Friday, December 7, 2018

Is There a Gold-Silver Ratio for Short Letter Domains?

The ratio of gold to silver in the earth's crust is around 1:17.5.  Gold is harder to find, and accordingly goes for a higher price.  Notably, over time the price difference between gold and silver has often come close to the scarcity ratio.  Right now the gold/silver ratio is higher than it has been for some time, with silver significantly under-performing.  

This got us thinking.  Is there a similar ratio underlying the price difference between short domains?  If domains are 26x less scarce than domains, should they go for 1/26th the price?

Here are some quick graphs of and prices over the last decade.  The graph I made using a trailing median price for non-premium (western or Chinese) domains.  It doesn't track the "floor" prices, which the graph below it does for's.  But it seems to track reasonable prices for run-of-the-mill domains, and you can see the hype building in 2015 for both types of domains.

So what is the price ratio between and domains?  Is it stable over time?  The data we're using is not perfect, and it might benefit from closer study.  But on a very rough basis, the LLL/LLLL ratio has been the following at various times:

2010: $25-$40 $3,750-$5,000.  Ratio: 1/125-1/150
2016: $250-$350 $17,500-$25,000.  Ratio: 1/70
2018: $100-$150 $12,500-$15,000.  Ratio: 1/100-1/150

So it's definitely not 1/26.  And the ratio does seem to fluctuate a bit over time.  The ratio does seem to be noticeable worse than 1/26, suggesting that adding another letter does not only decrease the scarcity of a domain, but materially worsens its marketability.  If we could quantify that, it seems as though the adding of a fourth letter reduces the price further by a factor of about 3x-5x, compared to just the scarcity factor. 

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