Thursday, October 13, 2011

Domain Name Investments: Why .COM is not KING

.COM is not King after all. Read this article republished from Australia's domain marketplace website netfleet : Why .com is not King :


There’s a common misconception among domainers that the best investment in domains is .com. This is patently not true – in fact .com domains have been a terrible investment over the last few years and prospects continue to look dire. The myth that investing in. com domains is the best choice and that anything else is a compromise has been fueled by the following misconceptions:

1)      .com domains command the highest prices so therefore are where the money is.
Whilst this is true, and will no doubt continue to be so, from an investment point of view this isn’t relevant.  Successful investors look for growth opportunities, not solely for high values – no one would claim that investing in platinum over the last few years just has to be better than investing in oil because pound for pound it’s so much more expensive – the same is true of segments of the domain market.

2)      All the really successful domainers seem to have made their millions in .com domains so that’s what I want to do
Again true, the guys in the industry who have really made it big, tend to have done so through .com investment.  But the key thing is most of them started over 10 years ago.  .com domain values did appreciate hugely between 2000 and 2007 and many people made a lot of money.  However that ship has sailed.  .com values have plateaued or even fallen since then whilst other name spaces have taken over the growth reigns.

3)      .com domains have a 6 billion person audience whilst ccTLDs are limited
The size of a market does not necessarily impact values or growth.  Whilst a bigger market will normally mean more liquidity, values in domains are driven by supply and demand.  If that balance of supply and demand doesn’t change, nor can you expect domain value too.  This is the same argument for saying one should invest in rice simply because it has a larger market than gold for example.

4)      Most domainers invest in .com – surely this says something about the namespace
Unfortunately just because everybody else is doing it, doesn’t mean it’s the best idea.  On the contrary, your competition is that much harder as to make a profit trading you basically have to beat the experts at their own game if you want to sell back into the domainer market.  Unfortunately the ‘com is king’ sheep mentality is kept alive by the many people who are heavily invested in the area and need to talk it up at all costs.

5)      .com domains rank the best in search engine results pages
Actually the opposite is true… in most countries a Google search will be dominated by results using domains in their respective ccTLD – .com domains often don’t get a look in.  Google’s goal is to return relevant results so it makes sense for them to return a .fr result for searchers in France, a co.uk result for the UK etc etc.  The exception (and also why this myth is perpetuated) is in the U.S where for various reasons the local ccTLD (.us) has not taken off – therefore .com is considered the default ccTLD and does indeed dominate results.
The facts are that .com values have fallen since about 2007-2008.  DnJournal, Sedo all concur.  We’ve had LLLL.com buyouts leading to a bubble which has since burst.  Clearance rates have bombed at auctions.  The vast majority of domainers who have started in domaining in the last few years by investing in .com domains have disappeared.

The main problem being there are less and less end users buying .com domains and new domainer entrants cannot prop up the .com market indefinitely.  If you think about it, the vast majority of businesses, looking for a website will be locally based.  They trade exclusively within their own country and have no interest in expanding on a global scale (I’m talking about the backbone of our economies here – the builders, carpet cleaners, cafes etc).  What happens when they decide it’s time to get a website together – if (and they may well not) they consider .com they will struggle to find anything remotely acceptable to hand register and a quick look on the aftermarket will be met with sky-high prices.  But if they look at their local ccTLD there will be many times the amount of available domains to register and purchasing a premium domain is a fraction of the cost of the equivalent .com.  So it’s an obvious choice.  As more and more of these end-users (which outnumber domainers 10,000 to 1) put their money into ccTLDs, .com will struggle to keep momentum even with the steady general growth of the internet.

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