As mentioned yesterday, I liked the Dot Investments extension but at 80+ bucks a pop, I decided to pass because I just don’t see how there can be any money in it for domainers at these price levels.
Let’s crunch some numbers and start with some basic considerations.
First and foremost, the very best domains will not be available at the General Availability registration fee (either because they were not available at all or because they were taken during the Early Access Program).
This leaves a lot of “not the very best domains but good enough” inventory.
The cheapest Dot Investments registration fee I found was $80.
Essentially, the value proposition is this: 80 bucks gets you a decent but not great Dot Investments domain.
Let’s crunch some numbers to see if all of this makes financial sense.
We’ll assume you like the Dot Investments string and register 100 domains. An initial investment of $8,000.
We’ll assume the renewal fee will also be 80 bucks, so the annual carrying cost will also be $8,000. In other words, you’ll pay $8,000 initially to register the domains and then roughly $8,000 each year to keep the portfolio.
Let’s assume you’d sell 2% of your inventory per year. It would be an ok-ish performance for a dot com portfolio, so for a new gTLD one, it would obviously be even better.
The average sales price? Let’s be generous and say $3,000, which would once again be a better performance than what dot com offered in 2012-2013. As you can find out by taking a look at this infographic, the mean sales price of a dot com was between $2,000 and $2,500 in 2012-2013. Closer to $2,000.
A short recap: your portfolio generates a 2% turnover rate and has a mean sales price of $3,000, in both cases better than what you’d expect with dot coms, so this is a reasonably optimistic scenario.
So, how much money would you make?
Well… you’d actually lose money.
Why? Because since you own 100 domains and have a turnover rate of 2%, you’re basically selling two domains per year at $3,000 each. In other words, the $6,000 in revenue doesn’t even cover the $8,000 yearly renewal fees.
And keep in mind, my numbers are reasonably optimistic.
In my opinion, it’s not that Dot Investments is a bad extensions. In fact, I consider it an ok one.
But at this price level, the likelihood of making money is quite low.
Maybe some of you guys can help me see the light and figure out how domainers can make money with registration/renewal fees such as $80, I for one just don’t get it.
August 21st, 2014 at 9:14 pm
I believe this is a very good topic for discussion but yet one where I believe less experienced domain investors are failing to consider the steep hurdle one faces with premium renewals. Yes, average annual industry turnover is in the 1-2% range. Some individuals may do better via aggressive outbound marketing or by offering their domains at prices well below what might be considered “fair value”. However, outbound marketing efforts entail expending a valuable resource – one’s limited time or paying someone else to do the marketing for you. People don’t work for free. Alternatively, one can cut price to increase turnover – say a domain acquired at auction for $500 with a potential end user value of $2500 may be sold for $799 to increase turnover. However, that discounted price doesn’t leave much profit to acquire more domains.
For those entering the domain space in recent years, parking income is immaterial so sales have to cover the renewals for the vast majority of domains which don’t sell (normally 99%). While those who entered the domain space twelve to fifteen years ago may see common five-figure sales, newer entrants should not be deceived by DNJ sales reports into thinking such sales are normal. They are not. SEDO reports that the median .COM sales price on their platform is around $600 (other TLD sales which are far less frequent often sell at even lower prices). Guess what that means – even an average 100-domain pure .COM portfolio with insignificant parking income will lose money as renewals will exceed sales while marketplace commissions reduce the net take even further.
As I have stated previously, .Net was launched in 1985 and .TV in 2000. You will find .Net and .TV sales on the weekly DNJ sales reports but the largest TLD seller by far is .COM and I do not expect that to change in the next five years – perhaps even into the next decade. So what implication does that have for those with new TLD portfolios and paying premium renewals? 100 domains with ZERO sales for five to seven years and annual renewals of say $50 each ends up being $25,000 to $35,000 invested BEFORE a POTENTIAL AFTERMARKET starts to emerge. By then there will be thousands of new TLDs to choose from which will hold down resale prices for options which are far from a first choice. So I wouldn’t expect sales prices or turnover to improve over time. Again, the reason developers and small businesses and startups choose a non-.COM TLD is because they can acquire it for reg fee rather than going with a three-word or six-figure .COM. When the only thing you can offer a new business is a new TLD which you already have several hundred dollars invested in, why would they pay four figures for your domain when they will have hundreds of other reg fee options to choose from?
