2014-10-06

Dear Domainers, 3 Year Market Forecasts On New gTLDs Are Worthless

Want to be taken for an easy mark? Trot out your "strategy" as a domain name "investor" based on some analyst's 3-year market forecast, like the one referenced in yesterday's post--by the way there are hundreds, if not thousands, of analysts just like him out there--and their 3 year market forecasts? All worthless. Stocks, bonds, new gTLDs, whatever. Note that I am talking about "market forecasts," not a report on a specific company based on hard performance data, management disclosures and projections, and other relevant data like this.

Why are market forecasts worthless? As pointed out yesterday, there are too many variables and biases to make an accurate overall market forecast one year out, much less three years out. Second, forecasters, as a group, suffer from optimism bias (as almost everyone does to some degree)--but in the case of analysts, they have an even stronger incentive to go wrong on the upside:

"If you're a bear and you're right, you're respected. If you're a bear and you're wrong, you're fired." (source: Wall Street Journal)

In other words, analysts produce rosy, upside-biased market forecasts as a matter of career survival, whether they are even conscious of it, or acknowledge it. For example, as a group, forecasters have never forecast a drop in stocks since year 2000 (source: Wall Street Journal, supra).

What's even more amazing is that people put any credence in these forecasts--some are even gullible enough to pay for this kind of misinformation.

Am I surprised that increasingly desperate new gTLD registry operators are trotting out worthless "market forecasts" and getting domainer bloggers to publish this stuff as "authoritative?" No, they are in the business of separating you from your money by selling you their mostly worthless domain names, and as most new gTLDs have pathetic domain name sales numbers (some even having near zero growth), I expect to see more of the same in the future. You should too.

Caveat Emptor!

For further reading:
Economic/Market Predictions: Still Terrible | The Big Picture

William Sherden, author of “The Fortune Sellers: The Big Business of Buying and Selling Predictions.” Sherden decided to test the accuracy of leading forecasters over a multidecade period. His conclusion: Forecasters stink.

Dow 17,000? Main Street lambs led to the slaughter - MarketWatch




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