Categorized | Domaining Tips

Are Short Domains Currently Underpriced?

Posted on 11 January 2019 by Andrei

As pretty much everyone knows, the short domain space has seen better days. Remember the short domain mania peak craziness of let’s say late 2015 to early 2016? When there was insane demand for decent and ultimately even bad short domains (5L, 6N, etc.)? Literally insane, as in buyers being desperate to acquire more short domains and as soon as someone was selling one or (better yet) an entire portfolio, buyers would gather like sharks once they spot their prey.

That craziness has been gone for quite a while.

Now that demand has fallen and prices went down significantly as a result, people can’t help but ask themselves: is this a buying opportunity, are short domains undepriced at this point?

In my opinion, there are two dimensions.

On the one hand, you have the end user dimension, so buying short domains from other investors in order to (hopefully) sell for a lot more to end users. Frankly, when it comes to this dimension, my answer would be a resounding NO. That’s because other than for the “best of the best” in terms of short domains, there really isn’t that much end user demand. I remember talking to a major LLL.com holder a few years ago, he had tons of LLLs that were initially considered “bad letter LLLs” but the tide has turned for many of them, with most people calling those Chinese Premium LLLs now. Anyway, what shocked me was that this person owned lots of LLLs for many years and could not recall *one* end user sale. Not one. The same way, you had lots of people who built huge LLLL.com portfolios before the Great Recession and bought their inventory at $8 a pop or whatever their registration fee was. Unfortunately, not even with such a low acquisition cost did these people manage to earn satisfactory returns by waiting for end users, which is why many of them later on sold entire portfolios at firesale prices.

So… yeah, when it comes to the end user dimension, I just don’t consider most short domains (the overwhelming majority) overpriced.

When it comes to the reseller or “store of value” dimension, then my best guess is that if you buy now (but only really good short domains) and are patient enough, the likelihood of ultimately doing ok is reasonably high. So if you were to ask me, I wouldn’t say short domains are currently underpriced from this perspective but rather that prices are “fair.” But in light of the fact that domains are risk-on assets that perform poorly when the economy turns, I would say there’s no reason to back up the truck and buy just yet. Better acquisition opportunities will most likely present themselves sooner rather than later.

What about you?

Do you think short domains are currently underpriced?

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