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Hello friends,
This is the fifth of 10 articles, which, I hope, can help members (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 here are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which will be ready on December 15, 2017, and you will be able to get it here.
Book is little late but hopefully will be finished by this date
Today I will continue discussing pricing of new gTLD domain names and will mainly share some of my thoughts about their appraisals.
If you have not done that yet, you can read the first 4 articles here:
New gTLDs Investment Mistakes and Opportunities (Part 1 - pizza.diamonds & short domains)
New gTLDsInvestment Mistakes and Opportunities (Part 2 - chaotic versus structured portfolios)
New gTLDs Investment Mistakes and Opportunities (Part 3 - big guys, flippers and builders)
New gTLDs Investment Mistakes and Opportunities (Part 4 - broad & narrow extensions)
Disclaimer:
all ideas here are just my personal opinion. This is not an investment advice of any sort. My opinions might prove wrong, as, despite the fact that I tried to understand things I describe here the best I could, I might fail in that in some cases. You must, therefore, do your own due diligence before making any investment. I am a private investor and I have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
Part 5 - take appraisals with pinch of salt (and that is particularly valid for new gTLD names)
"Please appraise my name". "What do you think is the value of my name?"
These are questions we hear every day. People are asking them on forums (we have a special section here at NamePros) here, and various automatic tools were developed for this purpose. Following thoughts will be particularly useful for members who are just starting with domaining, as I am sure all veterans already know everything that will be mentioned below. Still, there will be no harm done when we repeat those things, and I will do this mainly from new gTLD perspective.
1. Who is asking for appraisal
There are 2 kinds of people - some of them want to really know the opinion of others (usually first-time visitors, or people who just started, it can be the end user who happens to own some nice domain and would like to learn more about what kind of value it can have, etc). The other large group of users are people who are using appraising section as free promotion for their domains - in my opinion, it can partly work, but many users (I am one of them) stop to give appraisals to those members - there is a difference between helping others so they learn something and helping others to bump their threads for exposure. And in many cases it is mixture of both.
2. What kind of appraisal you will usually get
When it comes to quality of appraisals for legacy extensions (.com, .net, .org or ccTLDs - which are country codes like .de or .co.uk) appraisals are usually very reasonable in my opinion. People which are providing them usually have long years of experience selling domains in those extensions. In addition, there are large databases of existing sales, like namebio.com, and data accumulated through years can give some clear indication of value.
Experience combined with sufficient amount of data = pretty good appraisal/estimation of market value.
I also believe, it can be good idea for owners of more valuable domains not just rely on public, and free, appraisal opinions, but to actually contact few established brokers. It is also great to use Professional Domain Appraisal section in Namepros here where, if experienced veteran will reply, you can be pretty sure it will be spot on.
When it comes to new gTLDs, a situation is much different. Although some of the new gTLD extensions started in 2014, some went live in 2015, 2016 and 2017, and some are still expected. Therefore, on many of them we do not have almost any data available (selling prices and volumes).
Another part of the equation, experience, is also not there, yet. Even large new gTLD portfolio holders cannot have experience with all new gTLD extensions, and because the new gTLDs are so new, time experience is just that of 2-3 years of holding. That is all. Without enough data and enough experience, appraisals are just becoming personal opinions in most cases.
So when you have new gTLD name and have it appraised by others, be always very careful who do you listen to. People who invest in them can usually give you more precise information, comparing to people who have not invested in them. There are many domainers who do not like new gTLDs (usually because they hold lot of .com names and gTLDs are in direct competition, but there are variety of different reasons too) - if they will tell you their opinion about your new gTLD name, I advise to take it with a proverbial pinch of salt. On the other side, If some hardcore new gTLD fans (many of them heavily invested in them) will tell you their opinion about your name, you also need to take this with a pinch of salt, although this time it will be in another direction.
The conclusion is this: take appraisals of new gTLDs just as an inspiration. If the appraisal is well explained and reasoned, it usually has larger value then short sentences like "reg fee" or "crap"...I recommend not to take such statements into consideration. If someone tells you that your name is "crap", they should also explain in detail why.
