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Will “Dot Com End User Pricing” Strategies Work for New gTLDs?

Posted on 03 March 2014 by Andrei

In my opinion, the answer is no.

As far as great investment grade dot coms are concerned at the moment of writing, the strategy is simple: good dot coms are expensive, so your strategy is basically something along the lines of “buy high, sell higher” and it can actually work rather well.

As far as new gTLDs are concerned, this strategy is not appropriate in my opinion.

Why?

Because we’re dealing with a completely different situation.

On the one hand, dot com is obviously a proven extension with lots of end user as well as reseller market demand. On the other hand, new gTLDs are pretty much a mystery at this point.

Therefore, when investing in great dot coms, you’re paying a premium for that, which is why I mentioned that your strategy will most likely be a “buy high, sell higher” one.

As far as new gTLDs are concerned, the risk is considerably higher and therefore, I’d say the appropriate strategy would be something along the lines of “buy low, price aggressively” or in other words, the exact opposite of the previous one.

On the one hand, your acquisition cost should be as low as possible and on the other hand, your price expectations should be lower as well because again, we’re dealing with a completely different situation.

To make an analogy that pertains to the “offline” investment world, dot com is the safe haven investment and new gTLDs are risk assets. For example, if you want to invest in stocks and choose a company with solid dividends and a proven track record, it’s going to cost you. That stock will most likely be anything but cheap. Why? Because there’s a premium that has to be paid if you want the peace of mind that comes with investing in safe haven assets. So you’re basically buying high and selling higher.

When it comes to risk assets (for example unproven companies that you think have potential), the exact opposite is true. In most cases, the company in question doesn’t have a track record that comes close to that of the previous company. Therefore, the risk is considerably higher and the acquisition price has to be low enough to compensate for the higher risk factor.

It’s like that with domains as well.

Within the domaining industry, great investment grade dot coms are safe haven assets (I’m referring to the “best of the best” in terms of dot coms because there are lots and lots of risk asset domains in the dot com world as well) which aren’t cheap by any means, while new gTLDs are risk assets that might have more upside potential but which have to be purchased at a very attractive price to compensate for the higher risk factor.

Again, that’s how things stand *within* the domain industry.

Domains themselves are actually risk assets compared to other offline assets but that’s a topic for another article :)

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