Domain Name Investing, Making Money in China with New gTLD Domains

Reportedly another 3 to 5 billion people will soon join the rest of us online, including a lot of people living in China. Domain Mondo's caveat: don't get your hopes up. Domain Mondo hates to spoil the party, but these billions will mostly be impoverished people living at subsistence levels in the developing world, or under totalitarian regimes that really do not believe in a free and open internet. For example, good luck making your pipe-dream fortune selling to the Chinese mass market your new IDN gTLDs  that some hucksters in Vegas or elsewhere assured you were a sure pathway to success. Ever hear of the Great Firewall of China? Even Zuckerberg can't make a buck in China, and he speaks the language and is married to a Chinese American who has taught him things you will never know about China and Chinese culture. But you went to some CONference, and paid money to be CONvinced, and now you are invested, and sure you can? LOL!

• Rule #1: Nobody makes money in China unless the Party approves. Even then, it will cost you. Ask Jack Ma.
• Rule #2: The Chinese have been suspicious of outsiders for centuries (mostly for sound reasons--read Chinese history). 
• Rule #3: The Party is not a big fan of self-expression, people getting their own websites online, etc. You need a web presence to sell something inside of China? Alibaba and hundreds of others will provide that for you for free--even Amazon uses a virtual storefront on Alibaba's Tmall.com! If there is a problem, with something you are selling, or more likely, saying, the Party only has to make one call to Jack Ma et al. It's a simple system.
• Rule #4: Wealthy Chinese who are domain name investors, like smart wealthy investors everywhere else, want the "gold standard"--the dot COM domain names. Watch the markets. Why dot COM? Look at alibaba.com, jd.com, mi.com, etc. The government in China actively supports and encourages Chinese companies to capture global markets, including online global markets, which means having a dot COM domain name. Anything else is considered inferior--not recognized, breaks stuff, or fails to work across the internet.

Capiche? Or as they say in Beijing, 明白了吗？

Caveat Emptor!

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Smart Money, Dumb Money, New gTLDs, Worthless Domain Names

In Wall Street parlance there's the "smart money" and the "dumb money." Dumb money falls for all the investing fads, sells at the wrong time, or is forced to liquidate at a loss. Adding insult to injury, the dumb money usually pays ridiculous fees to boot. Smart money doesn't do any of that.

How does this play out in domain name investing?

Dumb money: Follows the domaining blogs that tout every new gTLD launch, buying into the new gTLDs that come on the market, often at premium prices, with no long-term plan for development or sale.

Smart money: Follows domain name sales reports and trends (including broader trends in technology and the world), reads and does his/her own research and due diligence, selectively accruing a portfolio of domain names [e.g., short .COM domain names] that can be developed into profitable businesses or held for resale, for a profit, to another end-user.

Here's an excerpt from what a reputable, experienced domain name broker recently wrote: "... new gtlds are like the "raw land" of the domain industry: while there are properties that can appreciate in value in a very short time... the vast majority of them will remain worthless. Why is that? Well this is simply because there are not enough end users looking to brand under under a new gtld, and there are even less looking to pay a significant premium for it... " (emphasis added)


Caveat Emptor!


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Good Domain Names for Business "end with .com"

Nice article by JJ Rosen (founder of Atiba) in The Tennessean about domain names and domain name investing (at link below, excerpt follows):

Domain names still have lots of value: ".... "Good" domains for businesses are usually short, with no dashes, easy to spell, end with .com [dot com] and are easy to build a brand around [brandable]. Obtaining a good one that customers will remember can make or break a product or company. In today's world, a domain is the main component of a brand. It's golden. The value of the domain name has in effect created a new currency. Owning a desirable domain name is like holding a piece of land in an up-and-coming neighborhood. If bought at the right time and right price — then sold at the right time — it can turn out to be a great investment... Every investment has its risks, and the buying and selling of domain names is no exception. Brand new domain names are cheap but rarely have much value. Existing domain names are expensive and there is no efficient public market like a typical stock exchange to help establish a fair price... Domains are generally long-term buy-and-hold investments that are relatively illiquid compared to stocks and bonds... (emphasis added, read more at link above)


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The Bull Market in dot COM Domain Names

Recently I received a newsletter from a domain name broker at Domain Holdings which raised the question "Are we in a bubble?" after noting (among many other things) that "Assets that used to be practically worthless, like NNNNN.com, suddenly started to have face value."

