Are You Ready for the Implosion of Domaining? (Guest Essay - Seabass of Namepros)
Below is a guest essay from Seabass at Namepros. Seabass is one of the most experienced domainers on the forum and possesses a portfolio that most would probably die for. He has been in the game since the 1990’s and devotes us to 15 hours a day, 7 days a week to this business. Someone with this level of experience is worth listening to. Enjoy the article below:
Are You Ready for the Implosion of Domaining?
Domains on a whole, even great ones, are not going to be doing so good in a few months.
A massive tidal wave of domains getting ready to drop…..especially alternative TLDs to the .com. It will be phenomenal to watch. The extra supply will lower the purchase prices willing to be paid by other domainers. End user sales on a whole might still do ok….but not good or great…..even for the best domains.
I say this b/c I personally believe a depression is coming. A real one. Don’t get me wrong….I’m not trying to be negative…..just a realist. I think that we are going to witness one of the most devastating times in our lives and no president, Democratic….Republican….Independent….or Libertarian can stop it. It’s too strong.
There is literally a litany of reasons why this will happen with the economy:
35% more money supply in circulation ; the U.S. Gov’t going into unchartered waters with this new level of debt ; wars ; global warming disasters ; everything has been overpriced for a decade or more and consumers have been complacent about objecting to prices ; keeping up with the Joneses has risen without an inkling of rationale ; citizens tripling their historic gas usage with SUVs ; overpriced real estate ; a growing trend of immorality and greed by our leaders of our great companies ; no savings in our accounts like our Grandparents had ; a growing service industry and a contracting production industry ; offshoring ; no accountablity when something goes wrong in our country or economy ; poor schools and teachers, uneducated masses (28% of the U.S. population can’t read), etc…… I’m sure you or I could keep adding to this list.
Yes, these are broad brushstrokes that most economists would laugh off. It’s not a deep, detailed, analytical position……however the top economists that predicted this crash incorporated similar notions into their analyses when they said it was coming. Guys like Nouriel Roubini and Peter Schiff . They both are still espousing the danger which is coming.
On a side note kinda’, if you have not yet seen this video of economist Peter Schiff calling the collapse then you owe it to yourself to watch it. It is surreal how he nailed what was coming :
http://www.youtube.com/watch?v=2I0QN-FYkpw
This is what were are dealing with……and it is somewhat a separated yet still related to coming collapse of domaining.
Here are my bold predictions regarding domains, domainers, G and Y, and the parking companies in relation to "domaining" only :
1. 70% + of current domainers, that exist as of today, will be out of business, or essentially out of business by summer/fall 2010. Most domainer’s portfolios are full of fluff. These guys will become extinct or marginalized to the point of irrelevance.
2. A couple of big parking companies will totally capitulate……I suspect Fabulous or Parked or couple of the big ones will go under….or have to morph into something different…..or sell out to G, Y, or another investment company. There will be several smaller parking companies to go under or get bought out.
3. Google and Yahoo will see this bad period as an opportunity to lower payouts more. Why? If parking drops 25% naturally, without a influential hand lowering payouts, for example, then it would be an opportunity for G and Y to lower payouts even more in order to force domainers to drop their domains, thereby undercutting us and helping to nix potential competitors to G or Y, and opening up many domains for new registrants that could become buyers of advertising. This means G and Y receive money for ads instead of pay out to domainers. Microsoft might, just might, step in with a parking platform to save us…..but don’t count on it.
4. An insane escalation of UDRPs and lawsuits will ensue. UDRPs already doubled between 2007 and 2008. What does that tell you about the future? Also, how do you make more money in a down economy when you can’t grow your market more though more advertising? You take your competitor’s share. That means coming after the eyeballs behind the domainer’s domains.
5. ICANN may pass some unfriendly terms for domainers. Go look at the minutes for the
icann-starts-working-group-on-registration-abuse-policies-wgrap-is-domain-parking-an-abuse
6. Advertisers will lower RPC and many will just plain stop advertising. It started last fall…..but many are still dropping off like flies. I’ve been watching them pull off my pages, and then when checked at G or Y……they are not there either. When these advertisers stop advertising then the parked pages lose advertiser depth and that will force the RPC down even further since the remaining advertisers don’t have to compete with those advertisers that pulled out. This exact thing will lower the CTR also. Why? Because in a poor economy generally the scammy and arbitrage ads generally do the best since they can be the most lucrative. The honest hard-working retailers oftentimes don’t have that profit margin to keep playing the PPC game or they have fixed overhead. Arbitrage has no overhead really……and scammy ads usually selling something intangible like an ebook or report, etc….. If that is the case then folks will not click on those poorer quality ads as much, which means even lower earnings.
7. Surfers are just getting smarter. They are tired of these parked pages. It shows in the uniques of the last few years with total daily uniques dropping. Ask any parking co. and they will tell you it is not true. Yea…right! Just go run four years of stats on some of your domains and you will see what I mean…..there a downtrend in uniques. This will continue because the parking companies are complacent. Once they realize they need to change it will essentially be too late for them…….they will have been burnt already. Expect them to start to scramble by fall to change the status-quo since they will begin to wake up and see domainers take their domains out of parking and develop them due to no other alternative, meaning they will need more cash than what parking can give them. Domainers will literally be forced out of parking in droves simply in an attempt to make ends meet through development. It won’t be their choice. They will have to.
