Last quarter I was invited by the legendary Ron Jackson of DnJournal.com to share my view about how the domain aftermarket would be impacted by Covid 19. This is what I wrote:
|Assuming that within the domain aftermarket there are 2 separate markets (investors and end users), and assuming that the investor’s demand is a function of the income investors receive – with the major variable component of that revenue being, ceteris paribus, End Users sales – I see the following happening for the remainder of 2020:
In the End User’s market, established companies who have not done so already, are being forced to go online. If you are a major company and you are not under financial stress, this is the time to go ahead and finally upgrade your domain. Companies having unexpected surge in demand are more willing to spend on domains. Sectors that are benefiting the most are E-commerce, Online Gaming, Online Media, Health Care, Crypto, Online Education, etc. At the same time, many companies are killing most new projects due to market uncertainty and/or allocating only a small budget for the domain. These effects should balance themselves out.
In the Investor’s market, as in any crisis, many investors will need to liquidate assets, both because they might be in need of cash or to take advantage of the buying opportunities in other markets. This naturally results in increased supply and downward pressure on prices. We are seeing this dynamic in place on LMX.com where traders are listing more domains for sale at reasonable prices.
While I expect low value domains going down in value even further due to increased supply, the most valuable domains (2/3 letter .com, 2/3 number .com, One Word .com, etc) will see a return to “price polarization” where the wholesale prices will go down, while the end user’s price points may be stable or even go up. For the buyers, these domains will be the most interesting opportunities.
By looking at the latest Liquid Market Report we published yesterday, I think this is might be exactly what is happening. Here is why:
- The publicly disclosed sales have gone down 42.7% from last quarter, but the volume of Escrow.com sales went up by 22%. The publicly disclosed sales provided by ShortNames.com normally relate to domains which are sold in auctions or marketplaces. Large End User transactions are private instead and typically remain undisclosed. A 43% decrease matched by a 22% increase, means that there have likely been some large End User transactions, while the investor market has been more fearful.
- 4L .com‘s floor prices have gone back up by 15% to $99, while the median prices have gone down by 21% to $249. This might mean that there are either more buyers at the bottom (i.e. more demand) or less supply at the lower end, while there are less investor buyers interested in “risking” by paying above floor for quality 4L domains.
- 3L .com have seen an interesting 45% decrease in number of sales (only 11 in Q2 – not enough to calculate a proper 5th percentile value). It is difficult to deduct something from these numbers, as many transactions at lower level might have gone undisclosed.
- 5N .com‘s floor prices decreased by 11% to to $232, and the number of domain sold went up by a staggering 48%. This is due to a large number of domains being auctioned, which explains the pressure on the floor prices. As I was checking the data today, I saw that 5Ns are actually hitting the $200 floor, going back to the 2015 level.
As usual a big thank you to our report partners:
Intelium. Much of the data is obtained through their proprietary software. Intelium’s products include DomainIq.com and EstiBot, which are essential tools for any investor who wants to take the guesswork out of investing.
Escrow.com. With over $3B in transactions, Escrow.com is the market leader for domain escrow services and has recently been awarded the BBB (Better Business Bureau) Torch Award for Ethics.
ShortNames.com. Investors use daily this essential tool to understand the historical trends and current values of liquid domains. Their chart section is extremely valuable to put the current trading ranges in perspective.
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