Tuesday, February 12, 2008

What Does the Future Hold?

It is final, all the NNNNN.com's have been bought out, you can't find any 5-digit .com domain except on the aftermarket now. These domains are already trading for 2x/3x registration fee, and in China they are worth about $25 each for non-premiums. Prices may continue to rise given the strong demand for these domains for use as US and foreign postal code sites, product-related sites, Chinese sites (173.com sold for over $300k recently and two NNNNN.com's are in the top 100 Chinese websites as ranked by Alexa), and the developing market in mobile phone search (where users can type in an alphanumeric site, say 466453.com, on their cell phone browsers to get to google).

NNNN.com's are reported to be worth about $500 each minimum, and LLLL.com's (4 Letter domains) are $50-60 for the non-premium. I don't know what will ultimately happen with prices for the NNNNN.com's, but I see several advantages they have over the LLLL.com's, and a few disadvantages.

The primary advantage of the NNNNN.com's is that they are extremely scarce compared to the LLLL.com's. Whereas there are over 450,000 LLLL.com's, there are only around 40,000 NNNNN.com's which are theoretically available for any liquid market (Marchex owns a significant amount as zip code wesites). One implication of this scarcity is that NNNNN.com's should be worth much more relative to NNNN.com's than LLLL.com's are worth when compared to LLL.com's. There are only 4x more available NNNNN.com's than NNNN.com's, whereas there are 26x more LLLL.com's than LLL.com's. This huge gap in scarcity in the letter domains is part of the reason why there is such a large price spread between LLL.com's and LLLL.com's, the former non-premiums going for mid $x,xxx and the latter non-premiums going for mid $xx.

The other reason why there is such a large price spread between non-premium LLL.com's and non-premium LLLL.com's is that it is very hard to make use of four non-premium letters. This is another area where numbers have an advantage. While it may be difficult to find a use for truly non-premium LLLL.com's, any random NNNNN.com probably already has multiple potential uses (and type-in traffic) which may include US zip codes, foreign postal codes, birthdates, spelled words on cell phones, part numbers, lucky numbers, and other possibilities. So it is quite possible that because of their scarcity and versatility, NNNNN.com's will be worth the same as, or much more than, LLLL.com's.

The disadvantage of the NNNNN.com's is that in the US market at least, people seem to prefer letters over numbers. In China there are developed websites for various NNNNN.com's, but there don't seem to be too many in the US (other than ones that Marchex is using as developed zip code web sites). But this should change as more and more people own numeric domains and seek creative uses for them. Also, since numerics are big in other cultures, especially in China, it may not matter much for the NNNNN.com market whether they catch on in the United States. The other disadvantage with NNNNN.com's is it may be hard to say which numbers are "premium". Aside from famous zip codes, numbers with many repeating digits (10101.com or 55555.com), it is difficult to say scientifically what makes any random number more valuable than another. It will be interesting to see, after the buyout of the NNNNN.com's, how people value each other's numbers in the resale market. I imagine there will be a flat fee that people agree a NNNNN.com is worth (say, $50 or $100), and that if a number has some identifiable "special characteristics" it will go for more. But who knows how this could play out.