Morning Folks!!
The Domain
Industry is not in trouble. However many sponsors and individual domainers are!
Prices that domains are fetching are very good. However the reason some
domainers and companies are selling is not very good. In fact, it is very bad.
That “Monthly nut” that we all have is eating some up. Some domainers, some
companies, some sponsors. They are FORCED to sell because of their overhead.
Because of salaries. Because if they don’t, their spreadsheets are gonna look
like shit in 2009 and they are scrambling. Many have watched their business
model totally disrupted. Their incomes have been slashed and their bills have
not. The leads to a lot of weak companies in the space. Those that are ahead on
this may be in much better shape. Those can take advantage of the weakness of
others. Great bargains are out there. Luckily, more than half of folks that buy
domain don’t know diamonds from glass. And if they do figure it out they had to
waste hours reading analytics instead of having the gut to know the difference
in a split second.
Here is an
outright prediction. On the surface it may look good. But it isn’t. My
prediction is that Ron Jackson will report that 2009 will be the #1 year for
total domain sales that he can track. With the year 3.5 months away from the
end, I feel confident we will break that record. Problem is it won’t be a
record broken from strength, it is a record born out of weakness. While income is
extremely important, it is the overhead these companies and individuals have that
is driving this avalanche of sales. While many focus on more income and we
should, all I can say is getting your monthly overhead in line is what will
determine your survival.
The worst is
not behind us. Huge consolidation and outright collapses will happen in the
coming months. There are pockets of hopes, but canyons of despair. There won’t
be headlines announcing it, they will just quietly disappear. Unless they owe a
lot of money. Then we’ll hear about.
Have a
GREAT Day!
Rick Schwartz
UFO
Biggest problem is that the industry suffers from a high operating leverage beta. Essentially profits have a large potential to swing based on small changes.
I’ve said for a while that I think that the market has hit the maturity phase in its life cycle. What the market does or doesn’t do in some ways has little effect on individual domainers portfolios. Also, different domainers have different business models, those large scale players that rely on PPC to marginally cover renewal fees are obviously most at risk.
In essence there is a shake out of the long tail”junk” grade domains.
Investors should always realise that if technology made your industry then it can change/destroy it just as easily.
Morgan
Great post Rick! I think this is an excellent point that applies to many companies in the current economy.
The problem is that so many companies around the world will fail to make changes until it is too late.
Running lean and focusing on what you do best will be essential for many businesses to make it through the next few years.
jeff schneider
Hello Rick,
The very fact that a lot of the valuation of generic domains is derived from the metrics of traffic they generate,it will be extremely important to focus on business generating ADDRESSES.
In other words can your business generating name actually pass as a business name or BRANDED ADDRESS, that is catchy and can be your own brand at the same time. Gone are the days when almost a 100% of a names value are based on its ability to recieve traffic.
Those who get this at this critical,paradigm, shift phase, and get it quickly will be the most successful. There is a sea change of strategy that should be taking place with all domainers and if it isn’t happening for you, it is best you consider it.
Michael Castello
Here is some of what we see with our developed names. Diversified portfolios can cover up and down markets. As an example, our Nashville.com and PalmSprings.com markets are down during this economy but sites like Daycare.com and Bullion.com are picking up the slack as unemployed mothers stay home and investors work to stabilize their assets. Traffic moves with the trends/impulses of the moment.
owen frager
The problem with the industry is that it was built on Overture scores. This was never smart or sustainable. And you feel it in the wallet now.
Kevin
The day of just being a”Domainer” to make it in this industry is coming to an end, if not already over.
Now you have to be a Businessman also to succeed.
Stephen Douglas
@Kevin
I thought being a”domainer” meant being a businessman… in the domain investment industry.
If you can’t make a living investing in domains, you aren’t a”domainer”. Everything else is just”dancing on the fire to keep warm.”
;-)