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Domaining Is *Not* a Zero Sum Game

Posted on 01 April 2014 by Andrei

Some of you probably already know what a zero sum game is but in case you don’t, the principle is simple to understand. Let’s assume two people engage in a business transaction. A “zero sum game” situation occurs if in that transaction, for every unit (in our case money) gained by one person, the other person loses.

In other words, there’s no “win-win” situation when it comes to that business transaction. For example, let’s assume three people live on a remote island: Person A, Person B and Person C. Let’s also assume that Person C owns an item Person A as well as Person B want and that Person C decides to organize a swimming competition in order to determine who he will give that item to.

There you have it, a zero sum game.

One person wins, one person loses.

No win-win situations, just one winner and one loser.

In real economies, things are fortunately not that black and white. To give you a similar example, let’s imagine a monthly swimming competition that attracts sponsors. In this case, were’ no longer dealing with a remove island that only has three inhabitants but rather with a large-ish community, a city or even a country. Thanks to the revenue generated via sponsorships, all of the participants will be able to receive money and all of them might earn at least a decent amount. This month, maybe Competitor A will win. Next month, maybe it will be Competitor B. The following month, perhaps Competitor C and so on.

Everyone makes money.

Everyone continuously strives to be better.

The result is that the competition is interesting to watch.

Therefore, more and more people might end up deciding to watch as well. In effect, more companies will be interested in being sponsors and the result is obvious: the competitors will be rewarded more handsomely. In such a situation, the incentive to become better is even greater, the competition will become even more interesting and so on… you get the point :)

What I’m trying to say that in our second example, pretty much everyone wins.

The people who are watching are enjoying themselves.

Sponsors are placing their ads in front of a more and more numerous audience.

Competitors are making more and more money.

Again, I’m sure you get the point.

Well, what about domaining?

If Domainer A purchases a domain from Domainer B, will that transaction *have* to result in someone “winning” and someone “losing”?

Of course not!

Domainer B might use the money Domainer A gave him to invest in a project that generates more revenue than what he would have made by keeping his domain.

Domainer A might earn a very nice return by ultimately selling the domain he bought to an end user or even to another domainer.

In fact, there are lots and lots of examples throughout the history of our industry. For example, let’s assume you bought a LLL.com back in 2003 from another domainer and overpaid quite a bit, let’s say you paid 2x the reseller market value at that point.

At first, we might be tempted to believe that you were the “loser” in that transaction but what if you held on to your domain for a few years? In that case, you’d still end up making an impressive return despite the fact that you overpaid back in 2003.

Now of course, that doesn’t mean everyone *always* wins.

You could have bought a worthless domain in 2003 for example so again, I’m not saying everyone always wins in the domaining industry. What I’m trying to explain is that there doesn’t *have* to be a winner and a loser for every reseller market transaction.

A lot of times, literally everyone involved wins. The domainer who hand registered the domain initially, the person who bought that domain from him, all of the other domainers who bought/sold it and ultimately the end user who managed to turn it into a profitable business.

Does this always happen?

Nope!

But the arguments I’ve presented throughout this post hopefully make it clear that in the domaining industry, there doesn’t always *have* to be a winner and a loser. Therefore, in my opinion at least, calling domaining a zero sum game is a huge mistake.

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1 Comments For This Post

  1. Domenclature.com Says:

    Nice post!

 
 
         
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