Analysis of the Domain Market

It has been almost a year since the buyout occurred and we at a point where there is much discussion and differing views on whether the buyout will hold or not. A lot has changed since last year in terms of registration/renewal pricing (Indian) domain names and more importantly the economic situation around the world.

The buyout occured at a time when the financial / economic outlook was quite bullish. The registration for .in domain names was on a promotional special pricing of just $3 or $4 at most registrars.

Throughout the year we’ve seen some great sales of premium names both on domaining forums, sedo and other aftermarkets. At one point we even saw sales of anti-premiums (eg. domains containg poor letters qwxz) going for upto $5-$6 in the reseller market. This can be looked at as double the return of investment (ROI) if you consider they were bought at just $3 or $4.

Thousands of’s have exchanged hands amongst resellers, names of all letter qualities. Average names were going for as much as $25-$35 each! Double premiums with semi-premium letters were averaging around $45-$65 each. Triple premiums reached were going for no less than $120-$150 each.

We saw very few names being dropped and those that were… even all anti-premium letter names… got snapped up within seconds. Competition amongst drop catchers was fierce, with some names being taken within 4-8 seconds after being dropped. However, with about 8-9 months passing after the buyout… things started to change.

Despite the higher quality names holding value throughout the year, the lesser quality names started to go down.The top speculators would have forseen this and taken actions just in time to make sure they didn’t lose out. However, many have fallen foul and will lose a lot of money.

The bleak economic outlook and talk of a possible recession has made everyone more weary of how we invest our money. The aftermarket has been hit quite hard… the renewal (and registration) price being around $14+ is a factor many have started to take more seriously, especially with many names being close to expiry.

The top drop catchers are only going after triple premiums or high quality double premium names and leaving most other names alone. From names being taken within 4 seconds we are starting to see some names being available for registration for up-to minutes after drop.

And now with news of hundreds more’s close to being dropped – what will happen with the buyout? Will it hold or will it fail?

I think it will fail. Thousands of names are coming up for renewal between now and April 2009. With high renewal prices I’m sure there will be big lists of names being dropped, especially poor quality names. There will be way too many names being dropped that not all will get picked, especially not anything less than double premiums.

Don’t get me wrong, I do believe in domain being valuable and I believe the buyout will re-occur. LLL ccTld domains, especially when we’re talking of developing countries such India, China and Brazil will no doubt be increasing in value over time.  However, the lesser quality names are just too expensive to be taking a risk on in the current economic climate and I doubt there are enough people willing to take a gamble right now and buying large number of dropping names.

I believe the better quality letters and popular acronyms will still continue to get snapped up within seconds, but the lesser quality – maybe even double premiums will be available to register once again. But again, I don’t think this will last too long.  As the financial markets around the world become more stable we will see once again the dropped names being registered… and slowly but surely the buyout will re-occur.

What do you think? Share your views on the domain market by leaving a comment below.