3. Appraisals of new gTLDs ALWAYS need information about renewal price!
Traditionally, when there are appraisals of legacy names, in extensions like .com or .org, it is enough to say the price. This name is worth 10k, and this one is maybe 100k. Other factors, apart from possible TM issues and history of the domain have a smaller role there, as renewals for those extensions are plus minus always the same, some slight differences between various registrars.
In new gTLDs, the situation is very different. Factors of possible TM issues stay there, and history of the domain too (while this is at the moment usually not significant), but as there are hundreds of new gTLD extensions, each of them has its own standard renewal price. That price varies often significantly between various registrars. There are tons of promotions, which also alters the price. And of course, many of higher quality domains are priced outside of standard renewal price, with premium pricing. This can be in some cases just higher one time fee, and then the domain continues with standard renewal fee, or it can be higher pricing for each year of renewal.
So when we appraise new gTLD name, we need to know exactly what is its renewal, and how this renewal will behave in years to come. High premium renewals will automatically bring value of domain name down, comparing to a situation when this domain would be secured with lower standard renewal. The lower the renewal, the better for your future buyer.
So if someone appraises your new gTLD domain name even without asking about its renewal fee, it is clear that the person will provide you usually with total nonsense.
There are few quick ways (and free, at the moment of writing) how I check whether domain has standard or premium renewal fee (but take it only as an indication, because there are some discrepancies for some names which I have found). I do following 5 verifications get some idea:
a) I check domain at mrdomain.com, it displays renewal prices automatically even if you do not own domain.
b) I check domain at tldpros.com
c) I would also check domain directly at my registrar (starting the "add years" process, and see what prices are offered). In most registrars the domain will be marked with some symbol indicating it is "Premium", but I am not be that sure this is really valid for all registrars. To see if pricing of your domain is different then standard pricing for extension your domain is using, compere pricing of your domain with something like "dskjahqwertyqwerty.gTLD where gTLD is your extension. If the pricing is the same, it is a further step to confirm that your domain has a standard renewal attached to it (but it still does not prove that 100%, as some domains where premium renewals are attached have the same price as those with standard renewals - still, there are very good reasons you should learn whether your domain has standard or premium renewal attached, no matter what is the actual price of it - more about this will be explained in the book).
d) I sometimes would initiate transfer out process just to confirm what price the particular domain will have at different registrars.
e) For higher valued domains, you should definitely call your registrar (or your future registrar if there is a transfer out) and confirm the prices of transfer, and future renewals, with the customer support, best in writing.
Just to note, I found different pricing (and differences are significant) for some new gTLD domains between tools from a) and b), so apparently to be as sure as possible, I would recommend to do all 5 steps, particularly if you are about to do some larger transaction. Remember that most buyers have no idea about different pricing of new gTLD names, and I guess it is our roles as domain investors and sellers to educate them (after you educate yourself at first place, of course). If you do not do that and you will sell domain name to buyer who will find out (at his first renewal) that that renewal is not what he/she expected, it can become a big problem for seller.
4. Even when perceived value is great, think of competition
Appraisal of new gTLD names should always take into account answer to the following question:
how many similar domains (or domains with similar quality usable for a particular purpose) can we create?
This is the reason why I personally prefer to invest in keyword.gTLD form of new gTLD domain names, instead of keyword1keyword2.gTLD form (although there are exceptions, as always). For example, let's appraise name:
mynicer*life (which is available to register at the moment)
It kind of makes sense and is nice, but we can create following alternatives:
yournicer.life, ournicer.life, livenicer.life, getnicer.life, enjoynicer.life, makenicer.life, and dozens of others.
The probability that someone likes mynicer.life so much that he or she will pay a significant premium to domainer holding it, is coming close to 0, as so many alternatives can be created for reg fee.
The previous sentence is a one I use again and again on this forum in appraisal section, and as I see the names registered, I am sure I will be using it for long time to go. It is logical, but it seems like lot of people are simply not getting it. Maybe in few years in future keyword1keyword2.gTLD form will become much more reasonable for me to invest in, but at the moment I personally go for it only with exceptionally strong keywords.
