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What Will Happen to Domains During the Next Economic Crisis?

Posted on 25 May 2014 by Andrei

The 2007-2008 economic crisis has proven that domains are by no means an oasis of stability during times of turbulence. Not at all. Domains are risk assets (as I explained back in 2012) and therefore go down in value during economic downturns.

So, should you buy now or wait for the next economic crisis to bring down prices?

Well, that depends on *when* the next economic crisis will occur.

Sure, domain prices will fall but the question is, compared to what?

To give you an example: yes, domain prices have fallen after the previous financial crisis compared to 2006-2007 but even after the fall, they were significantly higher than in let’s say 2002-2003.

Therefore, those who said something along the lines of “I’ll just wait for the next correction” in 2002 or 2003 ended up realizing that it was a bad decision.

The same principle is valid at this point.

If the next economic crisis will start next year, then those who decided to refrain from buying this year will have made the right choice because yes, domain prices would almost certainly be lower compared to the 2014 level.

But what if the next financial crisis will take place 4-5 years from now?

In that case, it’s quite unlikely that after the correction, the prices will be lower than the 2014 ones and I’m sure you understand the point I’m trying to get across: yes, prices will fall after the next economic crisis but it all depends on *when* it will occur.

If you have valid reasons to believe it will occur relatively soon, refraining from making new purchases would make sense.

if you have valid reasons to believe it will occur after several years, buying now would make sense.

There are no guarantees whatsoever and through today’s post, I simply wanted to point out that waiting for the next financial crisis-induced correction is not always the best approach.

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3 Comments For This Post

  1. Mike Says:

    If you were able to see future, you would not be a domainer, but CIA asset :)

  2. BT Says:

    Domain names did pretty well vs the S&P and DOW last time down. At the depth of the great recession when markets were freaking out, good names still had high values and sales were strong. The most noticeable thing during the last crisis was that crappy names were suddenly worthless. The wheat was separated from the chaff in the most deliberate way. I’d bet on the same outcome this time around.

  3. Andrei Says:

    @BT: on the other hand though, the stock market is currently at record high levels, while the recovery when it comes to domains hasn’t been as spectacular. Now of course, it’s impossible to generalize but at least when it comes to most (not all) reseller market sectors, domains have underperformed.

 
 
         
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