New Era Of Domain Investing
(First Chapter: Pizza.Elephant & Very Short Domains)
Hundreds of new gTLDs (also known as new generic top-level domains, new domain names, or a new generation of domain names: domains created in extensions like .life, .world, .online, store or .poker) are available on the internet since 2014, and more than 35 million of them were since registered. Hundreds of thousands of domain investors worldwide are now looking into opportunities and are purchasing these names. I am one of them, selling and buying every intensively. I have therefore some direct insight, and in my honest opinion, a lot of investors are not making good decisions when it comes to new gTLDs.
Along with some good decisions, I am not afraid to admit that I have also made some pretty bad ones — as did every new gTLD investor I know so far. Hopefully, after reading this series of articles, it can help people (mainly those which are just starting) to get some unbiased overview of investment opportunities, but also investment traps which one can face when investing in new gTLDs. Articles published here are shorter ideas from my book “New Era Of Domain Investing”, which should be ready around May 2021.
What are the new gTLDs?
New gTLDs are domain names like bring.love, short.codes, or printed.media.
They do not end up in .com, .net, .org or any national domain extension like .co.uk, .fr or .de. Above examples end up in .love, ,codes and .media domain extensions.
They are used globally, they aren’t tied to any specific country.
New gTLDs can form a great alternative to older domain extensions like .com, .net, or .org, which are also used globally.
First chapter: Pizza.Elephant & Very Short Domains:
Lets’s start with the 2 most common mistakes domain investors are doing.
They are investing in Pizza.Elephant style of domain names and they are also investing too extensively in very short domain names (just because it was profitable for them in the .com era).
1. Pizza.Elephant style of investing in new gTLDs: a big mistake.
This investment mistake is something that almost no one is able to avoid when getting familiar with new gTLD domains. It is simply investing in domain names with 2 strong words (one of them is a keyword and another one is domain extension itself), which are not making much semantic sense together. Some people call this mistake “Pizza.Elephant style of investing”. While Pizza and Elephant are very nice keywords, when we put them together, there is really nothing like “Pizza Elephant” out there. While it is very obvious to more experienced new gTLDs investors what is going on (those who already experienced at 3 or 4 renewal cycles and are holding large new gTLDs portfolios), it is definitely not obvious to many people who were just introduced to the concept of new domain names.
So this is why they do it: in 2014, just after the introduction of new domains to the general public, a lot of people (some of them very experienced .com investors who made millions in .com era) started to buy new domain names as well. It was the very beginning of the new gTLD domains, and so naturally no data of reported sales for new domains were available at the time. Therefore all purchases were based on individual projections, and more or less educated guesses, as of what will constitute good and profitable domain names in new gTLDs. As an inspiration, many domain investors brought in concepts, which worked great in the past, specifically for .com. One of the most prevalent concepts is to have a strong keyword located at the LEFT side of the dot.
So let’s discuss it more in detail now.
Strong keyword located at the LEFT side of the dot — is that enough to make new gTLD domain names valuable from an investment point of view?
While the above concept work amazingly when it comes to .com (in 2020 almost all investors are very well aware of how much “strong keyword”.com can be sold for at today’s market) we know now that it definitely can not be easily applied to new gTLD domain names.
Not knowing that yet in 2014, many investors had bought into domains like Pizza.Elephant (it is just a hypothetic example, as we do not have .elephant new gTLD extension, yet). The “logic” there was that both “pizza” and “elephant” would be strong keywords in .com — and as such, they could command premium prices also when combined in the new gTLD domain name, even when together they do not make much sense. As we see years later, the answer is — of course not!
There is no aftermarket and no demand for combinations of 2 strong words which does not make sense when they are combined together.
What is apparent though is that even in 2020, many people are still buying this kind of combination. When 1st renewals are coming, it will usually result, of course, into dropping of such names.
Brandables — really?
Some new gTLD investors justify their purchases by calling those nonsensical combinations “new gTLD brandable”. Let’s take another example, like “Dog.Elephant”. While both “dog” and “elephant” are strong keywords in .com, together they do not make any sense. To call this “brandable” in the same sense as we have in .com (when some people put almost any of 2 non-related keywords together and they say it is “brandable”) is not going to work for new gTLD domains well, at least not in 2020. So if you want to be profitable with new gTLD domain names, and to have a nice chance to sell your domains later for a good profit, my opinion would be — just do not do that. Exceptions from this rule are possible, but their probabilities of success are very tiny.
Leaving “pizza.elephant” style of names to their destiny, let us discuss another concept, which worked amazingly well in .com but will work only in very few instances for new gTLD domains.
2. Very short keywords located on the left side of the dot: usually a mistake for private investors, unless the domain renewal fee is reasonable.
