Hundreds of new gTLDs (new generic top level domains) went live since 2014, and more than 20 mil of them were since registered. Thousands of domain investors are now looking into opportunities and are purchasing these names. I am one of them, owning hundreds of new domains, selling and buying every week. In my honest opinion, a lot of investors are not making good decisions when it comes to new gTLDs.
Along with some good decisions, I am not afraid to admit that I have also made some pretty bad ones - as did every new gTLD investor I know so far. Hopefully, after reading this series of articles, it can help people (mainly those which are just starting) to get some unbiased overview of investment opportunities, but also investment traps which one can face when investing in new gTLDs. Please excuse grammatical errors and I am sure clumsy style in all my articles, English is not my mother language. I hope though that I still can get some important ideas forward. Articles published on this blog are shorter extracts from my book "new gTLDs - investment mistakes and opportunities", which will be ready in October 2018.
All ideas here are just my personal opinion. This opinion might prove wrong, as, despite the fact that I tried to understand things I describe here the best I could, I might fail in that in some instances. You must, therefore, do your own due diligence before making any investment. I am a private investor and have no ties to any registry or registrar (except the fact that I am a client of several registrars, where my domains are stored).
What are new gTLDs?
If you do not know exactly what the new gTLD names are (in the further text I will sometimes refer to them also as "new gTLDs", "new gTLD domains" or I will even use very simplified "new domains") please read relevant sections at NamePros. I will skip all this and will go immediately to the point.
Part 1 - pizza.elephant & short domains:
2 investment mistakes
Investment mistake no.1 - "pizza.elephant style of investing" in new gTLDs.
Today I will start with an investment mistake no.1 - something that almost no one was able to avoid when getting familiar with new gTLD domains. Some people call this mistake "pizza.elephant" style of investing". While it is very obvious to more experienced new gTLDs investors what is going on (those who already experienced at 3 or 4 cycles of renewals, holding larger new gTLDs portfolios), it is definitely not obvious to people who were just introduced to the concept of new domains.
So here is what is going on: in 2014, just after the introduction of new domains to the general public, a lot of people (some of them very experienced ccTLDs or .com investors) started to buy them. It was a very beginning of new gTLD domains era, so no data of reported sales for new domains were naturally available. Therefore all purchases were based on individual projections, and more or less educated guesses, as of what will constitute good and profitable domain names in new gTLDs. As an inspiration, many domain investors and speculators brought in concepts, which worked great in past, specifically for .com. One of the most prevalent concept is to have strong keyword located at left side of the dot. So let's discuss it more in detail now.
Strong keyword located at left side of the dot - is that enough to make new gTLD names valuable from investment point of view?
While above concept work amazingly when it comes to .com (in 2018 almost all investors are very well aware how much "strong keyword".com can be sold for at today's market) we know now that it definitely can not be easily applied to new gTLD domains.
Not knowing that yet in 2014, many investors had bought into domains like pizza.elephant
(it is just an hypothetic example, as we do not have .elephant new gTLD extension, yet) . The "logic" there was that both "pizza" and "elephant" would be strong keywords in .com - and as such could command premium prices also combined in new gTLD domain name. As we see 4 years later, the answer is - of course not! There is no aftermarket and no demand for combinations of 2 strong keywords, which does not make sense when they are combined together.
What is apparent though is that even in 2018, still many people are buying this kind of combinations. When 1st renewals are coming, it will usually result, of course, into dropping of such names. Whoever does not believe me, can have a brief look at the appraisal section of NamePros.com - a number of "pizza.elephant" style of names there is still pretty high.
Brandables - really?
Some new gTLD investors justify their purchases by calling those nonsensical combinations "new gTLD brandable". Let's take another example, like "dog.elephant". While both "dog" and "elephant" are strong keywords in .com, together they do not make any sense. To call this "brandable" in the same sense as we have in .com (when some people put almost any of 2 non-related keywords together and they say it is "brandable") is not going to work for new gTLD domains well, at least not in 2018. So if you want to be profitable with new gTLD domain names, and to have good chance to sell your domains later for good profit, my opinion would be - just do not do that!
Leaving "pizza.elephant" style of names to their destiny, let us discuss another concept, which works amazingly well in .com, but will work only in very few instances for new gTLD domains.
Investment mistake no.2 - Very short names located at left side of the dot.