Btw, if there are some of you who sold keyword1keyword2.gTLD for significant amount of money and are willing to share, pls comment below
5. When you appraise, think of probabilities (very important)
There are a lot of combos in new gTLDs (keyword.gTLD making great sense together), which can sell for low - mid-XXXX. There are some combos where reported sale prices are now at XXX XXX range (we still need to see first 7 figure sale, I guess). So it can well happen that you own names (mainly when you started early with new gTLDs) which are of similar quality of those sold.
Now, when you ask me what such a name could sell for, I can immediately google and see, wow, similar name sold, in let's say 2016, for mid-XX XXX. And of course, there is no reason why your name should not sell for the same amount of money if all parameters are almost the same. So the output of such appraisal would be, naturally, that your name can sell for mid-XX XXX too.
But...there is a big BUT, which is called probability. There are around 20 millions of new gTLDs names registered in 2017, and, let's say, some hundreds of reported large sales, so far. That means that for each fantastic sales there are much much more domain names which did not sell at all.
To get little bit math into that (sorry for those who does not like it), one can assume that we can assign to each individual portfolio of domain names certain probability. This probability will tell us, roughly said, how many domain names we will sell per given year for every 100 names in that portfolio. When we say "sell", we consider only sales which are significant, (significant in this context means that the selling price must be at least 100x the purchase price of the sold domain. This is just an example, various people are using various mathematical models, so it might be 80x, 100x, 200x, 1000x or maybe only 50x, depends in what kind of domains you invest, how you use promotions, etc)
So let's say, for example, that I have 700 domain names, and I sell 7 names/year for prices which can be considered "significant". If I observe it for 2-3 years and it continues like this, I can say that probability of a sale for a domain in my portfolio is around 1%. That means, in other words, I will sell in average 1 domain per 100 registered domain in any given year. If I sell each year 2 names for each 100 names, this probability would be 2%, and so on.
It is clear that for portfolios with fantastic names, which were secured with low renewals early, this probability is much higher comparing to bad portfolios with crappy names. Each domain investor knows (or should know) his figure.
So why is this important?
It is important, because even when you register a great domain name where most of the appraisals will be around 10k, for example, that still does not mean it is going to be profitable investment.
I will show it in the following example: recently, I got an email from my friend and new gTLD domainer, telling me he is going to register a great name, which dropped recently. He asked me what do I think he can resell it for, and whether I think it is an good idea. I am getting such emails pretty often now, as, I assume, people who knows me know that I am not going to snatch the name in question and register it for myself
Apparently, the name was an excellent combo, it really made sense with tons of end-users who would benefit from it. I was immediately thinking about $5000 for an ideal end user in 2017 and I was ready to say my friend that I think it is perfect. But after I checked its renewal price, I changed my mind. It was about $500 year.
Why that change of opinion? Math. I knew, from the information my friend gave me, that probability of significant sale is around 1% for a portfolio of my friend (which is ok, and he picks up some good names). The name in question was imo at that level, and I was thinking - if it just sits in his portfolio, without any outbound effort which would increase it, it would be just that probability of 1%. Which means, that in any given year, he would have to pay $500 renewal, but would have only $5000*0.01 = $50 sale equity....that does not make any mathematical sense.
To make it sensible for domain investor, either the name should have $50 renewal fee (even then this would be still an even exercise), or the realistic resell price would need to be around $50 000 instead of $5000 (which I was almost 100% sure was unrealistic for this name in 2017), or he would need to boost his probability from 1% to 10% (which is again pretty unrealistic, unless he would become sale guru and focus 24/7 on domain sales, which he is not).
Saying that, I think it is not a problem of the name or its pricing. $500/year can be acceptable for large end user who will have ability to commercially utilize the name. But the name was not suitable for quick domain flip, or even for medium, few years hold, considering mathematical parameters described above.
There are plenty of much better opportunities within new gTLDs.
So, do not care only about appraisal value itself. It can realistically be pretty high, but your sale probabilities also matter, together with a renewal fee of a domain name in question. It all must match the equation, otherwise, the investment is not going to be profitable.
I hope it helps a bit
Happy investing in new gTLDs, and lot of amazing sales!
lolwarrior
.
