This post won’t exactly help me make new friends in the new gTLD world, nor will it enable me to attract new advertisers. In fact, it will probably upset several people I consider friends and who are involved with new gTLDs in one way or another. As sorry as I am, it has to be written because this is why I blog in the first place: to share my 2 cents with readers, to share my perception of reality with them.
DomainingTips turned 7 back in February. Seven years, it’s ridiculous how time flies.
As one of the oldest and most respected domaining blogs out there, I owe it to you guys to post my honest opinion about new gTLDs. Some readers have been asking me to do this right from the very beginning. I refused. Why? Simply because it was too early to draw conclusions. There wasn’t enough data, debates were way too heated and not rational enough, not a good climate to draw conclusions.
Here we are, one year later.
At this point, I can safely say I have a conclusion. I’ve tried investing in new gTLDs myself, I’ve kept in touch with other domainers, I’ve analyzed publicly available data as well. This puts me in a reasonably good position to write this post. So let’s get started.
My Personal Experience
Some of you have followed the case study I published last year. I invested in several new gTLDs and all in all, pretty much broke even or ok, maybe I’m a wee bit profitable. But nothing noteworthy by any means. I’ve been investing in domains for several years. I am a very calculated buyer. I have various venues (including this blog) at my disposal whenever I want to sell… in other words, I’m better-positioned than most domainers to do well.
I gave it my best and after drawing the line, can safely conclude it wasn’t worth it. After factoring in the time I invested as well, what can I say except “thanks but I’ll pass” and this brings us to my first argument (1): if someone like me barely managed to make a few pennies, the average domainer is anything but well-positioned.
Am I saying it’s impossible to do well? Certainly not, I’m sure some investors have done ok. However, the odds are stacked against you and in my opinion, if you’re talented enough to do well with new gTLDs, you’d make exponentially more by investing your time/energy elsewhere.
Further Anecdotal Evidence
I keep in touch with a lot of domainers and quite frankly, I’ve yet to come across someone who told me he did very well with new gTLDs. And by very well, I mean being more than just reasonably profitable after drawing the line, not merely having a solid sale or two under your belt. There are several decent documented new gTLD sales but this doesn’t mean the domainers in question actually have a good business model. Until you know what their expenses are (how many domains they own, how much was spent on acquisitions, how much will be spent on renewals and so on), you cannot draw any conclusions.
Over a year has passed and at this point, we don’t really have much to show for it in terms of documented sales. According to nTLDStats.com, there are almost 6,000,000 new gTLDS at the moment of writing, spread across over 600 TLDs. Yet if you head on over to DNJournal.com and analyze a few weekly sales charts, you’ll notice the documented sales are only a drop in the bucket, percentage-wise.
Yes, yes, I know: not all sales are disclosed, NDA, etc.
The exact same thing was said about Dot Mobi domains for example and it’s a very weak argument. Dot Com sales can just as easily be subjected to NDAs, so my second argument (2) would be this: if a year down the line, there are so few documented sales, it can be considered a clear warning signal.
Yep, it’s time to move on from anecdotal evidence to a more fact-based analysis. The most recent data I have is from the official Donuts blog, where they shared the renewal percentage for their first 25 extensions, which ranges from 54.7% for Dot Directory to 71.7% for Dot Technology.
Very poor numbers.
And let’s keep one thing in mind: if you’ve been involved in the industry for at least a few years and have some experience with let’s say Dot Mobi or Dot TV, you’ve undoubtedly noticed how domainers are willing to hang on to poorly performing portfolios for a few years. Therefore, if the year #1 numbers are this poor… draw your own conclusions. This would be my third argument (3).
Another peculiar aspect is this: Donuts posted their Day 10 stats on their blog, the numbers weren’t awful. Then the Day 26 numbers came, they weren’t good. After that, they stopped sharing stats on their blog. Once again, draw your own conclusions. Consider the lack of recent updates argument number four (4).
