The previous articles in this series on domains can be reviewed by clicking on the following links:Part 1 - Domain Industry and Valuations
Part 2 - The domain bubble
Part 3 - What caused the domain bubble?
Part 4 - Domains and the sub-prime shock
Part 5 - Domain values and opportunities
Part 6 - The Pressures on PPC
Part 7 - domainers under the magnifying glass
Part 8 - Domain values increase
Part 9 - Domain valuation at point C
Part 10 - The virtues of standards
So what does point D look like? Is it domain name nirvana or is the landscape going to be littered with the destroyed dreams of the forever hopeful?
I should say up front that I'm inherently an optimist when it comes to domains. There are a number of reasons why I'm really positive about domains and the major reasons are:
1. Domains are unique - no two are the same.
2. While there is ecommerce there will be the need for a domain.
3. There will always be the need for quality traffic.
The first item in the list should remind us that we should never lose site of what makes a domain name special. Domains are unique and this uniqueness will greatly influence their resale price into the future. The value of the uniqueness will largely depend upon whether the domain can be applied to a functioning business.
As ecommerce continues to expand around the globe the demand for quality domains will increase. This demand will drive up prices so that new businesses can enter the boiling cauldron of e-business.
If you have a domain that generates type-in traffic then there will always be a demand for that traffic. Even if both Google and Yahoo abandon the domain channel and stop domain PPC advertising altogether (which I believe is very unlikely) someone else will step in and tap the valuable seem of gold which is highly targeted domain traffic. This traffic is valuable to advertisers and they will pay for it now and into the future. The challenge for the domain industry is how to educate advertisers on the benefits of our quality traffic and rid ourselves of all of the fraudulent players.
I believe that there will be a surge in interest by speculative investors after point C and that's when the wider non-domaining community will begin the see the value of a domain name. After the initial onrush a correction will occur and then like any mature market domain name valuations will continue to increase across time. The steepness of the valuation curve is unknown at this time but I imagine that it will be in the range of 10-15% per annum.
I believe that domain name owners that ride this journey out to its conclusion will be rewarded for your efforts and patience. The challenge will be to balance the risk/reward profile for your own portfolio of domains and then not lose your nerve in a time like we are experiencing at the moment.
This article concludes the journey that we've taken through the chart that I first published eighteen months ago. I hope that you have enjoyed reading it even as much as I've enjoyed writing it.
Source: Posted on WhizzBangsBlog by Michael Gilmour -- Reprinted with permission -- October 30, 2008