values
- note
- note
1
related:
auDA
ICANN
dot-nz
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This
page looks at domain name auctions and sales, supplementing
the discussion in the broader Domain Names & DNS profile.
It covers -
- mapping
prices - what's the 'standard' price
- Australia
and New Zealand - no names bubble down under?
- derivatives
- licensing names, name futures and other name games
The
preceding page covered -
mapping prices
During the bubble there was surprisingly little questioning
of those figures, with little analysis of
whether
prices sought/achieved were justified (eg reflected
an inherent value
or were likely to offset 'investor' acquisition and
holding costs)
whether prices featured in the media and on some sites
were actually achieved
whether prices are stable (eg what are lewinsky.com,
clintonscandal.com or kennethstarr.com worth as memories
of the Clinton presidency fade to black)
Overall
it's clear that 'million dollar names' were exceptional.
Most dot-coms transferred in the secondary market changed
hands for under US$1,500. The indifference of potential
buyers meant that several hundred thousand domain names
were not renewed. (Some observers suggest non-renewal
figures as high as three million; there's an indication
on the DeletedDomains
site) That's good news for some people seeking a domain
name, as the name of choice is now available from a registrar
at the standard fee or on the secondary market at a 'discount'
price.
There is considerable uncertainty about some of the peak
prices. Some of the 'million dollar sales' celebrated
in the media, for example, occurred in private. There's
no publicly available information to confirm that a transfer
took place between unrelated parties (some WHOIS searches
suggest that a transfer occurred only on paper from the
right hand to the left hand) or took place at the claimed
price.
WHOIS searches and conflicting information between claimed
transfers and continued appearance on GreatDomains and
similar sites suggests that some 'sales' simply didn't
occur. At least one observer has accordingly argued that
particular entities were deliberately ramping the market,
although the absence of a detailed investigation by trade
practices regulators means that argument hasn't been substantiated.
In discussing valuation methodologies we noted that there
are no authoritative global figures on
- the
number of companies that have simply bought out speculators
or blatant squatters
- the
aggregate value of such transactions
- the
aggregate expenditure in the secondary market
- the
number of domains that have left the secondary market
through non-renewal
- the
extent of the slump in secondary market prices for 'non-premium'
names, ie those at the US$1,000 rather than US$1 million
end
- changes
in secondary markets for ccTLDs such as dot-tv, dot-nu
and dot-md
- the
extent of the secondary market in problematical alternative
domain names
As
with other financial bubbles, it's probable that many
speculators made no money by punting on the intangibles
and that the expectations of some corporate investors
weren't met.
Procter & Gamble for example is reported to have come
out marginally ahead after selling much its portfolio
of 2,000 generic names such as flu.com or cleaner.com,
deciding that the importance of generics in marketing
was greatly overrated and that its brands (which embodied
years of promotion and billions in good will) were more
effective domain names. P&G's renewal costs are estimated
at around US$350,000 over five years.
Some speculators are likely to have acquired their names
on the secondary market and have incurred holding costs
(in particular registration renewal fees) which mean that
any profits will be small.
Media
attention has centred on claims of multimillion dollar
sales. The absence of comprehensive public databases inhibits
a definitive assessment but it appears that most sales
- through domain name auction services and direct from
registrant to registrant - involve only a few hundred
dollars.
Many offers, as noted in our discussion of domain name
valuation, simply haven't
met with a buyer and the name has returned to the registry.
That's not too surprising, given limited demand for gems
such as
Following the dot-com crash and a wave of action by trademark
owners under the UDRP and ACPA it appears that the following
price structure is likely -
high
(US$50,000 plus) - names common to two or more trademark
owners (eg Ajax petroleum and Ajax dogfood). Speculative
registration/resale by non-trademark owners has diminished
because anti-squatting regimes
have introduced liability (in particular fines of up
to US$100,000 in addition to legal fees and forfeiture
of the name) for Great Domains claims that act.com sold
for US $500,000 to the owner of Act contact management
software.
Generic names (US$10-49,000) - functional names
such as holidays.com or pharmacy.com. Declines since
the market peak (eg the famous sale of business.com
for US$7.5 million) reflect competition from similar
names - was it holiday.com or holidays.com - and failure
of some generic names to suck in traffic from the right
demographics, which instead use search engines, other
navigation methods or wickedly stay offline.
More specific names (US$500-9,000) - such as
bestcars.com or pinelogs.com
Niche names (US$200-500) - ranging from thejohnsons.com,
brewarrinapizza.com to XXX
horrors such as animalsexbestialityzoophiliabeastiality.com
and boysodomy.com
Junk names (US$25-200) - weird confections, such
as carbonatedmooncowcheese.com and iamabraindeadmoron.com
(perfect for some blogs),
that attract the 'impulse purchase' consumer.
Australia and New Zealand
What are the peak prices of Australian and New Zealand
domain names?
The answer is unclear. Australia hasn't seen the emergence
of a real secondary market, primarily because of the 'substantial
association' provisions in auDA's
rules covering domain name registrars and registrants.
Holders of dot-au names aren't free to trade in the names
as such, attempts to publicly trade names in defiance
of the dot-au rules (breaching contract law) have resulted
in action and there's no formal online secondary market
site.
The extent to which registrants have worked around the
restrictions, eg by selling the company that holds the
name, is unknown but is likely to be exceptional.
derivatives, commodification or common fiction
In a world where it seems that almost anything can be
converted into a financial instrument - David Bowie commodified
his copyrights by issuing Bowie
Bonds - it is unsurprising that entrepreneurs have
characterised names as "a new asset class" ripe for exploitation.
There have been attempts, for example, to sell domain
name futures - a punt on whether a basket of names would
rise or fall in price.
Some gurus have suggested that registrants lease dot-com
names to site operators, whether for a flat fee, a traffic-based
fee (eg 0.1 cents per unique visitor) or a share of revenue
(typically a few percent of advertising sales). In the
absence of independent studies it is unclear whether many
registrants are recouping holding costs with such leasing.
One resale specialist trumpets "Turn my domains into
a cash machine!" in urging registrants to use their
unutilised domains as advertising space. "Even an
average domain can easily earn back the cost of registration,
and quality generic domains can earn several hundred dollars
per year."
Some US vendors have promoted domain name insurance, apparently
aimed at speculators worried that the 'value' of their
names might fall and result in the fire-sale offers such
as that of the US vendor noted elsewhere on this site
-
The
inventory of domain names alone is conservatively valued
at over $150,000 ... you can walk away with the entire
network and all of the domain names for only $9,995,
that's 85% off the normal price. I must be in love,
or just losing my mind. Grab this before I come to my
senses.
As
with insurance regarding speculative investment in other
intangibles where there's only a small market, it's unclear
whether vendor establishment fees and annual charges are
offset by protection against ongoing falls in the price
of some names or the indifference of many buyers.
More prosaically in 2001 the BBC reported
that the Industrial Bank of Korea had teamed up with dot-kr
main registrar Internet Plaza City, accepting domains
as collateral for loans. The venture planned to make loans
of up to 30% of the assessed value of the name, with a
limit of £16,000. (It is unclear, however, whether the
scheme wasn't in fact a way of dealing with problem loans
to the Korean dot-com industry.) Elsewhere we've seen
specialists offering insurance based on the value of domain
names.
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