For the most part, despite hundreds of extensions being live, most renewal prices far exceed those of Dot Coms, for example. You’d think that with all of this competition, prices would go down but the thing is, registries also know domainers are willing to lose money for a few years. Therefore, don’t expect significant renewal price drops to come just yet. Once again, remember what happened in the past, with premium priced dot TVs for example. Verisign kept prices high for several years until finally (back in March 2010) implementing changes and making formerly premium domains available at the regular registration fee (or at the very least at a lower price than before).
A lot of people talk about long-term strategies and what not. That’s great and everything but if your portfolio isn’t profitable now, expenses can and will add up. If you own 1,000 dot coms, you’ll need $9,000 per year to cover renewal fees. With new gTLDs, you can easily end up paying 2-3 times more. No matter how much potential you think new gTLDs might have, remember this: the market can remain “irrational” longer than you can remain solvent. The renewal price issue represents my fifth argument (5).
The Numbers Are Misleading
Guess what: I own 100 Dot Berlin domains.
Why? Because I got them for free. Will drop all of them this year. Now don’t get me wrong, the Dot Berlin registry can do whatever it pleases. If it wants to give domains for free, so be it. But let me ask you: in light of this marketing strategy, what do you think about their total number of registrations? How many of their ~150,000 registrations are actually domains *bought* by people and how many are freebies?
This is just one example. As mentioned previously, there are currently about 6,000,000 new gTLDs. But the Dot Berlin example tends to put things into perspective and all of a sudden, we can now safely conclude the registration numbers are misleadingly high. This is argument number six (6).
Would You Like a Dot Lawyer? Or Perhaps a Dot Attorney? A Dot Law, Maybe?
This ridiculousness represents argument number seven (7). If there’s a Dot Lawyer, a Dot Lawyers, a Dot Attorney, a Dot Attorneys, a Dot Law, a Dot Legal and so on, this puts you in an awful position as an investor. With so many alternatives out there, it becomes excruciatingly difficult to convince end users to pay a premium for your domains.
People wanted to expand the namespace, fine. Good for them, go for it. But they should have been more smart about it because things would have been confusing anyway. Having so many similar extensions adds yet another layer of confusion… yay!
Opportunity Costs 101
Look at how LLL dot coms have been doing lately, LLLLs as well. Let’s not even talk about NNNs, NNNNs and so on. A lot of domain types have performed extremely well, so my 8th argument (8) is this: there are a lot of more exciting opportunities than new gTLDs out there. By investing in new gTLD domains, you’re not just investing $x, you’re also saying no to the opportunity to make considerably more by investing those $x elsewhere.
Again, opportunity costs 101.
But Aren’t Registries Profitable?
I don’t know, didn’t do any research on this because quite frankly, I don’t care. DomainingTips is a blog for domain investors, not for registry operators. Sure, maybe the registries are making money. Maybe not. I’m not here to “rule” on that. If they’re making money, good for them. If not, c’est la vie. What I care about is this: are domainers in a good position to make money?
My 9th argument (9) is this: the interests of registries and domainers aren’t necessarily aligned. Dot Co is an eloquent example. The registry obviously did amazingly well, yet how many domainers do you know who earn a living buying/selling dot co domains? I rest my case.
Reseller Market Demand = Pretty Much 0
This is my 10th and final argument (10). Trying to sell a new gTLD domain to another investor is an amazing test of patience. And humility. There’s almost no reseller market volume. Waaaaaaaaaaaaaaaay too much supply, severely limited demand. Economics 101.
IMO, Investing in New gTLDs Is Not Worth It
It had to be said. And I said it.
If you’re involved with new gTLDs in one way or another, please don’t take it personally. But for over seven years, DomainingTips.com has been a blog written by a domain investor, for domain investors. After so many years, I owe it to my readers to articulate the truth as I see it, even if it hurts. The writing is on the wall. We have more than enough data at our disposal to be pretty much certain new gTLDs just aren’t worth it. Unlike a lot of other people, I didn’t rush to conclusions. I waited, gathered and processed information before writing this post. Don’t think I took this responsibility lightly. I did what had to be done and basically through this post, said goodbye to thousands of dollars in advertising revenue.