Simply put, a contrarian is a person who doesn’t mind investing in things that most people stay away from. In other words, what the “crowd” says doesn’t influence contrarians all that much or actually, it might somewhat influence them but not like you’d expect: the more people stay away from certain types of assets (or certain types of domains in our case), the more tempted some contrarians tend to become.
So, should you be a contrarian domainer?
For example, let’s assume everyone says a certain new gTLD has no potential whatsoever.
Should you jump in?
Well, there are positives and negatives associated with this approach.
Let’s start with the positives. First and foremost, there will be little if any competition (since everyone else is staying away) and for this reason, you will be able to obtain the best possible terms for the extension in question.
Secondly, even if you are not the only person interested in that extension, there won’t be much of a market for those domains so if you really have confidence in their ability to do well, you will be able to buy inventory from the few sellers who do exists and have to liquidate at very low prices.
Last but not least, since you will be able to buy domanis at either the registration fee or at a very low price, the potential upside is theoretically higher. So if you are right and the extension in question will eventually start doing better, your returns might end up being very high.
Ok, now let’s move on to the negatives.
First of all, low or even no liquidity. This is a good thing if you’re a buyer since you can snag the best domains at very low prices but if you’re a seller, it’s an awful situation to be in.
Secondly, low or even no demand. Are you prepared to hold and hold and hold despite the fact that nobody comes knocking at your door?
Last but not least, the risks are higher because what if the registry operator in question ends up on the verge of bankruptcy before the extension even has a chance to gain traction?
As you can see, it’s a complex situation.
As an answer to the question that constitutes the title of this post, I’d say it depends on whether or not you consider that the potential upside justifies the high risk factor. If you think you’d “only” be able to double your money in a “best case scenario” and think there’s a 10% chance of that happening then there’s no way this approach makes sense.
However, if you think you’d be able to make 10x your investment and consider that there’s a 25% chance of things unfolding that way, the investment opportunity might all of a sudden start seeming tempting.
At the end of the day, there’s nothing wrong with taking on more risk in my opinion but the potential rewards have to be tempting enough to justify that risk because otherwise, being a contrarian just doesn’t make any sense.