Giuseppe Graziano had an interesting observation in his excellent LLLL.com guide which he recently published, saying in part “you might have noticed how Chinese investors are bidding amounts that end users are rarely willing to match”.
He cited two specific cases,
For example, just a couple of months ago, I found myself explaining to the head of marketing for a large corporation that we had received a $27,000 bid from an investor in China for a three letter .com and therefore their $5,000 bid could not be considered. His reply was: “The seller is crazy not to take it“. Fast forward to another recent exchange with the General Counsel of a large software multinational with offices worldwide: “I spoke with my CEO and we can offer a maximum $50,000 for this domain”, talking about a NL domain that routinely received bids around the $100,000 range from Chinese buyers.
With that backdrop, I’m curious to hear your thoughts on the future values for the types of domains where investors are currently paying prices in excess of what an end user will pay. A couple possibilities come to mind:
- The right end users will eventually adjust their pricing higher to match or exceed investor pricing.
- There is a bubble in certain types of domains, and investor pricing will have to come back down to end user pricing.
- Investors will endlessly trade these types of domains back and forth with one another, with few of these domains ever being developed by end users.
- Something else?
In a market such as domain names where every asset is unique, the answer likely varies from one domain to another.
Your thoughts?
I agree with point #3. Whilst the Chinese investors have $$$ to burn, they will remain dictating prices for short domains and are quite happy to continue trading among themselves IMO.
Matt, I agree with you in the short term. However, longer term, I believe there needs to be real end user demand to support pricing.
For some categories of domains there has never really been “enduser demand”. Low quality LLL.com and most NNN.com are good examples where enduser sales are very rare. I wouldn’t expect enduser prices to adjust or domainer prices to adjust to endusers because that just isn’t how it works for those names.
In a sense the “endusers” are investors/domainers. It is comparable to collecting coins or art work. They aren’t really business assets but they are desirable and rare trading chips.
Despite their recent run in pricing, 5N and 6N domains don’t have a lot of rarity going for them, but I can understand your point of view when applied to LLL.com and NNN.com.
One possible reason for the dramatic and sudden interest in Domains by the Chinese Market that has not been raised and/or discussed in the domain industry is ‘Money Laundering’.
The Chinese cannot convert their money into foreign currencies without a permit and cannot transfer money abroad. China leads the world in ‘illicit capital flows’ or in simple terms ‘money laundering’.
Domain names may simply be another creative vehicle the money laundering masterminds have identified.
Speculators trade gold for decades and the volume of end-user buyers is not even 1%.
A probability of bubble is extremely low for low volume category. You need a huge volume to trigger a selloff. Therefore LL.com and NN.com are very safe, LLL.com and NNN.com are safe enough, LLLL.com and NNNN.com are getting risky, 5+L and 5+N names are risky.