This is the fifth of 10 articles, which, I hope, can help members (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 here are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which will be ready on December 15, 2017, and you will be able to get it here.
Book is little late but hopefully will be finished by this date
Today I will continue discussing pricing of new gTLD domain names and will mainly share some of my thoughts about their appraisals.
If you have not done that yet, you can read the first 4 articles here:
New gTLDs Investment Mistakes and Opportunities (Part 1 - pizza.diamonds & short domains)
New gTLDsInvestment Mistakes and Opportunities (Part 2 - chaotic versus structured portfolios)
New gTLDs Investment Mistakes and Opportunities (Part 3 - big guys, flippers and builders)
New gTLDs Investment Mistakes and Opportunities (Part 4 - broad & narrow extensions)
Disclaimer:
all ideas here are just my personal opinion. This is not an investment advice of any sort. My opinions might prove wrong, as, despite the fact that I tried to understand things I describe here the best I could, I might fail in that in some cases. You must, therefore, do your own due diligence before making any investment. I am a private investor and I have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
Part 5 - take appraisals with pinch of salt (and that is particularly valid for new gTLD names)
"Please appraise my name". "What do you think is the value of my name?"
These are questions we hear every day. People are asking them on forums (we have a special section here at NamePros) here, and various automatic tools were developed for this purpose. Following thoughts will be particularly useful for members who are just starting with domaining, as I am sure all veterans already know everything that will be mentioned below. Still, there will be no harm done when we repeat those things, and I will do this mainly from new gTLD perspective.
1. Who is asking for appraisal
There are 2 kinds of people - some of them want to really know the opinion of others (usually first-time visitors, or people who just started, it can be the end user who happens to own some nice domain and would like to learn more about what kind of value it can have, etc). The other large group of users are people who are using appraising section as free promotion for their domains - in my opinion, it can partly work, but many users (I am one of them) stop to give appraisals to those members - there is a difference between helping others so they learn something and helping others to bump their threads for exposure. And in many cases it is mixture of both.
2. What kind of appraisal you will usually get
When it comes to quality of appraisals for legacy extensions (.com, .net, .org or ccTLDs - which are country codes like .de or .co.uk) appraisals are usually very reasonable in my opinion. People which are providing them usually have long years of experience selling domains in those extensions. In addition, there are large databases of existing sales, like namebio.com, and data accumulated through years can give some clear indication of value.
Experience combined with sufficient amount of data = pretty good appraisal/estimation of market value.
I also believe, it can be good idea for owners of more valuable domains not just rely on public, and free, appraisal opinions, but to actually contact few established brokers. It is also great to use Professional Domain Appraisal section in Namepros here where, if experienced veteran will reply, you can be pretty sure it will be spot on.
When it comes to new gTLDs, a situation is much different. Although some of the new gTLD extensions started in 2014, some went live in 2015, 2016 and 2017, and some are still expected. Therefore, on many of them we do not have almost any data available (selling prices and volumes).
Another part of the equation, experience, is also not there, yet. Even large new gTLD portfolio holders cannot have experience with all new gTLD extensions, and because the new gTLDs are so new, time experience is just that of 2-3 years of holding. That is all. Without enough data and enough experience, appraisals are just becoming personal opinions in most cases.
So when you have new gTLD name and have it appraised by others, be always very careful who do you listen to. People who invest in them can usually give you more precise information, comparing to people who have not invested in them. There are many domainers who do not like new gTLDs (usually because they hold lot of .com names and gTLDs are in direct competition, but there are variety of different reasons too) - if they will tell you their opinion about your new gTLD name, I advise to take it with a proverbial pinch of salt. On the other side, If some hardcore new gTLD fans (many of them heavily invested in them) will tell you their opinion about your name, you also need to take this with a pinch of salt, although this time it will be in another direction.
The conclusion is this: take appraisals of new gTLDs just as an inspiration. If the appraisal is well explained and reasoned, it usually has larger value then short sentences like "reg fee" or "crap"...I recommend not to take such statements into consideration. If someone tells you that your name is "crap", they should also explain in detail why.
