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Great Term + Unproven Extension or Considerably Weaker Term + Dot Com?

Posted on 17 June 2014 by Andrei

Leonard Britt has posted several interesting comments on DomainingTips about the fact that even dot coms are hard to sell to end users and this observation leads us to an important question: what does this mean as far as new gTLDs are concerned?

In my opinion, limiting ourselves to analyzing what’s at the right of the dot (the TLD) would be a mistake because sure, it’s highly unlikely that any other extension will come close to dot com but does this mean all dot coms are valuable?

Or as another interpretation of that question, does it mean that all it takes for a domain to be investment grade is having dot com at the end of it?

In my opinion, the answer is negative in both cases.

Yes, the fact that dot com is the #1 extension by far is a significant advantage but this doesn’t mean we shouldn’t pay a lot of attention to the term on the left of the dot.

As mentioned in my response yesterday:

“I agree that the end user potential shouldn’t be overestimated but the same principle is valid when it comes to dot com domains caught after they were dropped in my opinion. Sure, they’re dot coms and that’s an advantage but a lot of those domains are pretty much worthless because the term on the left of the dot is extremely weak.

Therefore, we’re dealing with an interesting dilemma: very strong term on the left of the dot + unproven extension or considerably weaker term on the left of the dot + dot com.

Now of course, getting strong and very strong terms on the left of the dot + dot com would be the best case scenario but in a lot of situations, the acquisition price would be so high that the upside potential would end up being (severely) limited.”

Today, I’d like to expand a bit.

There are 113,445,148 dot coms registered at the moment of writing according to RegistrarStats.com.

Are all of them investment grade?

Definitely not!

Are most of them investment grade?

Definitely not!

Are 10% of them investment grade?

Nope.

5% perhaps?

No, I don’t think 5.6 million genuinely investment grade dot coms exist.

Then how many?

I don’t know, all I know is that we have more than enough reasons to consider the following conclusion accurate:

Most dot coms are not investment grade.

Now of course, the dot com TLD has exponentially more investment grade domains than any other extension but this doesn’t change the fact that most domains just aren’t investment grade.

This leads me to the following dilemma: what should you do as a domainer?

Right now, at the reg fee – backorder fee range (as in low two figs to mid/high two figs), you basically have two options:

1) Hand register or preorder a new gTLD

2) Hand register a dropped dot com or backorder it

Those two options bring us right back to the question which constitutes the title of this post:

1) Great term (as in one word commercial keywords) + unproven TLD

2) Considerably weaker term + dot com

That’s basically the dilemma you’re facing at the reg fee to backorder fee price level.

Now sure, it would be great to buy a great term in dot com but such domains are often so expensive that as mentioned in my reply to Leonard’s comment, it’s hard to see the upside in a lot of cases.

With new gTLDs, the extension is indeed unproven but you have the chance to register very strong terms. Again, one word commercial words for example. With dot com, the extension is definitely extremely popular but on the other hand, you’d have to settle for considerably weaker terms on the left of the dot.

What will it be?

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9 Comments For This Post

  1. Scott Alliy Says:

    Three reasons to buy either .com or other GTLD extension
    Investment
    Development
    Protection

    Protection is buying names relating to your core domain. Development requires marketing no matter the extension. Investment therefore is the big question no matter for parking or end user sale.

    Regarding parking it remains to be seen if google ranks non dotcom GTLDS so this is a question each investor will need to speculate about.

    As for my company we are pleased with several strong one word and two word GTLDs in support of our core business and for resale. Of course we don’t expect .com ROI but if 5 figures that would be a 372x ROI. Not too shabby.

  2. William Says:

    Two domain buyers. One buys WisconsinBestPlumber.com for 5k. The other buys Plumber.xyz for 5k. Who has the better domain? Which domain is more likely to appreciate or depreciate over the next 5 years? Which name can you build a big business with? Which domain are you proud to tell people you own?

    The answer is obvious unless you own a lot of 3 and 4 word .coms and don’t want to face the fact that your investment is on very shaky ground.

