no doubt that it is a hype, a bubble and it will pup, but if you can make money until the bubble pups, what is the problem? People must know that when this bubble pups the domain name business will go back to normal because by then people will have understood that the value and demand of a domain name can only be based on rarity, keyword, abbreviation, memorability, pronounceability and search volume. When this happens, the people holding keyword, rare and short domain names will make a lot of money because not only there will be more people involved in domain business but people who understand the real reason why domain names have value and are demanded. Don’t drop your keyword, rare and short domain names. This hype will be over and people will go back to valuing domain names as they usually did before the hype and just make sure you take advantage of this hype. Don’t get left holding a bag.
mik says
Great read!
The difference IMO between mobi & the latest gtlds & cctlds is that a country with over 1.3 billion people is involved now within the internet compared to when mobi came out.
If I can be left holding an egg roll instead of a hoagie I’d be satisfied!
Your story about the guy who sold his domains and lost out on the big payoff is a typical example of the herd mentality unfortunately for him he believed someone else other than his own thoughts and instincts. Its a shame of course and indicative of how one can be drawn into others thought processes.
Mike says
I been buying 4L’s over the years as I found them cheap, tended to like ones that I could put a meaning to, so about 3 weeks ago, I heard about this chip hype.
In the past weeks I have sold 22 domains in 2 seperate lot sales for about $27K.
Yes, I could wait for $2k to maybe hit, but I am happy.
Now I look at a guy like Berkens who is maybe pushing 60, sitting in hundreds of liquid names, holding on for what? Being outbid in auctions by Chinese catchers on a daily basis, why not take the cash, and enjoy your life, rather than sit there getting outbid emails all day long.
All these western investors with Chinese bootcamp skills, trying to outbid Chinese domain houses in auctions are insane, you can’t outbid them if you don’t know what they mean.
They have direct sales channels, you have Ab inbox of spam, get real
Barry Felds says
Are Chinese buyers really buying all these names?
I would like to see some analysis, breakdown and segmentation of the various combinations (LL, LLL, LLLL, 2N – 6N) to actually see if there has been a ‘significant’ movement of these domains to Chinese domiciled owners and accounts over the last 12 months. Further to this, the same analysis would be need on monthly basis to see if there is any trend forming.
Until some quantitative data is provided, rather than qualitative data and gut feel, then I don’t think that anyone can truly say with certainty that the demand and market is being driven by Chinese buyers. I have seen only one analysis of the LL.com breakdown of Chinese –v – Others owners.
Yes, some Chinese domain investors have bought domains. Are they really driving the market or is it non-Chinese buyers who are driving the short letter and numeric domain market up?
Tim says
It is no secret, CHIPS, and Numerics are a front to remove wealth out of China.
It is not physical, highly portable, and now highly liquid.
I could probably sell a 4L Chip, faster than I could sell a bar of gold.
One regulation, one rule change, and this dog & pony show will turn into a sh8t storm real quick.
Samit says
The current 6N / 8N / 9N does look like a bubble, while some people make millions the vast majority will be left ‘holding the bag’ as you put it.
Reminds me of .mobi, don’t know where those ‘investors’ are now, but I remember the same fervour in promoting ‘their thing’.
I’m staying out of it for the most part, I don’t have the appetite for the amount of risk involved and will continue to hold the rest of my llll,com till such time as the ROI is too tempting not to sell.
WeAgency says
This part had sent chills down my spine. I understand that a lot of domains can be registered and forgotten, but to not do in depth research on your current holdings is a grave mistake. I sure hope that this person is alright. There are sharks out there that will gladly buy your assets for pennies on the dollar. I’ve watched groups of people on forums swarm to give bad advice to newcomers that walk in holding gold – they end up leaving with copper. Thank you for sharing this Raymond.
” I had someone come to me about a week ago who was on the verge of committing suicide, he owned several 5N.com and 4L.com that he dropped because as he describes it, those who supposedly know more than him told him they were pigeon shit, so he dropped them, at conservative whole prices, he missed out on close to $350,000.”