When I was a kid, my Grandma used to say “Don’t put all your eggs in one basket.”
I didn’t understand the meaning of that phrase back then, because I didn’t have a basket to put any eggs into, and my Grandma handled breakfast – God bless her.
Actually, my Grandma never said that, because the phrase doesn’t exist in Greek. But it’s a great conversation starter, when one wants to define investment strategies.
Whether you personally handle your ‘nest egg’ or not, it’s a good idea to be aware of diversification, as opposed to becoming heavily vested in a single commodity.
With domains, the good old approach will continue for some time: Invest in quality domains, across well-performing TLDs, keep exotic ccTLDs at a minimum.
In the new era of brands and gTLDs, however, diversification acquires an even more important meaning, that of selective, strategic ownership of domain assets.
Frank Schilling’s launch of .Sexy and .Tattoo, with .HipHop, .Guitars and .Photo to follow, is an example of how diversified your domain portfolio will become.
In the coming months and years, if you close eyes and ears to what is changing around you, will only deprive you of the opportunity to establish a healthy approach to the rapid-changing world of domain names.
Among the new gTLDs, diversification means that you understand the purpose and function of “keyword + gTLD” that redefines the brand potential of online destinations; the gTLD becomes a key element of the combined brand. No more anchoring oneself to the .com or other non-descriptive TLD.
Finally, by spreading your investment across several gTLDs or even ccTLDs, you are able to define the development potential of the particular brands. The plethora of available extensions ensures that you cannot have every keyword under the sun – just the ones that make sense for your strategy.
Treat every gTLD as a distinct, wholesome egg, and while eggs exist in abundance, only carry a small basket to put a select few into.
And that’s a true statement that my Grandma made.
For those who want stock diversification via an ETF, a few options are SPY, IWM and EFA. Unfortunately domain investors don’t really have an ETF or domain portfolio mutual fund option. Perhaps one could consider publicly traded companies such as Demand Media, Marchex, etc What domain investors typically are faced with are limited choices at varying price points. True, one can limit how much .Net, .Info or .newTLD they have in a portfolio. Likewise, one can stick with English only or diversify into foreign-language domains and CCTLDs. I will note that .ES is a royal pain from an administrative standpoint to deal with. Sometimes what appear to be very risky investments can result in spectacular returns down the road. One just has to select carefully and not bet the farm on one option.
Going back to my initial point, I would like to see a domain portfolio mutual fund or domain ETF option. Of course an investor would have to review the portfolio and monetization strategy. Perhaps such a concept is still many years down the road.
Leonard – The problem with this spinoff on financial hedge funds is that the domain industry isn’t regulated. I don’t see how this would be possible, unless of course one simply invests in a stock portfolio composed of domain-related companies that are publicly traded. Demand Media stock seems to be having some trouble lately.
Think about it – Godaddy already has account reps and there are large domain portfolio holders who contract salespeople to do outbound marketing. A mutual fund will normally have a fund manager or board overseeing the fund’s holdings – which stocks to add or drop from a portfolio. Likewise, a large registrar could contract domain portfolio managers to do outbound marketing, set optimal pricing to attract passive sales, place domains in industry auctions with reserves, assure domains are renewed, and as long as cash flow from sales/parking allowed, acquire new domains if the acquisition price were attractive. Of course this would only be possible with quality portfolios and perhaps would only be viable with one’s top holdings . So if a domainer with 1000 domains selects their top 100 domains for such a program, would it be possible that other investors would be interested in investing in such a portfolio and provide liquity to the owner? Implementation would have some challenges but an idea nevertheless 🙂
Note I have already suggested to my Godaddy rep the idea of UDRP insurance. We’ll see if such a product makes it to market.
LB
Leonard – That’s an entire different beast altogether, as it involves outbound sales, but I like the way you’re thinking; definitely ‘out of the box’ 😀 If GoDaddy ‘bites’ let me know.