Hong Kong and the next 5 years in domaining.
The market in China is still soft. After Domain Fest in Hong Kong and a quick trip to nearby China to meet investors, it seems like everyone is watching the market from the sidelines. Ron Jackson from DnJournal reported one of the lowest week for sales this year; even the domain da.com sold for only $650,000. While you might think that $650k is a fair price for a domain with a,e,i,o,u,v, “da” in mandarin is the natural and most used word for “big, large”, therefore seeing such a huge keyword selling for so little, it is not a good sign.
So the question is once again: is China ever coming back? James Iles interviewed me for his upcoming book and asked me a few questions about what I think will happen:
What do you think will happen to the Chinese domain market in the next 5 years?
I think the level of prices we saw in 2015 is unlikely to be repeated unless end users (specifically Chinese end user) can catch up and sustain the demand that has been driven for the most part by investors.
Do you think domain names as investments will become more popular in China in the future?
It will depend on several factors. Investing in any asset (not specifically domains), becomes less and less attractive as a market becomes more efficient. If market prices are perfectly transparent, there are fewer opportunities for arbitrage and lower margins. Many investors in China have been attracted to domain names by the large margins, the Chinese e-commerce boom and the lack of viable alternative investments, with the Chinese stock market being too volatile and the real estate market being way overpriced. At the moment the domain market is very competitive (there are many investors and brokers constantly looking for underpriced assets) and new data about market prices is being released every day, therefore we should expect even lower margins in the future. Of course there will always be opportunity for good returns for investors who are willing to go in depth and do their homework.
Which domain extensions (TLDs) are most popular with your clients?
.com, .net, .cn, .cc, .co.
What makes a domain name valuable to a Chinese investor?
1) Quality of the extension (.com is king, .net and .cn are simply derivatives of the value of the .com),
2) Length of the domain – the shorter, the better;
3) Meaning of the letters/numbers (if the domain is also a word in pinyin, the value greatly increases);
4) Specific patterns (ABA, AABB, sequences, etc);
5) Potential for end user sale.
What advice would you give to anyone looking to buy Chinese premium domains?
1) Look for market inefficiencies – there are still many opportunities for profit. Go deep in one niche and learn everything you can until you are confident in investing.
2) Avoid new registrations. 99% of the new registrations never make money, and sit in your portfolio as $10/year liabilities. It is a much sounder strategy to buy an underpriced asset and flip it for at least market price.
3) ALWAYS perform thorough diligence before investing any money.