3. Appraisals of new gTLDs ALWAYS need information about renewal price!
Traditionally, when there are appraisals of legacy names, in extensions like .com or .org, it is enough to say the price. This name is worth 10k, and this one is maybe 100k. Other factors, apart from possible TM issues and history of the domain have a smaller role there, as renewals for those extensions are plus minus always the same, some slight differences between various registrars.
In new gTLDs, the situation is very different. Factors of possible TM issues stay there, and history of the domain too (while this is at the moment usually not significant), but as there are hundreds of new gTLD extensions, each of them has its own standard renewal price. That price varies often significantly between various registrars. There are tons of promotions, which also alters the price. And of course, many of higher quality domains are priced outside of standard renewal price, with premium pricing. This can be in some cases just higher one time fee, and then the domain continues with standard renewal fee, or it can be higher pricing for each year of renewal.
So when we appraise new gTLD name, we need to know exactly what is its renewal, and how this renewal will behave in years to come. High premium renewals will automatically bring value of domain name down, comparing to a situation when this domain would be secured with lower standard renewal. The lower the renewal, the better for your future buyer.
So if someone appraises your new gTLD domain name even without asking about its renewal fee, it is clear that the person will provide you usually with total nonsense.
There are few quick ways (and free, at the moment of writing) how I check whether domain has standard or premium renewal fee (but take it only as an indication, because there are some discrepancies for some names which I have found). I do following 5 verifications get some idea:
a) I check domain at mrdomain.com, it displays renewal prices automatically even if you do not own domain.
b) I check domain at tldpros.com
c) I would also check domain directly at my registrar (starting the "add years" process, and see what prices are offered). In most registrars the domain will be marked with some symbol indicating it is "Premium", but I am not be that sure this is really valid for all registrars. To see if pricing of your domain is different then standard pricing for extension your domain is using, compere pricing of your domain with something like "dskjahqwertyqwerty.gTLD where gTLD is your extension. If the pricing is the same, it is a further step to confirm that your domain has a standard renewal attached to it (but it still does not prove that 100%, as some domains where premium renewals are attached have the same price as those with standard renewals - still, there are very good reasons you should learn whether your domain has standard or premium renewal attached, no matter what is the actual price of it - more about this will be explained in the book).
d) I sometimes would initiate transfer out process just to confirm what price the particular domain will have at different registrars.
e) For higher valued domains, you should definitely call your registrar (or your future registrar if there is a transfer out) and confirm the prices of transfer, and future renewals, with the customer support, best in writing.
Just to note, I found different pricing (and differences are significant) for some new gTLD domains between tools from a) and b), so apparently to be as sure as possible, I would recommend to do all 5 steps, particularly if you are about to do some larger transaction. Remember that most buyers have no idea about different pricing of new gTLD names, and I guess it is our roles as domain investors and sellers to educate them (after you educate yourself at first place, of course). If you do not do that and you will sell domain name to buyer who will find out (at his first renewal) that that renewal is not what he/she expected, it can become a big problem for seller.
4. Even when perceived value is great, think of competition
Appraisal of new gTLD names should always take into account answer to the following question:
how many similar domains (or domains with similar quality usable for a particular purpose) can we create?
This is the reason why I personally prefer to invest in keyword.gTLD form of new gTLD domain names, instead of keyword1keyword2.gTLD form (although there are exceptions, as always). For example, let's appraise name:
mynicer*life (which is available to register at the moment)
It kind of makes sense and is nice, but we can create following alternatives:
yournicer.life, ournicer.life, livenicer.life, getnicer.life, enjoynicer.life, makenicer.life, and dozens of others.
The probability that someone likes mynicer.life so much that he or she will pay a significant premium to domainer holding it, is coming close to 0, as so many alternatives can be created for reg fee.
The previous sentence is a one I use again and again on this forum in appraisal section, and as I see the names registered, I am sure I will be using it for long time to go. It is logical, but it seems like lot of people are simply not getting it. Maybe in few years in future keyword1keyword2.gTLD form will become much more reasonable for me to invest in, but at the moment I personally go for it only with exceptionally strong keywords.
