Domaining on the decline?

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Over the years there have been many discussions on the demise of domaining. The latest debate started last month on Namepros “Domain industry is dying slowly?”

. The discussion started out with a lot of focus on new gtlds and the confusion and choice they have brought to the domain market.

Longtime domain investor Brad Mugford posted,

Adding a bunch of new “land” in a bad area does not really effect the value of prime real estate (quality .COM).

Also, the whole premise of top tier combos like solar.energy being affordable is not realistic. 99% of those are registry reserved and come with massive premium prices and/or premium yearly renewals.

So people can decide if they want to pay a premium for .COM, or a new extension. In most cases the choice is pretty easy.

Brad

While others jumped on the new gtlds are going down the tubes bandwagon, Hawkeye posted,

A common theme among domainers, but 99% going bankrupt and disappearing…nope, that won’t happen. The majority will survive either on their own, or under the wings of another gtld operator. As for being ‘popular’ or ‘investment’ worthy, probably not on a bigger scale like .com domains are now. Though despised and hated by domainers, there are end-users that ‘use’ them now and will continue to do so in the future. And they care more about a domain name that is relevant/describes their business (that they can afford) today, not about it’s resale value down the line. Just a reality that isn’t going to disappear just because of domainer despisement.

That is a valid point that many who just love the noise and seek confirmation bias like to espouse. The new gtlds may never be successful investments for domainers, (not their stated purpose), they will be around, and they might best impinge on the other extensions like .me and .tv.

Arca posted that they might also affect the kind of .coms we see sell for $2,500 and below.

“Ultrapremium” .com domains won’t be affected by the new Gs, because there just isn’t any equivalent for that quality level in the ngtlds.

The only kinds of names that can be affected by the ngtlds are average quality .com domains (the kind of names that sell for sub $5000, more often sub $2500 range). Some end-users opt to buy a name in one of the new extensions instead of paying up a grand or two for an okay .com name.

After running a site on a new g for a while, they come to realize that they are guinea pigs in an unwise experiment, and gradually start learning of the massive drawbacks of running a business on a new g (NOBODY recognizes that your keyword.keyword is a domain, marketing a .unknown is highly ineffective, a .whatever at the end of a domain generates distrust, sending and receiving emails is a huge challenge, new g registrars may jack up your renewal costs etc.).

New gtlds are only part of the story for the path of domaining. It was back in May that Rick Schwartz recommended 90% of domain investors start over again.

For many years the domain industry has been a low barrier to entry market with minimal start-up costs. You could register a few domains, park them, maybe make a few quick flips turning $7 into $100 or more. Parking may have provided you with a few dollars a month. Domain forums were buzzing with posts and threads and appraisals. The domainer to domainer market was vibrant.

The domain business was seen by some naive newcomers as easy money, it’s that easy money that attracted them to domaining and they were looking for their pot of gold. All one had to do was read the DN Journal weekly sales charts and go, “That sold for what ? I have better names than that, I am going to be rich.” Many did not get rich, they just were collecting names like baseball cards, only difference is you pay for a baseball card once, you don’t have to renew each year.

Today there are still domain forums and domain flipping in the domainer to domainer market, but the activity on domain forums is down and the domainer to domainer market is not quite as vibrant.

The game is changing with some of the most attractive qualities that brought in new domainers changing.

1) Its not a minimal start up game anymore

Many have complained that the price of average .coms are going too high in auctions at NameJet, DropCatch and GoDaddy.

2) Parking money down

Parking revenue, once a primary driver of business in the domainer to domainer market has dried up. This has greatly affected domaining to a point where the market is unrecognizable to those doing business in the 2004 – 2007 era.

3) UDRP

Its becoming more and more of  a risky industry for domainers. Domains one would never think were at risk have seen some odd decisions in a UDRP. Companies are looking to take a chance at a UDRP if they don’t like the price the rightful owner is asking. Of course if someone is squatting a trademark the owner should have the right to get that domain, but there are cases everyday where decisions are being made on domains that don’t fit that category. The small to mid-sized domainer does not have the resources to deal with this like a big domainer does.

Domaining is still an interesting business with opportunity that can be enjoyable and profitable. The domainer of the future must realize the game has changed, it never was the easy money newcomers thought it was and now that notion should be completely put to bed. It is going to require more capital, more research and being active in selling your domains and standing out in a crowd of 400 million domains.