Domaining Economics

By | August 4, 2016

The domain market in China has gone through a cold winter in the past a few months. Will the market turn warm along with the temperature? It is believed that the swifts could always tell the weather. Are there also the swifts in the domaining market?

The Main Indexes of The Market

The domain name itself has so much variety. How to figure out the trend in the market in such an artascope? First we sort the domain names into different strains. The extensions shall be the first criterion. The mainstream extension is .com at the moment, besides there are also the ccTLDs and .net. In additional to these extensions, there are also many new gTLDs. The class can also be divided into numeric domains and digital domains. In general, the more common the extensions and the shorter the domains, the more valuable they are. Explain with an expression, the market value of all the domain names is equal to the sum of average prices of each strain multiplied by the number of each strain.

V = ΣPrice × Number

Market Value Average Price Domain Number

Since the actual value of the domain name lies in the website building of the end users, on this base the value of premium domain names are more reliable. According to the data from Chaomi.cc we find that NNN.com, NNNN.com, 3-letter-chips and 4-letter-chips .com domain names have taken up a considerable part of the total domain market value. The transactions of more premium domain names are less active. Looking from a comprehensive point of both quantity and market value, we choose the market performance of NNN.com, NNNN.com, 3-letter-chips and 4-letter-chips .com domain names as the sample for the main indexes.

Market Performance

The sample we choose directly reflects the market trend in the price and the volume.

4-letter-chips .com domain names were the hot spot of the market in 2015. The price has skyrocketed to 20k CNY from 1k CNY. The fever seems to calm down since 2016. The present price of 4-letter-chips .com domain name is about 10k CNY. The sales of 3-letter-chips domain names are also weak. The short numeric domain names are a little stronger, but not as good as they were in the 2015.

The price and the transaction volume reflect the market confidence and the capital flow. The development of this market has attracted a lot of investors, and the capital inflow has pushed up the price. The questions rose while the waves faded. How to sell the domain name after high price acquisition? How to realize the cash flow when you have invested all the money into the market? What is the influence of the new gTLDs to the capital pool? Now it is the time to think about it.

The Economic Theory in Domaining

In a plane coordinate system, the horizontal axis stands for the amount of domain name, and the vertical axis stands for the price of the domain name. In the theory, the most premium strain of domain names has the highest average prices and the smallest amount. The strain of inferior domain names has the lowest average price and the largest amount. Therefore, put the rectangles which presenting the market value of certain strain of domain name from the premium to inferior, the rectangles in the left will be taller and slimmer than the ones on the right. Draw a smooth curve to fit the trend; the shape of the curve indicates the market preference.

If the capital is fixed, then the area between the axes and the curve is fixed. As the domain amount of a certain strain domain name is fixed, then the shape of the curve simply reflects the price. If the domain market prefers to the premium domain names, then the price of inferior domain names will go down, vice versa. As the prices of the premium domain names are determined by the purchase power and the demand of the end users, the prices are relatively stable. Therefore in the inferior end, the market value is greatly affected by the inflow and outflow of the capital. Unless the capital pumps into the domain market endlessly, the withdrawal and the evaporation of the market will come out from the inferior end.

Expectations

In the days when the capital flows in the market blindly, the prices of all the domain names fly up regardless of the quality. Speculation is the only reason to support the inferior domain market. When the waves fade and the market returns to rationality, what is the anchor point of the long and meaningless numeric domain? Or to whom could you sell the domain names?

After all, the demand of domain names is increasing along with the development of the internet. The market value will also expand. Although with the expectations, the investment still needs to fit the internet environment and the speed of developing.

For the new gLTDs, they do fit the internet thinking in the diversity and originality. But the over-speculation will finally ruin the market. Only the value-oriented investment could lead the market in the long run.

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