Categorized | Domaining Tips

Two (Almost) Parallel Worlds

Posted on 31 October 2016 by Andrei

The industry has changed and if you’re expecting the “good old days” back, you will in my opinion be disappointed.

In my opinion, you as a domain investor have to understand that there are two almost parallel worlds in our industry right now:

1) Traditional Domaining

… or, if you will, the “buy domains with end user potential” model which revolves around end user appeal.

In other words, the ultimate goal is selling to… you’ve guessed it, end users.

Now, of course, an entire ecosystem has been built around this system and the ecosystem includes a reseller market. In other words sure, you can sell to other domainers if you need quick cash or sure, there are people who focus exclusively on the reseller market but this doesn’t change the fact that the end user is at the center of all this.

Investing in domains based on end user appeal. If I were to sum up “old school domaining” in just a sentence, that would be it.

2) Chinese Domaining

… for lack of a better term.

Some people thought that what happened back in 2015, with the huge short domain surge, was just an anomaly. A phase, if you will. Something that’s going to quickly go away.

But in my opinion, they were wrong.

Chinese domaining (and I’m calling it this because its origins revolve around the influx of Chinese capital that shook the industry) is here to stay in my opinion, with all of its particularities:

1) pump and dump momentum-based investing in categories with pretty much zero end user demand such as 5L dot coms

2) ultra-focused on liquidity

3) closer to commodity trading than traditional domaining (which revolved around the uniqueness of each asset), with clearly-defined categories (pattern Chinese premium 5L.com without lnpqr, for example, so really *really* specific definitions and less wiggle room than with traditional domaining)

… and so on.

Again: I find it hard to believe that this type of domaining is going anywhere soon.

Am I saying prices will go up? No, I have no idea what will happen.

Maybe they’ll go up, maybe they’ll stagnate, maybe they’ll go down, maybe they’ll trade in a more or less tight range… I don’t know. Nobody has a crystal ball.

But to think that this approach to domaining was just a fad or that it’s going away would be a mistake in my opinion.

Why?

For the simple reason that Chinese capital isn’t going away anytime soon and as such, there is a clear need for domains as an asset class for Chinese investors.

Think about the particularities of Chinese domaining again and ask yourself WHY their approach is so different.

1) Why pump and dump? Perhaps because that’s simply how Chinese investors currently behave when it comes to all asset classed they’re targeting, from cryptocurrencies to real estate

2) Why ultra-focused on liquidity? Because to a lot of Chinese investors, domaining represents a way to diversify, to move money out of the country

3) Why closer to commodity trading? Because due to all sorts of issues such as the language barrier dimension, this type of investing makes more sense to Chinese investors. Therefore, having clearly defined asset categories and subcategories makes investing easier for people who don’t have a let’s say Western view of the Internet in general and domaining in particular

All in all, I think this much is certain: love it or hate it, Chinese domaining is here to stay.

You can embrace this world as well if you think it complements old school domaining.

You can drop old school domaining and focus on Chinese domaining.

You can decide to stay away from Chinese domaining.

… it’s all up to you, just don’t expect this new approach to domaining to go away anytime soon. It most likely won’t.

1 Comments For This Post

  1. Steve Says:

    “The sky is falling, the sky is falling”.
    Yes, the Chinese market for domains hasn’t even started yet. The market ebbs and flows with World markets and overall is performing better than many investments.
    Go long on short names and number combos’ in .com, .cn and .cc. imho.

 
 
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