Tuesday, October 25, 2011

NNNNN.com Buyout Update

NNNNN.com domains (five digit .com domains) remain all bought out.  The buyout has held for nearly a month.

What's more, supply is tightening as well.  The number of daily drops has fallen off a cliff, in the five days from October 24th to October 28th,  only 107 domains will drop, which represents an average drop rate of around 21 domains per day.  This compares to an average drop rate over the past few months of more than 60 per day. 

With such a small drop rate the buyout is certainly sustainable.  It remains to be seen whether the drop rate will stay this low.  To put the numbers in perspective, the number of LLLL.com's dropping over the same 5-day time period will be 149. 

However, it is likely that even if the drop rate does not stay this low, supply will continue to tighten compared to historical averages.  There have been several hundred auction sales of NNNNN.com domains this year, mostly on Chinese auction sites like 4.cn, and the average sale price is well over $100.

Continued growth of the Chinese internet, strong sales of the domains, tightening supply, and a buyout that has been foreseeable since summer has probably convinced many holders to renew their domains.

Wednesday, October 12, 2011

A Tale of Two Buyouts

NNNNN.com's remain all bought since October 3rd.   This is the longest they have remained bought out since the frenzy in early 2008, although this time the market seems much stronger for reasons we have chronicled in previous posts. 

To try to figure out if the buyout can stick this time it is useful to look at that other big domain buyout of recent times that has stuck, the LLLL.com buyout in late 2007.  A couple months after being bought out these domains experienced significant price appreciation, which anyone who was involved in the domain market back then will surely remember.

I thought it would be interesting to go back in time and research how many LLLL.com's were dropping on average on a daily basis before the buyout.  Because, for the buyout to stick, this number of domains had to be accounted for on a daily basis even after the last available LLLL was registered.  So there needed to be enough buying support to "cover" the daily drops so to speak.

Here is a graph showing the average daily drops from Q3 2007 for LLLL.com's, compared with the average daily drops from Q3 2011 for NNNNN.com's.

Online Graphing
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There are about 20 fewer NNNN.com drops per day than LLLL.com's were dropping around the same time in 2007.  This is 20 fewer domains that need to be "covered" on a daily basis for the buyout to stick.  The NNNNN.com buyout seems definitely doable at this point.

One could argue that the numbers actually suggest the opposite, that since there are about 4.5x more LLLL.com's than there are NNNNN.com's in total, so the number dropping could suggest that there are currently too many drops relative to the total size of the market for NNNNN's.  But this seems like an incorrect way of looking at the situation, since the total number of NNNNN.com's is not really relevant to the question at hand, which is: is there enough buying support to cover all of the daily drops.  The percentage of total domains dropping seems less relevant than the actual number, especially when we are dealing with such small percentages of the total domains anyways. Over the next weeks and months we will see whether the buyout will stick.  My guess is it will.

Monday, October 3, 2011

As Markets Crash, Numeric Domains Disappear

Anyone watching the markets these days ($SPY $QQQ $IWM) can see that things are bad, and probably going to get a lot worse.  With bonds, precious metals, commodities, and stocks all looking like bad investments at these levels, there seems to be very few places worth putting money.  $SPY looks poised to break $110 for a trip down to $100 and then possibly much lower.  Bonds ($TLT) are doing well but how much further do they have to go?  Europe is falling apart, and precious metals provide some hedge against currency debasement and global unrest ($SLV $GLD) but are very expensive at these levels and prone to mass liquidations like we saw over the last few weeks.  Are there any alternative investments that make sense right now?

Yes.  My personal preference is numeric domain names, because China is driving the demand for these pieces of internet real estate.  As we have profiled before, Chinese registrars are booming, and numeric domains which are popular in China are in the early stages of a huge bull market.  There simply aren't that many of these domains available, only 10,000 four digit .com domains exist and only 100,000 5 digit domains, all of which are registered as of this morning.  There are a million six digit .com combinations, and there seem to be more than 100,000 of these domains registered already as well, with the nicer ones commanding high prices every day in auctions at 4.cn, the premier Chinese domain auction site.

This is a tiny market, and supply is drying up.  Five digit .com domains have been teetering near a buyout for months, and are currently bought out as of today.  If the buyout sticks, prices will likely rise, and six digit domains will be the next battlefield for registrations.  With total .com domain registrations approaching 100 million, it is very likely that over the next decade these domains will all disappear as well.  While everything else in the market may be crashing, numeric domains look likely to significantly outperform over the next several years.