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Are We in for a Significant Industry-Wide Profit Margin Adjustment?

Posted on 13 May 2014 by Andrei

Will this happen for the very best dot coms? I don’t think so but everything else may very well be fair game. Whether we’re talking about lower quality dot coms, existing TLDs or new TLDS, this much is certain: there will be more and more competition when it comes to “next best thing” domains.

Who will benefit?

The consumer, the end user in our case.

Why?

Because end users will have more and more reasonably good options at their disposal and this has two obvious implications:

1) end users can simply move on to one of the many alternatives if they deem your domain too expensive

2) even if they don’t move on, they can use their newly found leverage to put pressure on domain owners

The result?

We might be in for a significant industry-wide profit margin adjustment when it comes to most domain categories.

Does this mean making money will be impossible?

Of course not!

It means one thing and one thing only: domainers might end up having to settle for lower profit margins.

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10 Comments For This Post

  1. Mike Says:

    You are just wrong. What alternatives? nTLD? Nope!

  2. Domenclature.com Says:

    @Andrei,

    “Who will benefit?
    The consumer, the end user in our case,
    Because end users will have more and more reasonably good options at their disposal and this has two obvious implications”.

    So, to fully get you on the record. I presume, like me, you are for for the Consumer winning and benefiting? Right? Therefore, if you conclude that the New gTLDs will bring this about, it is clear now that you are a supporter of the new gTLD scheme, not sitting on the fence? Am I right?

  3. William Says:

    Interesting post and I see your point. I also think it’s important to remember that new inventory created by the new extensions is being absorbed pretty fast. I bought a one word .club in a great category today that is registered in every other extension imaginable. There are thousands of businesses in the US in this category. Owning the .com would be like printing money. However, the .com .net and .org are all parked because an investor saw the opportunity first and apparently hasn’t been moved by any offers to sell despite other extensions being available. Now, I am sitting on the .club, which is a natural fit for this recurring purchase category. As an investor, I don’t care if someone wants to go register widget.ninja or widget.wtf. This keyword in this extension makes sense, has great potential and I’ll either develop the domain myself or wait until someone comes along who also sees the value.

    All I’m saying is that new money will come into the market and soak up the valuable strings pretty fast. Buyers will have the same choice, pay for quality or settle for something else. The idea that end users will be able to sit in their lazy boy with a cup of coffee, sign up for Godaddy and register a category killer in an extension that makes sense for 10 dollars is not realistic. I’m doing my best to make sure of that! :)

  4. Leonard Britt Says:

    End user looking for several chairs for the breakroom…

    OK blue ones are $50 each
    hey red chairs are $40 each
    but green chairs are $30 each
    wow orange chairs are $5000 each – are they nuts?
    let’s buy these brown chairs at $15 each – sold

    But if next week someone offers some nicer chairs for $2500 each, what are they going to say? We already have chairs and don’t need any more. Even if the ones we had broke we wouldn’t pay $2500 for a silly chair.

  5. Elena Says:

    @William

    ” I bought a one word .club in a great category today that is registered in every other extension imaginable. ”

    The question here would be:
    Is your “one word” registered in every extension or is your “one word combined with the keyword club” registered in every extension?

    Too many domain investors register (not saying you did) for example a domain like keyword.club and think it’s good because keyword.com, keyword.net, keyword.org, etc.. is registered.
    But in fact to see if their domain is valuable they should check if their domain is available in keywordclub.com, keywordclub.net, keywordclub.org instead. That would determine if it’s actually valuable.

    Keyword.club will never be worth as much as keyword.com, keyword.net, keyword.org, etc… but it may equal keywordclub.com in value (or even surpass in the future).

  6. Andrei Says:

    @Mike: in my opinion, new gTLDs could end up representing decent alternatives on some cases. For example, I’d rather use Insurance.web than QualityInsuranceInformation.com but of course, Insurance.com will always be the #1 choice by far and I’m sure not even registry owners disagree

    @Domenclature.com: I’m not a new gTLD supporter and I’m not a new gTLD hater either. Just a blogger who tries to point out the pros as well as cons to help readers make informed decisions

    @Leonard Britt: I agree that for new gTLDs to be attractive, the price has to be attractive and that’s why I think we might be in for significant industry-wide profit margin adjustments

  7. Domenclature.com Says:

    @Andrei,

    You are NOT for something that will give Consumers “more reasonable options”?

    After Your article, you are now pigeon-holed by your article; you must now choose between being anti-Consumer or a new gTLD supporter. You are one of the two. You have to choose one. Or recant the article.

  8. Andrei Says:

    @Domenclature.com: this isn’t the first time I mentioned that new gTLDs will be reasonably good options for end users in some cases. But that doesn’t make me a new gTLD supporter because in other cases, new gTLDs can also represent a bad thing for consumers due to the confusion generated by extremely similar strings (for example domain.accountant vs. domain.accountants or even situations where one niche/industry has lots of similar strings, this sort of thing shouldn’t have been allowed to happen in my opinion and I wrote a post about this issue a while ago).

    If I say something positive about new gTLDs, that doesn’t automatically mean I’m a supporter and the same way, I’m not automatically a hater just because I say something negative about them. On DomainingTips, I try to cover all angles so as to help you guys make informed decisions.

  9. Domenclature.com Says:

    You can’t give tips or directions on how to get to New York unless you know where it is. You can’t say “I don’t have enough info about New York, but here’s how to get there”.

    Before you could legitimately provide tips about new GTLDs, you would have to declare your support, foundation, bearing, point d’appui, locus standi, or as the case may be, disapproval, opposition…something.

    I honestly thought you did that with this article.

    Sure, you’ve written pro and con posts in the past regarding this issue. But this time, you summed up. You declared that ““Who will benefit?
    The consumer, the end user in our case,
    Because end users will have more and more reasonably good options at their disposal…”

    This conclusion of yours can only come about, after weighing the pros and cons.

    I have been trying to get you to own your position now for over 3 months. Like I said, it’s irritating when Democrats say “I’m a Republican, but I’m voting for Obama” on blogs, during US Presidential Elections. I think you’re doing the same thing with new gTLDs.

  10. William Says:

    @Elena

    I disagree although I will admit that you could be right and it will be a few years before anyone knows for certain how .club will be received by end users.

    In my view, end users do not look to the extension to understand the meaning but rather to complement the meaning. It’s about a 90%-10% proposition. Taxes.com would tell you that this is a site about “taxes” but with a commercial intent. Taxes.org would say the site is about taxes but might have a non-profit or advice aspect to it. Taxes.gov would say the site is about taxes and is an official government site. Taxes.club would say the site is about taxes but in context of some kind of forum, community or group benefit. At the end of the day, you expect every site to be about taxes.

    Imagine trying to value a .net by adding “net” to the end of a .com. It would drop the value to 0 in almost every case. We know the market doesn’t value them that way. I don’t think the market will value .club that way either.

 
 
         
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