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Higher Upside Potential vs. Lower Liquidity

Posted on 27 January 2014 by Andrei

In my opinion, this is what it will ultimately all boil down to when it comes to new gTLDs: making informed decisions after analyzing the pros as well as the cons.

Today, I want to put the “upside potential vs. liquidity” argument under the microscope.

Compared to investment grade dot coms (please remember that not all dot coms are investment grade), the upside potential will be higher but at the same time, the reseller market liquidity will be considerably lower or even non-existent in some cases.

I’m sure that for the right terms in the right extension, the end user demand will be there.

When it comes to the reseller market demand though, things will unfortunately be different, especially at the beginning. Will there be exceptions? I don’t know, time will tell. The only thing that’s certain is that not even the best new gTLDs will come close to the dot com extension in terms of reseller market liquidity.

In my opinion, there will definitely be opportunities if you have the right attitude but you have to understand exactly what the particularities of each extension will be.

In some cases, only a handful of terms will make sense from a domaining perspective.

In other cases, there will be more investment grade domains.

There will most likely be success stories, just like there will be less than optimistic stories.

The bottom line is that you as a domainer have to understand how things will work in the industry once the new gTLDs go live. The more upside you want, the higher the risk factor will be and when it comes to reseller market liquidity indicator, dot com has an advantage.

On the other hand, let’s assume you purchase a LLL dot com.

It’s a great investment grade domain but realistically speaking, the chances of making 50-100x your investment are very low. When it comes to new gTLDs though, given the lower acquisition cost, I’m convinced we’ll even see returns such as 1,000x. In other words, I’m convinced we’ll see people buy certain domains at let’s say 2 figures from the registry and sell them for let’s say 5 figs.

If you want to take advantage of the higher upside potential however, you also have to accept the fact that while selling a LLL dot com on the reseller market whenever you need liquidity is a piece of cake, the same thing won’t be valid for new gTLDs.

As long as you know the rules, you’ll be in a good position to do well.

But the burden will be on you.

If you want great results, you and you alone are responsible for figuring out how to do it. Not me as a blogger or anyone else for that matter. I’ll do my best to share tips (pun intended) and opinions but 100% of the responsibility lies on your shoulders.

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4 Comments For This Post

  1. Leonard Britt Says:

    I believe there are select keywords in some of these new TLDs which make sense and which an end user will be willing to pay for. It appears however that many of those logical combinations are either going to be reserved, auctioned off, or sold at premium rather reg fee prices to maximize the return to the registrar. Renewals in many cases will be much higher than those for .COM or .Net. So that significantly reduces the investment appeal. Keep in mind that when end users decide to acquire an alt TLD today one motive is price so there will always be a limit on the sales price potential for these new TLDs.

  2. gene Says:

    What seems to be missing in the analysis of how the secondary/resale market will respond is this:

    Think about the current sales process now, particularly the tried-and-true pitch to end users: How well do you think it’s going to be received when you make the following pitch:

    “Hi, I have [noun/adjective dot-whatever] for sale, and I think that it will be very helpful to your existing business that currently operates on [compound phrase dot-com]. As you can see, _____ is much more intuitive for your users and will result in much higher search rankings.”

    How many recipients of this type of message will be utterly confused — and not just for the first year, but for years and years to come? I would expect to hear responses such as “you mean dot-com, right? No…well then I don’t understand what you’re even trying to sell me.”

    Sure, a lot of domainers will point out that they don’t sell their names this way; instead, they use one or more of the sales platforms. But for the rest of us, it just seems like a losing game to even play — so I never will, because I see NO UPSIDE.

  3. Andrei Says:

    @gene: I strongly disagree because for example even Rick Schwartz who is a very successful dot com investor did very well with the dot me extension. Why? Because he realized that call to action domains such as meet dot me make sense for this specific extension.

    The most important thing, in my opinion, is analyzing each extension on a case by case basis in order to figure out which domains are worth investing in and which aren’t.

    For dot me or dot us, we have call to action domains such as meet.me or meet.us. For niche extensions, we have domains related to the niche in question.

    I think there will definitely be end user demand for great new gTLDs. Will someone who owns YourQualityInsuranceGuide.com (random example) be interested in upgrading to let’s say QualityInsuranceGuide.web?

    I doubt it.

    But at the right price, I’m sure he would be interested in upgrading to Insurance.web.

    Again, each extension has to be analyzed on a case by case basis.

    Some extensions will have more investment grade domains than others, it’s hard to generalize but with so many options coming to the market, there’s definitely upside potential for those who buy the right terms in the right extensions at the right price.

  4. Andrei Says:

    @Leonard Britt: as mentioned in my reply to gene’s comment, it’s all a matter of buying the right domains in the right extensions at the right price. I agree that when it comes to end users, the lower price argument is one of the most important ones and domainers definitely have to pay special attention to the “acquisition costs” variable of their business model.

 
 
         
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