I had already begun to write a post about this, but I replied via email to Giuseppe, and what follows is an edited version of my email:

The Bull Market in Dot Com Domain Names Has Just Begun: Dot Com domain names are, in effect, like a global currency but unlike, for example, bitcoins, Dot Com domain names are completely legal, regulated, easy to buy and sell worldwide in multiple currencies, and form the foundation of the global marketplace -- the internet. For example, Chinese who have wealth but find it difficult to move their wealth outside of China (for safety, security, to diversify investments, minimize currency risks, etc.), are easily able to purchase Dot Com domain names -- the gold standard of domain names. They can even put their ownership under Whois Privacy. This is an IDEAL way for anyone in the world to hold and protect assets! ALL of the world's Central Banks are destroying the value of all of the world's currencies (but they cannot touch Dot Com domain names!). US stock markets are inflated, interest rates are artificially deflated, select real estate markets are already in a bubble again, commodity prices are falling because of the state of the global economy (particularly the construction market in China), and collectible art prices are exploding -- "where to invest" is a real problem for anyone with wealth.

ICANN has destroyed the value of the new gTLDs by flooding them into the domain name ecosystem -- no one will remember hundreds of domain extensions -- but they already know and use .com (and if they are outside the US, also their country code). If you are building a website and your market is global, or you are in the US, you better build on a Dot Com domain name OR you will be solely relying on a search engine, advertising, etc., to get any traffic to your site and, even then, you will still be bleeding traffic to the Dot Com domain name! Example: the US government's healthcare.gov with massive amounts of publicity and money spent in advertising and promotion, still bleeds unbelievable amounts of traffic to privately owned healthcare.com. [And you think you can do better than the US government with your cheapo new gTLD instead of a Dot Com domain name? LOL!] The Chinese, among others, "get this" and they want the "global market's gold standard" -- .com domain names -- this is why Xiaomi (the up-and-coming Chinese smartphone/tablet manufacturer) just bought and now uses (not redirects) mi.com for their global branding and internet website.

Bottom Line: the Dot Com domain names "bull market" has just begun, with lots and lots of room yet to grow and run -- I expect Dot Com domain name prices to increase exponentially from here in the aftermarkets. Why do you think Warren Buffett's office contacted Mike Berkens for a possible consultation about domain names? [This was disclosed by Mike on a domainsherpa.com show.] As more and more people (and corporations) with wealth (cash) understand this, Dot Com domain name prices will only increase. Google is getting ready to launch 180 satellites that will provide global internet service and add 3 billion consumers to the internet's "global market." What do you think this will do to Dot Com domain name prices?*

John Poole
Domain Mondo
June 11, 2014

*Disclaimer notice: As always, note the disclaimer below (bottom of web version page) or at the foregoing link.

Update: title of post revised May 25, 2015, to The Bull Market in dot COM Domain Names


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Domain Names, Your Brain, and Domain Name Investing

Michael Berkens, The Domains: Rick Schwartz Now Owns More New gTLD’s Domains Than I Do

It's 2014 people: "Rick, you have lost your mind."

If your investments of choice are Domain Names -- just substitute those words for "stocks" in the slides below -- (hint: when you get to optimism bias, herding, and over-optimistic groupthink, think of the ICANN new gTLDs program!)

FPA Nor Cal 2014.Ppt
source: Barry Ritholtz presentation May 27, 2014


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