Wednesday, August 31, 2011

Short Domains by Market Cap

Given the hunt for stores of value these days that are unaffected by currency debasement, I thought it would be interesting to look at what the "market cap" is for various short domains?

Here are the results (in $ millions) when market cap is determined by median sale price. $10 million $67 million $15 million $95 million $160 million $275 million

N refers to a number and L refers to a letter, so NNN.coms are 3-digit .com domains, and's are four letter .com domains.

The market cap for's is the smallest, around $8 million, because there are only 100 of these domains, and median sale prices are around $80,000.  The median sale prices for's (676 in existence) are around $125,000.

Interestingly, there is a huge drop-off in market cap for's versus's, because median sale prices for's is approximately $20, and even with the huge size of the market (456,976 domains), the market cap is dragged down by the vast quantity of "bad letter" sales.

Of course, if you determine market cap by reference to average sale price, a completely different result occurs. $10 million $67 million $15 million $95 million $160 million $150 million

The total market cap for all short domains two letters's and's?  About $500 million.  This figure may seem large, but it is actually mind-numbingly small.  A hedge fund or large institutional investor could easily buy up a huge chunk of the market.

Compare this to the market for gold.  I know there are some gold bugs out there, but come on, things are a little bit nuts over there, the market cap for the gold market is approximately $9 trillion!

I would personally rather have a decent or a random than an ounce of gold right now, that's for sure.  At least short domains have a variety of real uses and generate income.  Plus the available supply is fixed.  People hoarding gold and silver right now apparently do not seem to notice or care that the stuff is just sitting there in the ground, and can be retrieved for a fraction of current prices.  Basic logic suggests there will eventually be a huge price correction.

In short domain land on the other hand, awareness among the general population of domains as an alternative investment vehicle is still very low.  As we are approaching 100 million registered .com domains, with no end in sight to the growth of the domain market as China comes online en masse, it is inevitable that the shortest and most versatile domains will become more.