8. All these things combined will take the wind out of domain auctions and lower prices will be had for many domains.
9. If you are sitting on cash…..there is a chance to do something like Frank Schilling did in 2000-2002. Domainers will be forced to drop quality domains. IF you have cash you could become very wealthy if you execute correctly.
Sadly, there is a perfect storm brewing. But, what does this all mean?
Well, remember these are predictions and nobody can predict the future right all the time. However, I have a good unpublished track record of calling the future. I called it in 1995 by buying lots of domains, I called it when I bought AOL for $22 a share in 1998 and it went up and split eight times making me enough to buy a house at a young age, I called it when I got back into heavy domain buying in 2002 (albeit a little late), I called it last Jan. when I was freaking out my friends by calling them incessantly for months telling them to get ready for the collapse. So, that said, I am fairly confident in what I say. I study/buy domains for 15+ hours a day, seven days a week most of the time…..like many of you who are reading this. If you do work that hard at domaining…..maybe you can relate to what I am seeing.
Wow….I just realized I sound like Rick Schwartz with that last statement. But, then again, I agree with most of what he says…..so maybe we think alike.
Am I wrong? I suppose time will tell. Either way, just remember the old saying "an ounce of prevention is worth a pound of cure". If you are not already prepared for the coming depression my advice would be to sell a name(s) that can give you a one to two year cushion for the really dark days coming. That one domain, or several domains, might save the rest of your portfolio and your home…..maybe even a marriage.
IMPORTANT: The window to sell a domain for what it is worth is closing. Sell sooner than later…..if you need the cash. Liquidity will be worse as the months roll on.
Good luck…..and I hope to join you on the other side where the dark, ominous clouds have broken and flowery meadows, cobalt blue water, and green skies of $$$ await us. Why will there be $$$ on the other side? Because we will be back in control once the dog fight is over.
Regards,
"Seabass" member from NamePros.com
Well thought out article. Thanks!
Domaining dystopia, intersting read, I always pay attention when seabass is posting/commenting on namepros. Cheers
I agree completely with what Seabass is saying. Folks like Roubini and Schiff were disregarded as kooks not long ago, but what is most disturbing is that many economists, financiers, and business leaders are even now, whistling past the graveyard.
I was talking with my partner about just how pessimistic I am about the market (stock) and the overall prospects for the economy, and he pointed at yesterdays close (Dow 6,726) as ‘the technical bottom everyone has been looking for’ according to long term technical analysis.
What is going on right now has nothing to do with technical factors of stocks, subprime loans, or the safety of banks. We are in a macro-economic feedback loop that will only drive earnings, and in turn, asset prices in general, much lower.
Valuing assets based on future earnings expectations certainly supports Seabass’ assertion that the domain market will implode, as it also supports sound reasoning that stock prices will continue to fall.
Thank you for sharing those sobering views. All signs point indeed in the same direction, not only in the US (I live in Europe and just returned from a business trip to Asia).
What is difficult is to assess how much time this could last, and what the consequences for domain names will be after the next few months.
Anyway, better to be prepared for the worst, and to discern opportunities too, as Seabass rightly suggests.
What a load of bollox. “The sky is falling” technique never fails to send some lemmings down the hill. Yeah, sell now, at the low point, idiot. If the market has reached a critical point, you don’t sell - you hold. Markets rebound. Panic selling is the best way to make those with the cash really happy.
We’re suppose to take advice from someone who goes by “Seabass?” What are some of Seabass’ to “die for” domain names?
I am not disagreeing with you on this but domains will not just collapse like that. They are held up by end users and search. Regardless of what the economy is doing unless everyone stops using the internet or google(or any other major search engine)changes things domains will always be valuable to someone.
As much as it has been said over and over again, domains are like real estate. They maybe down in value but they are worth something. So unless we stop living in houses they will sell regardless of the state of the economy.
A tidal wave of domains may be dropping, but many are not good quality and don’t really affect the sales of better quality names. Domains aren’t the same as with gold or oil in supply and demand, each one is unique and has it’s own values, so dumping more crap names back in the pool might not change much.
I agree we probably aren’t at the bottom yet, but it must be close because you are starting to hear the doomsday scenarios from people. It is soon becoming ‘irrational pessimism’ if you know what I mean, I’ve heard of gold parties in people’s homes where friends bring gold jewelry, etc. to sell to an appraiser. With extreme acts like this we must be near a bottom.
The future of the internet still looks good, more people going online, using it more, and advertising online is still growing compared to traditional media. You need a domain name to be online. Sure domains won’t be unaffected by this downturn, but like you said use this opportunity if you can to position yourself for when things get better. Good luck!
So I read it all.. Not bad.
Some I agree with some not so much but what I will have to say is that there is definitely a lot of money to be made from arbritrage right now and domain investments as well.
Take advantage of the opportunities.