For purposes of this article, I define very short domain names as domains where N, NN, NNN, L, LL, or LLL is at the left side of the dot, and where N represents the number and L stands for a letter. The intrinsic value of these names can be very good in some cases and can be almost zero in other cases. Unless you are from China maybe and know very well the actual trends in new gTLDs there, the chance is significant that you will not make a profit as an individual investor with those domain names. There are 2 main reasons in my opinion: high renewal fees, and a large number of available new gTLD extensions.
High renewal fees.
The main reason for that is high renewal fees which are attached to such names in many cases. Imagine the following situation: you own a registry (the company who owns a particular extension), and you just won the auction for specific new gTLD extension. For explanatory purposes, let’s say the new gTLD extension is .MYEXAMPLE. You have paid all the auction fees, all setup costs — usually hundreds of thousands of dollars. Now, you as registry are the owner of .MYEXAMPLE and your task is to evaluate how to price renewal fees for your domains before you release them to the public. It is not very intellectually challenging to understand that there are only 10 domain names in form of N.MYEXAMPLE, where N is a number (so domain names like 0.MYEXAMPLE, 1.MYEXAMPLE..9.MYEXAMPLE), less than 100 domain names in form of NN.MYEXAMPLE, less than 1000 domain names in the form of NNN.MYEXAMPLE, etc, while the same logic applies to alphabet characters as well. This is a very limited supply. So what you will do as a registry? You will, with high probability, attach higher premium renewals for all those names. After all, there is only a limited number of such names, and you paid a LOT of money for .MYEXAMPLE new gTLD extension. So, it is definitely not in your best interest to put a low standard renewal on them, and have all of them registered within first minutes by domain investors (it would mean you basically gave away some of your best names). In addition, for you, as a registry owner, it is not such a big risk to price your short names with higher renewals, as you can test the market, and adjust your renewal pricing based on the actual situation and your actual financial needs as time pass. You can do that as you do not need to pay high renewal fees on your own unregistered domain names.
Domain investors’ wishes, and reality.
Obviously, many domain investors will not be happy with that approach and will tell you that you should price all your names with standard renewals so “your new extension will gain certain momentum at the market” (which is usually another wording for: “we want to get your best new gTLD domain names almost for free”). Your argument would be that you do not need to sell all your short names immediately for standard renewal fees to gain that momentum, which is in most cases probably a correct statement.
So what are the opportunities for domain investors here? Unlike registry owners, when you register such very short name, let’s say with 500$ yearly renewal, you are basically undertaking high liability for yourself unless you are able to sell that name within 1 year of holding with some profit (so in our example for the price at least 501$+). Or within 2 years for 1001$+. Or within 3 years for 1501$+. So unless you are pretty sure you CAN sell the name and have a very good idea who your buyer is, or you have a significant budget and can easily wait some years, it is probably not a very good idea to get into this type of domain name. Here, more then in other areas of domain investing, imperative for successful investing is that you must really know what (and why) you are buying.
Which strings will be in demand for very short new gTLD names?
While higher premium pricing is one of the biggest obstacles when it comes to achieving good profitability with short new gTLD domains for private domain investors, it does not end there. At the moment we have hundreds of new gTLD extensions (very good source to check what is going on is here) So, (now putting pricing aside), should you buy those short names in .HOCKEY or .ONLINE or .VIP or ..SHOP or .ACCOUNTANT or .XYZ or .CENTER or .CLICK..or .PHOTOGRAPHY…..where exactly?? The list can go on. This is, of course, a 1 million-dollar question for the private new gTLD domain investors, and I am not going to answer it here. I have my strong opinion about it though, and I believe some of the new gTLD extensions are more suitable for investments in very short domain names than others. I will touch that lightly in future articles.
But in general (taking into consideration generally higher premium renewals, and hundreds of possible extensions to choose from), while I personally can consider some very short new gTLD names with higher renewals, there are definitely some better opportunities in new gTLD space in my opinion. This is what I am thinking in the year 2020— it might change in the future.
Summary of this article:
“Pizza.Elephant” type of names usually do not have a lot of intrinsic value — therefore there are massively available even in 2020, and usually not priced with premium renewals. As a domain investor, get only names which make great sense, and forget most of the automatic appraisal tools out there (nothing is going to replace your common sense, at least not yet), and also forget ideas about strong keywords in the case when the left side of the dot does not match well the right side of the dot. If they make great sense together, then it is a completely different story.
Very short new gTLD domain names — some of them have very good intrinsic value (but registries know that too, and that is reflected usually by higher renewals, which in many cases then makes them not ideal candidates for private domain investors).
The above-written article is a personal opinion of Marek Eckhaus, a private domain investor, and Founder and CEO of Brands.International. Although a large effort is made to keep articles up-to-date, it might contain inaccuracies as the internet is developing fastly. This is not investment advice under any circumstances. Never invest in anything you fully do not understand, as if you do, you most probably will lose your money. Always make your own full due diligence. To connect with me write to email@example.com