Is This A Bad Time To Be In Domain Investing?

Finding consistent success in domain name investing is always challenging, but are we entering a particularly difficult period? I don’t know the answer, and some successful veteran investors consider this a golden time, but let’s look at a few potential challenges.

Economic Uncertainty

Instability, both political and economic, reigns these days. Will the upheaval result in a different, but strong, world economy? Or will there be an extended period of difficult times? The situation may also influence your other source(s) of income.

The impact on the domain market is not completely clear. Economic disruptions can lead to opportunities for new businesses, that can drive aftermarket sales. But it is also true that businesses like stability, and may delay name upgrades in turbulent and unpredictable times.

Acquisition Costs Up

Most agree that domain name wholesale acquisition costs, at least at expired domain auctions, have kept going up, possibly at a faster rate than retail prices.

Holding Costs Higher

There have been annual increases in renewal costs in most extensions. But renewal costs are not the only holding costs. If you pay $1000 for a domain name, and if the effective interest rate is 4.5%, it means that you are ‘paying’ $45 per year in the form of the cost of money you have tied up. While interests rates are not unduly high, and have gone down slightly, they are higher than they were for many years.

AI Impact on Brandable Market

We don’t really have access to definitive numbers, but I suspect the last year or two have been particularly challenging in the brandable portion of the aftermarket. One reason is that names generated by AI tools have displaced a part of the low end of the brandable market. I believe another reason the brandable sector has been challenging is that many more investors are in that part of the market than used to be the case.

Too Many Domains For Sale?

In the aftermarket overall, there are probably more domain names for sale than has ever been the case. That is not only a problem because more names means more competition for sellers, but large numbers of names make effective domain search more challenging.

Search and AI Changes

As some turn to AI tools instead of search engines, the domain name that hosts relevant material is less prominent. The same is true with Google search summarizing results, rather than simply linking to results. While there are regulatory and legal steps that may counter this, the trend should be of concern to domain investors.

Domain Parking Less Lucrative

There was a time when you could hold a large portfolio essentially cost-free, as returns from parking a portion of the portfolio easily covered renewal costs for all of the names. While some still make significant amounts from parking, overall it is in decline. The Google decision to not forward to parked domains will further impact this.

Commissions Remain High

One might have thought that with automation efficiencies, and larger numbers of names for sale, that commissions, as a percentage, would decrease. But that has not been the case for the most popular selling venues.

Confusion About Domain Names

I think it is likely that the web3 blockchain ‘domain names’ have caused confusion that has hindered the traditional domain name market. It is not so much that these have had a significant impact in drawing end user funds from the aftermarket, but rather, they have made it confusing for potential purchasers.

Premium Renewal Confusion

Speaking of confusion, I think that the practice of registry premium renewals has also spilled over into general confusion about which names might have a premium renewal.

Some Positives

It is not all negative, of course. Here would be my list of some things that have improved.

• The .ai extension has become the most successful country code of all time.
• There is no significant evidence of weakening of .com dominance.
• Ability to manage large domain portfolios at many registrars has never been easier.
• Competition among registrars has kept prices not much higher than their wholesale costs.
• It is now easy to attractively present a domain name, including AI-generated logos, product mockups, or descriptions.
• We live in an era with excellent tools and information sources to help guide domain acquisition and pricing decisions.
• Buyers can pay in different ways, and can spread costs on monthly payment plans, if desired.
• A number of new marketplace alternatives have emerged.
• Information sharing among investors, at sites like NamePros, continues vibrant.

Is There Evidence that Market Down?

I wondered if there was any evidence that the past month has been down, given the economic turbulence. I used NameBio to look only at predominantly retail venues (Sedo and Private) and restricted to .com sales only. Here is what I found:

• Over the past one month period, 242 sales totalling $3.8 million.
• If I look at the last three months, and convert to a per month rate, there were 259 sales/month and $3.2 million per month.
• If I look at preceding 12 month period, I find an average of 413 sales per month, and $4.7 million per month.

I don’t think there is a clear indication of a drop in the domain name market.

In the case of the 2007-2008 economic downturn following the subprime lending crisis, there was an impact on the domain name market, but it had some months lag time. The pandemic onset caused a short term downturn, but that was rapidly erased as businesses turned online, resulting in one of the best years ever in the domain name aftermarket.

What To Do?

So if we do end up in challenging times, how should domain investors respond? The right course will be different for each situation, but below are a few points to consider

Protect Your Best

If sales drop for an extended period, make sure that you retain enough cash to keep renewing your most valuable assets. The starting point should be an assessment of what you consider the top domains in your portfolio.

Watch Trends

Information is power, watch economic indicators carefully. One of the best indicators for the USA is the new business application data provided monthly by the US Census Bureau. At time of writing, the data is only up for the month of January 2025, but I suspect February will be posted within a week or so of this article.

While above shows total, you can also use their interactive visualization to break it down by sector, should your portfolio predominantly hold, for example, health or travel related domain names.

Be Renewal Smart

In times of increasing renewal rates, there is an argument for renewing your best names well in advance. But also the argument to take a critical look at which names truly warrant long-term hold. Also, use tools like TLDES to make sure you are getting competitive rates. Remember that you can use TLD Price Changes to stay on top of upcoming price increases.

Possible Opportunity

If in a position to do so, this may emerge as a time to make smart acquisitions while other investors are curtailing acquisitions. Warren Buffet famously said: ““Be fearful when others are greedy, and be greedy only when others are fearful.”

Marketplace – One Size Does Not Fit All

Paying 25 or 30% commissions really cuts into profitability. Some names will need the exposure offered by the marketplace, but for other names you may mainly need an effective lander. If you can do that effectively at a low commission marketplace, or using NamePros free landers, then your overall effective commission can be reduced.

Take Things Into Your Own Hands

If your names are demonstrably solid, but where you have them listed are not getting many sales or offers, maybe it is time to stand out from the pack and consider promoting your names on your own marketplace. I am not under estimating the challenges, but there has probably never been a better time to do that.

I look forward to hearing what you think in the comment section below.