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.

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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.