There Could be Major Losses for Domainers Jumping on the Numeric Domain Train

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It’s something we don’t talk about much but should probably talk about more. The Chinese domain name market is on fire and numeric domains are without a doubt hotter than they have ever been. While I get NN.com, NNN.com and NNNN.com’s holding real value over time there have been concerns about the prices of 5N and 6N .COMs and if these prices really reflect market value.

I think we’re entering into exciting, but also dangerous territory.

Here’s why it’s dangerous. The value of 5N, 6N, even 7N domain names is going up massively, in a way that I think signals competition amongst buyers a lot more than it does true increase in value. Don’t get me wrong, I think 2N, 3N and 4N domains have real potential, but at the same time, prices on these are their highest so they don’t make great flips, yet.

With all the buzz about activity from the Chinese domain market I think it’s easy for investors to go deep on trends that we haven’t seen sustain over time, trends that sadly could covert to major losses for some Domainers. Yes, 5N .COMs might be hot now, but if you buy tons of them you could be in for some sad times a few years from now.

In short, the train has left the station, it’s moving fast, and those that get on at the right time will cash in big-time. Just be careful, do your homework, and make sure that you’re not buying above fair market value and instead in a bidding war with people who have a very different investment strategy and risk profile than you.

There, it had to be said, and as you all know I’m usually nothing but positive, however I do think some fair warning should be given here. Still, to get back to my usual self, I do think there are great opportunities, the challenge is buying domains with long-term value vs. short term investor interest. At the end of the day we all know there are tons of end-user buyers for 2N and 3N .COMs but once you get into uncharted territory it’s all a calculated risk, the question is, how big of a risk?

What do you think? Comment and let your voice be heard!

Photo Credit: Matthew Stinson via Compfight cc

{ 12 comments… add one }

  • Diana Goodwin November 11, 2015, 9:21 pm

    I think 5N and 6N domains that contain a pattern repeat, a number sequence, that can be mentally associated with some already-familiar cultural phenomena or that are memorable in some other way will have hold and likely increase in value. Random digit sequences of increasing length are hard to remember and have no meaning for most people.

    Reply
    • Morgan November 13, 2015, 8:37 am

      @Diana – great point and I agree, if there is a good repeating pattern then I get it, but the vast majority, esp. in the 6N .COM space I think aren’t going to have much value over the next 3-5 years.

      Reply
  • John November 11, 2015, 9:35 pm

    Morgan-you are so correct with this piece. Having been in the financial markets my whole life I can tell you this-this time is not different. When you see Rick Swartz etc selling for major prices it’s not time to buy. That said-myself I would rather buy numeric .io right here-right now and see if they catch on-if they don’t it’s not a big loss-if they do it’s a major home run. Many Chinese are starting to buy them-quietly. If there were a way for me to short this numeric domain market -the 5 6 7 NNN I would-with everything I have-right here-right now.

    Reply
  • Hire.Domains November 11, 2015, 9:52 pm

    I think it is actually better to go longer and have good patterns, I the 9N market will boom! one day The internet is only young at this point, if going short, pay extra for something memorable I would suggest

    Reply
  • Leon November 12, 2015, 2:46 am

    Easily one of the best posts I’ve read all year.

    Reply
  • Eric Borgos November 12, 2015, 8:10 am

    One of the signs of a bubble is when investors jump in expecting huge quick returns, without really knowing about or caring about what they are investing in. That is what is happening now. Another sign of a bubble is when all the players say, after being confronted with all the various warning signs, that this time it is different, and it is not a bubble. That is what is happening now. On the other hand, bubbles like this can be huge opportunities, because people like me say it is a bubble but then it still keeps going up and up. So, it may be better to invest now and ride the trend until it is all over, but that does not take away from the fact that it is likely there eventually will be a big crash.

    Reply
  • John November 12, 2015, 8:25 am

    Could be a Climax Top occurring with all this volume activity of buyers going on …

    Reply
  • Howie November 12, 2015, 11:48 am

    There’res nothing wrong in writing a critique and doesn’t have to side the negative.

    Reply
  • John November 13, 2015, 8:42 am

    Morgan-you have one of the few domain blogs that doesn’t “reach” for content every single day. You seem to post when you have a great idea to discuss and this is one of them. Great blog!

    Reply
  • Martin November 14, 2015, 2:11 am

    It might be a bubble. But people have been saying it is a “bubble” for a long time and prices are still rising. I’ve lived in China for over 10 years, and I find that Westerners consistently underestimate how successful China can be and how high asset prices in China can go. Morgan: you might be making the same mistake.

    At the same time, nothing is guaranteed and prices might go down from here. But my guess is prices will continue to rise, even for some longer numeric domains.

    Reply
    • John November 14, 2015, 9:43 am

      Couldn’t disagree more with the comment re “Westerners consistently underestimate” etc. China built “empty” cities upon empty city. There is nothing “successful” about that and now the same thing is happening with high number numerics. As to Westerners “underestimating” etc Jim Chanos-one of the best hedge fund mgrs in THIS country started shorting the China market over three years ago via-building suppliers to China contractors etc. and the market has since imploded. The only thing we Westerners may underestimate is the magnitude of the size of a bubble China is willing to create-not the success.

      Reply
  • James November 24, 2015, 9:53 pm

    I agree Morgan. Every day I see in domain forums that people are talking and investing in 7N, 8N and even in 9Ns now. No offense to anyone but there should be some logic before we all go on a shopping spree just because we think that the market will be what we think in the future.

    There are many factors to consider before diving into things. The market, the hype, and etc. to understand why the value and prices are increasing at a rapid pace.

    With all due respect, just because 2,3,4,5Ns are selling for big bucks doesn’t necessarily mean that 6,7,8,9Ns will also have some future. Yes, there will be exceptions for some patterns but for the majority, I see a very little light unfortunately.

    Reply

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