The intrinsic value of these names (N, NN, NNN, L, LL or LLL at the left side of the dot, where N represents number and L stands for letter) is much better comparing to "pizza.diamond" style in my opinion, but it still probably will not work the best for domain investors. Unless you are from China maybe and know very well their actual trends in new gTLDs there, the chance is that you will not make any profit as an individual investor. Why?
High renewals (and why they are there attached to many of the very short names):
The main reason for that are high renewals. Imagine the following situation: you own a registry, and you just won the auction for specific gTLD extension. For explanatory purposes, let's say the new gTLD extension is .MYEXAMPLE. You have paid all the auction fees, all setup costs - usually hundreds of thousands of dollars. Now, you as registry are the owner of .MYEXAMPLE and your task is to evaluate how to price the domains. It is not very intellectually challenging to understand that there are only 10 domain names in form of N.MYEXAMPLE, where N is a number (0.MYEXAMPLE, 1.MYEXAMPLE..9.MYEXAMPLE), less than 100 domain names in form of NN.MYEXAMPLE, less than 1000 domain names in form of NNN.MYEXAMPLE, etc, while the same logic applies to alphabet characters as well. This is very limited supply. So what you will do as an registry? You will, with high probability, attach higher premium renewals for all those names. After all, there are only limited number of such names, and you paid a LOT of money for .MYEXAMPLE new gTLD extension. So, it is definitely not in your best interest to put a low standard renewal on them, and have all of them registered within first minutes by domain investors (it would mean you basically gave away some of your best names). In addition, for you, as a registry owner, it is not such a big risk to price your short names with higher renewals, as you can test the market, and adjust your pricing based on the actual situation and your actual financial needs as time will pass. You can do that as you do not need to pay high renewal rates on your own names every year.
Domain investors dreams, and reality, when it comes to very short new gTLD names:
Obviously, many domain investors will not be happy with that approach and will tell you that you should price all your names with standard renewals so "your new extension will gain certain momentum at the market" (which usually translates just to: "we want to get your best mew gTLD domain names cheaply"). Your argument would be that you do not need to sell all your short names immediately for standard renewal to gain that momentum, which is in most cases probably true.
So what are the opportunities for domain investors here? Unlike registry owners, when you register such very short name, let's say with 500$ yearly renewal, you are basically undertaking high liability for yourself, unless you are able to sell that name within 1 year of holding with some profit (so in your example for the price at least 501$+). Or within 2 years for 1001$+. Or within 3 years for 1501$+. So unless you are pretty sure you CAN sell the name and have a very good idea who your buyer(s) is(are), it is probably not a very good investment idea to get into this type of names. Here, more then in other areas of domain investing, imperative for succesful investment is that you must really know what (and why) you are doing.
Which strings will be in demand for very short new gTLD names?
While higher premium pricing is one of biggest obstacles when it comes to achieving good profitability of trading with short new gTLD domains, it does not end there. At the moment we have hundreds of new gTLD extensions (very good source to check what is going on is here) So, (now putting pricing aside), should you buy those short names in .HOCKEY or .ONLINE or .VIP or ..SHOP or .ACCOUNTANT or .XYZ or .CENTER or .CLICK..or .PHOTOGRAPHY.....where?? The list can go on. This is, of course, a 1 million-dollar question for new gTLD domain investor, and I am not going to answer it here. I have my strong opinion about it though, and I believe some of the new gTLD extensions are much more suitable for very short domain investments than others. I will touch that lightly in future articles.
But in general (taking into consideration generally higher premium renewals, and hundreds of possible extensions to choose from), while I can consider some very short new gTLD names with higher renewals, there are definitely some better opportunities in new gTLD space in my opinion. This is what I think for year 2018 - it might change in future.
Summary of this article:
"Pizza.Elephant" type of names usually do not have intrinsic value - therefore there are massively available even in 2018, and usually not priced with premium renewals. As a domain investor, get only names which make great sense, and forget most of the automatic appraisal tools out there (nothing is going to replace your common sense, at least not yet), and also forget ideas about strong keywords in case when left side of the dot does not match welll right side of the dot. If they make great sense together, then it is a completely different story.
Very short new gTLD domain names - some of them have very good intrinsic value (but registries know that too, and that is reflected usually by higher renewals, which in many cases makes them then not ideal candidates for domain investment).