Btw, if there are some of you who sold keyword1keyword2.gTLD for significant amount of money and are willing to share, pls comment below
5. When you appraise, think of probabilities (very important)
There are a lot of combos in new gTLDs (keyword.gTLD making great sense together), which can sell for low - mid-XXXX. There are some combos where reported sale prices are now at XXX XXX range (we still need to see first 7 figure sale, I guess). So it can well happen that you own names (mainly when you started early with new gTLDs) which are of similar quality of those sold.
Now, when you ask me what such a name could sell for, I can immediately google and see, wow, similar name sold, in let's say 2016, for mid-XX XXX. And of course, there is no reason why your name should not sell for the same amount of money if all parameters are almost the same. So the output of such appraisal would be, naturally, that your name can sell for mid-XX XXX too.
But...there is a big BUT, which is called probability. There are around 20 millions of new gTLDs names registered in 2017, and, let's say, some hundreds of reported large sales, so far. That means that for each fantastic sales there are much much more domain names which did not sell at all.
To get little bit math into that (sorry for those who does not like it), one can assume that we can assign to each individual portfolio of domain names certain probability. This probability will tell us, roughly said, how many domain names we will sell per given year for every 100 names in that portfolio. When we say "sell", we consider only sales which are significant, (significant in this context means that the selling price must be at least 100x the purchase price of the sold domain. This is just an example, various people are using various mathematical models, so it might be 80x, 100x, 200x, 1000x or maybe only 50x, depends in what kind of domains you invest, how you use promotions, etc)
So let's say, for example, that I have 700 domain names, and I sell 7 names/year for prices which can be considered "significant". If I observe it for 2-3 years and it continues like this, I can say that probability of a sale for a domain in my portfolio is around 1%. That means, in other words, I will sell in average 1 domain per 100 registered domain in any given year. If I sell each year 2 names for each 100 names, this probability would be 2%, and so on.
It is clear that for portfolios with fantastic names, which were secured with low renewals early, this probability is much higher comparing to bad portfolios with crappy names. Each domain investor knows (or should know) his figure.
So why is this important?
It is important, because even when you register a great domain name where most of the appraisals will be around 10k, for example, that still does not mean it is going to be profitable investment.
I will show it in the following example: recently, I got an email from my friend and new gTLD domainer, telling me he is going to register a great name, which dropped recently. He asked me what do I think he can resell it for, and whether I think it is an good idea. I am getting such emails pretty often now, as, I assume, people who knows me know that I am not going to snatch the name in question and register it for myself
Apparently, the name was an excellent combo, it really made sense with tons of end-users who would benefit from it. I was immediately thinking about $5000 for an ideal end user in 2017 and I was ready to say my friend that I think it is perfect. But after I checked its renewal price, I changed my mind. It was about $500 year.
Why that change of opinion? Math. I knew, from the information my friend gave me, that probability of significant sale is around 1% for a portfolio of my friend (which is ok, and he picks up some good names). The name in question was imo at that level, and I was thinking - if it just sits in his portfolio, without any outbound effort which would increase it, it would be just that probability of 1%. Which means, that in any given year, he would have to pay $500 renewal, but would have only $5000*0.01 = $50 sale equity....that does not make any mathematical sense.
To make it sensible for domain investor, either the name should have $50 renewal fee (even then this would be still an even exercise), or the realistic resell price would need to be around $50 000 instead of $5000 (which I was almost 100% sure was unrealistic for this name in 2017), or he would need to boost his probability from 1% to 10% (which is again pretty unrealistic, unless he would become sale guru and focus 24/7 on domain sales, which he is not).
Saying that, I think it is not a problem of the name or its pricing. $500/year can be acceptable for large end user who will have ability to commercially utilize the name. But the name was not suitable for quick domain flip, or even for medium, few years hold, considering mathematical parameters described above.
There are plenty of much better opportunities within new gTLDs.
So, do not care only about appraisal value itself. It can realistically be pretty high, but your sale probabilities also matter, together with a renewal fee of a domain name in question. It all must match the equation, otherwise, the investment is not going to be profitable.
I hope it helps a bit
Happy investing in new gTLDs, and lot of amazing sales!
lolwarrior
.
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