Over the last few articles in this series we've been discussing what's been going on in the industry and why PPC rates have fallen and domain valuations have dropped considerably. You can read the previous articles via 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 As I've previously stated, a result of both internal and external pressures at point B in the chart has resulted in a mini domain name recession. The recent demise of Lehmann Brothers, the sale of Merrill Lynch and the collapse and subsequent bale out of AIG by the US government is a clear indication that all is not well in the wider economy.
This downturn in the economy is both bad and good for investors. Obviously the bad is if you have a whole lot of stocks where the share price has just taken a tumble. The good is if you are cashed up then there are some real bargains available for purchase.Think about the implications of this for the domain industry. Investors can pick up blue chip stocks for half the price that they were 12 months ago and you have guaranteed liquidity. Domains on the other hand are still largely viewed as a speculative investment that in some cases is perceived to have a legal risk associated with them and it can be quite difficult to exit the investment profitably.
In addition, the major players (Google/Yahoo) have complete control over the revenue line generated by any traffic associated with the investment. This represents significant risk as compared to a blue-chip stock.
I believe that these pressures are rising to a peak and we are fast approaching the bottom of the domain recession. In a similar fashion, those investors that are cashed up will be able to pick up some incredible bargains that many people will wonder at in the years ahead.
Both Rick and Howard (founders of TRAFFIC ) took a substantial risk in focusing on auctions for the New York conference. In Australian speak, "It was a guts move". The sales will either show that the recession has passed or that we still have a little way to go. I've got to hand it to Rick and Howard that their timing is absolutely perfect and it is likely that NYC TRAFFIC will set a benchmark for domain valuations. I just wish I was there to see the action.
I just read a few posts (unverified) from the first TRAFFIC auctions and it appears that the prices are a little lower than expected. Most of the names are selling due to reduced reserves....hence the recession is a place to make a lot of money for those that are cashed up.
A final thought, as the wider market picks up, expect investors to search around for higher returning investments and don't be surprised if domains come back on their radar. Remember, you make more money in recessions than the good times or in other words you make your money when you buy not when you sell.
Domain Wiki: Rick Schwartz , Howard Neu , TRAFFIC
Source: Posted on WhizzBangsBlog by Michael Gilmour -- Reprinted with permission -- September 25, 2008