  3. Leonard Britt Says:

    I do agree that just because a domain is .COM doesn’t mean you can backorder just anything and then slap a $5k sales price on it thinking it will sell for $5k in the next week. However, those relatively new to the industry often are misled by reading the reported sales into thinking that end users gladly open their wallets for what an investor might perceive to be a quality domain. The reality is many end users are perfectly happy with their reg fee domain and even if they respond to an outbound marketing inquiry, “How much?” that doesn’t mean they want to spend four or five figures for your domain – even if it is .COM. Most of my sales are under $1000. True I did not start fifteen years ago so I don’t have high type-in traffic domains or one-word .COMs but I am not a newbie either so I have more experience in identifying what is a decent keyword domain vs. junk. Recently I had a broker promoting an English one-word fitness .net domain of mine and I recall one response which basically amounted to they would offer maybe $100 for it. The trainers at my gym charge $65/hour for personal training and I see ads for this sort of service on TV but the broker’s effort did not result in a sale.

    .Net has been around for what some fifteen years or more and small businesses do use it quite often – but probably because they can are picking up those domains for reg fee. But good luck seling a .Net for more than $XXX. I have held hundreds of .Net domains and can only recall one $XXXX .Net sale.

    I do find some of the geo and real estate TLDs interesting and might reg a few at some point. But it is difficult to justify doing so when portfolio turnover is low and sales prices don’t seem to justify paying what appear to be end user prices (when you consider the likelihood of having to renew them five years minimum before an aftermarket MIGHT develop) for some of the premium keyword domains in these new TLDs.

    The other issue for newbies regging new TLDs is that they have not yet learned what a quality commerce-related keyword is. So while there may be more keyword availability in the new TLDs than in .COM, they are still regging &*^%$@! domains in new TLDs that would still not be worth much even if they were .COM.

    My view is be cautious with new TLD regs and limit the portion of your portfolio in these. Even pros such as Michael Berken still are keeping their new TLD portfolios as a small percentage of their total holdings because they realize that those investments are going to be illiquid for quite some time.

  4. William Says:

    @Leonard – I just cruised by your site and it looks like you have a nice portfolio. You have a lot of Spanish domains and I was wondering if you mind sharing what the Latin American market is like right now. I just bought some Portuguese names but I haven’t tried to move them yet.

  5. Pete Says:

    I just don’t get why anyone would want a gtld. I wouldn’t… even for free.

    They lose traffic, they bleed email, they are not recognized and cause extreme confusion, they can not be advertised on the radio, they look funny in.print, they sound funny, most are ass.backwards, there will be both singular and plural, the good ones are labeled as premiums, most will accidentally refer to them as .com, and, among other ingredients of failure, they usually cost more than a .com.

    Why would anyone attempt to build a site on a gtld without owning the matching .com first? And, if they did own the .com, why would they want a gtld at all? Just makes no sense to me.

    I have concluded that the gtld program is designed and intended for suckers.

  6. Snoopy Says:

    You can’t ignore either the term or the extension.

    I’d say new tld’s are almost impossible to make money from for domain speculators. You got a bad tad to deal with on every name so you’ll never get the magic combination of good keyword/good extension. I’ve never met a wealthily new tld speculator. I’ve never even met one making a living.

    .com is very very hard to make money from, you need to know something that 95% of other speculators do not know. So the bulk are always going to lose.

    So I’d always bet on .com, at least there is a chance.

  7. Eric Borgos Says:

    William – 95% of the domains I own are .com, and the rest are .net, and I agree Plumber.xyz for 5k would be the better domain, but on the other hand many times you can hand register a good enough .com instead. I don’t like WisconsinBestPlumber.com for 5k or Plumber.xyz for 5k, so I would, if I were you (William), hand register something like
    WilliamPlumbing.com or PlumberBill.com, both of which are still available right now.

  8. Domains Gains Says:

    Hard not to agree with what Leonard has said.
    I see gtlds as vanity domains.
    Apart from .com some top geo domains (.cn and .in come to mind) have great potential…

  9. William Says:

    @Eric – If someone hopes to have a little one man business with a little website, plumberbill.com might work. But that is not an appropriate domain for a plumbing company who hopes to one day be the largest company in the state. Not to mention if the company is using ppc, the domain will be more expensive to advertise than an exact match alternative. The subdomain possibilities alone make the domain valuable from a ppc perspective.

    Plumbers.com is parked because someone probably wants a million dollars for it. Even plumber.co which would be stupid beyond belief for an actual company to own because of the proven confusion with .com sold for 5k.

    It is very hard to persuade someone when the effect of that persuasion will mean recognizing a personal loss. Perhaps your 95% .com portfolio is coloring your judgement and my investment in the new g’s is coloring mine. Time will sort us out in the end.

 
 
         
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