August 21st, 2014 at 9:28 pm
One other point to add regarding the pure new TLD portfolio is that by assuming $50 renewals per domain I am assuming that was the acquisition price – after general availability rather than paying more to acquire the domain during the early access period. However, since the best keywords get taken prior to general availability, the odds of selling new TLDs obtained during general availability at four-figure prices is reduced even further. Wonder why I have not yet acquired even one new TLD domain?
Now I believe it makes sense to observe adoption of new TLDs and reported sales. Perhaps after a period of years if an aftermarket develops for new TLDs one can evaluate obtaining select new TLDs from fatigued early adopters who by that time just want to get out at breakeven.
August 21st, 2014 at 10:25 pm
Only Berkens keeps buying these, you guys are right with premium renewals this is not investment grade domaining. More extensions can be created, .com is a natural
Diamond
August 21st, 2014 at 10:32 pm
5star.Vacations
AffordableAuto.Glass
Antigua.Today
Baltimore.Today
Chocolat.Club
Choice.Media
DelawareReal.Estate
Digi.Solutions
Editor.Consulting
Excavators.Parts
Excellent.Vacations
Fancy.Shoes
General.Solutions
Hottest.Vacations
Information.Media
Ixtapa.Vacations
Jazzy.Club
Living.Sexy
Negril.Vacations
Salt.Media
Tibet.Media
This are some of my names that i bought for $10-$20.
NOT$50 not $80 not day 5 $200
Where do you guys buy your domain names?
If i want to transfer this names to Uniregistry they already offer deals for like .club under $10 the rest about $16-$18 not $50
So all my names are bought at general availability.
This names are far better of what i got in .com and if i need to keep them for 5 years so be it it will cost me double then what i pay for .com renewal.
To me it makes sense this type of investment.For me it’s worth to get 1,000 names or maybe even 2,000 names.
Now I’m at 700 names.
August 21st, 2014 at 11:23 pm
Registration fees/renewal fees are the key thing when it comes to domaining.
I think something like .investments would have a far lower selling rate than .com. This is based on my experience owning some .info and .biz’s in the past, It is very rare to get an inquiry. Actually I never got a single one owning about 30 of these names for about 5 years. They were mainly one word names that went on the first day. Eventually I sold them off in auctions.
I suspect if the reg fee was $1 on .investments it still would not be profitable. I guess with this though, if the registry knows your going to lose money maybe it makes sense to charge a really high price. In others words the buyers are wishful thinkers. I guess we will see what their numbers are like.
August 21st, 2014 at 11:29 pm
Yes, average annual industry turnover is in the 1-2% range
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That is a figure that has been quote a lot, for many years. I remember initially it came from buydomains data. In my view 1% applies to really good portfolios. It is no where near the “industry average”. I suspect an average figure is probably 10% of that, e.g. 1 in 1000.
August 21st, 2014 at 11:41 pm
Excavators.Parts
Lol really??????
August 22nd, 2014 at 12:23 am
http://www.excavatorsparts.com
yes,really !!!!
August 22nd, 2014 at 5:14 am
Actually Snoopy raises a good point about that 1-2% average turnover which has been quoted for years. I don’t know the current number but I believe at one point SEDO had some 18 million domains listed on their platform. Their first half 2014 report showed slightly in excess of 16 thousand sales. Assume perhaps 14k in the second half as the loss of Godaddy auction listings hurt their sales in the second quarter and will continue to do so going forward. What percentage is 30k sales over 18 million listings? Nowhere near 1%. What happens if a new TLD portfolio even after five years only sees a one in 500 turnover ratio? This is why IMO new TLD registrations (or freebies) by domainers are an irrelevant statistic – aftermarket sales as a percentage of registrations (and then factoring in typical renewal costs for that TLD) is a more telling stat to evaluate the merit of investing in any TLD.