They don’t last long
Jump on em !
Best,
Mike
Gunner – thanks for your post. You make some interesting points. The market doesn’t do what we think it should and large percentage swings occur in both directions. We’ve gotten used to it on the upside, but are we prepared for it on the downside.
Ross – I’m still selling names, just not in the quantities and for the prices I was previously – still the margins are pretty good – but like most of us I like the easy money
Robb – I agree with quite a lot of what you say, but the old saying applies here: the market can stay irrational longer than you can remain solvent. I just hope it doesn’t stay irrational for too long.
Thanks,
James
Interesting viewpoint, even though I’m going to disagree with certain specifics, I am going to agree with the intent. I feel too a crash is coming in real world economy, however, I don’t think domains will be as badly hit.
Most domainers are already moving towards development, minisite, blog, whatever. Plus a lot of people have already optimised their portfolios to retain the revenue names. People who have no income streams to support renewals will fail, more likely than not.
But one thing you fail to consider… with more people out of jobs, the web offers a low entry barrier for people looking for alternate sources of income. And since it is global, a demand for exactly what you recommend people should sell off might actually take you by surprise.
Seems like the best thing to do right now is to shut down all domaining activity for 2-3 years, and hang on to your day job like a leech.
There is nothing better than getting a “doom and gloom” prediction from a guy who doesn’t reveal his real name and calls himself a tasty morsel of food I like to order when it’s caught fresh and present as a “Special” on the menu.
You make your own history, people. You act smart, buy smart, sell smart, you will push forward and continue to make money. For every “lack” of an answer, someone will come up with a respectable solution quickly. For every doomsayer, they make money selling their woeful tales, and then civilization continues forward, growing even ever stronger.
Unless King Neptune is posting here, I am giggling reading “seabass” reports, although two or three of his articles are about enough for me.
Thanks for the Fish Tales, Namecake!
Stephen Douglas
Successful Domain Management™
Blog: Successclick.com
DomainRelevance.com
“Own Your Competition™”
I guess gloom and doom is always possible, and I think alot of names have already fallen from the sky to a degree. However, charts don’t show much more than the usual downturn we’ve all been expecting, and performance is still significantly better than the DOW or Nasdaq.
“Seems like the best thing to do right now is to shut down all domaining activity for 2-3 years, and hang on to your day job like a leech.”
I completely disagree. Now is exactly the time for people that are smart, dedicated, and hard working to cast out on their own and rely on their own drive and ambition to succeed.
Those who rely solely on an employer to keep them employed may find themselves in a pinch if they put all of their eggs in that basket.
Kick his ass, Seabass..
“I completely disagree. Now is exactly the time for people that are smart, dedicated, and hard working to cast out on their own and rely on their own drive and ambition to succeed.”
Thanks for saying that Domain Superstar. The US is effectively insolvent according to the latest Forbes article. And the people who will bring prosperity back must be the SMBs, brick by brick, domain by domain. Not the MNCs, not the people with names to die for.
Sharks are smelling blood now, they are just encouraging panic sell hemorrage of the best domains. Thanks for reminding all of us that its not what domains you have, its what you do with it in the next 2 years (at least) with your self-determination, hard work, and ingenuity and not short-selling your value.
[...] a very interest post on NameCake.com, the guest author, laid out some good arguments about the economy and how the domain industry [...]
I believe Seabass is right on the money. And I usually don’t agree with anybody, or anything.
Go ahead and listen to the Ben Stein’s of the world, and the idiot in the video that said the DOW would hit 16,000. Nice predictions fella’s.
Somebody, anybody - you tell me just how things for the immediate future can get better? Thousands of jobs are lost everyday, we’re spending money faster than the fools can print it, banks, insurance, finance, housing, auto, etc. are all tanking, and you think your “domains” and this industry won’t get hit? What Domainer is gonna’ have the money to buy your “oh so special” 4 letter domains you thought wre “golden” a year ago? Last I looked you can pick most up for $10 a piece today. Wasn’t it just a year ago how the mighty Stein’s of the Domaining World were spewing about how “they’re sold out” and gonna’ double or even triple in a year? Wow, geniuses.
I’m not one to call for the “sky is falling”, but I will tell you this, if some of the “everything’s peachy” crowd end up on my door when the shit hits the fan, well we’re gonna’ just bury them out back no questions asked and say “I told ya’ so”, just like the Stein’s kept telling me so.
I would rather wear a life preserver and go through the storm - then wait ’till the last minute and scramble. Then again, there’s a bunch of folks out there calling for calm seas and sunny skies while you net worth, stocks and retirement disappear listening to their music (and while your truck is repo’d). Oh, I must have missed the point that now you’ll have more money to buy high priced domains, right?
Bottom line is no person, business or industry is exempt. And last I looked, you don’t print and spend more money to save money.
Be smart. Plan ahead and I’m tellin’ ya - don’t knock on my door.
It’s just beginning.
L2 Lumpy
Wow……it looks like Fabulous is capitulating like was said in the predictions. Merge or die.
http://domainnamewire.com/2009/03/11/domain-name-industry-acquisition-watch/
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