Sunday, August 26, 2007
Making A Market (Part II): Real Estate

When comparisons are made of domain names to real estate the comparisons are all about claims of limited supply and increasing demand. So far as confining the consideration to .com domains it is easy to understand that viewpoint. I am making a broader comparison in terms of existing and potential markets for each type of asset.

Real estate meets some of the elements but it is unlikely (and it may be undesirable) that real estate can ever compare to stock markets. Each property is unique and establishing “comparable” properties for valuation purposes involves a large fudge factor. This is unlike the stock market where each of my 10 shares of Sample, Inc. is just like each of the 10,000 shares of Sample, Inc. owned by a mutual fund. And, each of my shares is worth the same as theirs.

Domain Names and Real Estate

Now it is easier to understand that, in terms of making a market, domain names have similarities to real estate due to the individual uniqueness of each asset. Trying to make them comparable by counting the letters, or classifying them as adult, casino, GeoDomains, or whatever, should not imply that the market action of one should directly affect all others in that "arbitrary" category.

Unlike real estate, domain transactions are not necessarily public information. So it is not always possible to know the latest value of any “type” of domain with any certainty. You may be selling a good 3 letter domain for less that someone else is getting for a 5 letter domain. It may be best that you not find out.

The domain market is decentralized and unstable. Even if information from recent sales is known. Today is a new day and a new deal.

Domains are only a liquid asset to the extent that you are able to promote your names that are for sale.

Domains do not have listing standards. Any domain can be offered at any price the owner wishes. Only an informed potential buyer can moderate the general tendency toward  gullibility. This is not totally unlike real estate although real estate agents have their professional ethical standards.

The top gurus in the current domain name scene, as well as corporations whose names you would recognize, are thinking and promoting ethical practice for domain name transactions.  They are the first to make us aware of scams and potential pitfalls. They, more than anyone else, recognize the advantages and desirability of establishing universal best practices and of establishing universal standards for domain name markets. --Bob Ducker