Over at DomainNameWire, Andrew is optimistic about the state of domain economics. While I agree overall, I think that a fuller picture is needed in order to accurately define the state of the domain economy. As I mentioned, commenting at his post:
For those of us that are now in the business for several years, the industry is buzzing along nicely. For the newcomers, the expectations are higher. Five years ago, there was one domain conference every year, now there are almost a dozen. The overall economy is erratic and does not provide with the necessary excitement that sustained us during the up-and-coming years of domaining. There are opportunities, for sure, there is inherent risk as a side-dish. I don’t view sales figures as a pure indicator of the industry’s health, I consider the overall volume and the monthly trends to be a more accurate gauge of the state of the economy.
There are several additional factors that would determine the direction of the domain economics: end-user sales, volume of online advertising and outwards growth in the industry.
Nowadays, it’s not sufficient to quote sales that completed at various domain conferences and venues; it’s important to scrutinize the end-user sales as they define the health indicators of the economy. Purchases and acquisitions of intellectual property, including that of domains, show that corporations value the important role of domain names and invest in them for a variety of strategic purposes.
Online advertising is another indicator of how well the economy is doing; the usual suspects – Google, Yahoo & MSN – are determined to survive the drop in online spending, from the consumer standpoint and that of the advertising agencies. In the first months since the change of guard at the White House, the financial scandals and the corporate greed that defined the previous years are getting under the microscope. So companies end up spending less for online advertising because their budgets are tighter until a raise in productivity is justified by increased consumer spending.
The domain industry itself has lost its momentum and we are witnessing job losses and cuts in spending across the board; perhaps in the coming months acquisitions of some companies might lead to odd strategic mergers that we didn’t think of as possible. The flow of money right now is within the corporate core; the need for an outwards growth and investment is needed, in order to sustain the goals set forth in the previous years, when the economy appeared to be healthier overall.
And that’s the challenge of the coming months: to keep a cool head and plan for a prosperous and rewarding domain year.
“And that’s the challenge of the coming months: to keep a cool head and plan for a prosperous and rewarding domain year.”
Amen to that. I just got off the phone with someone talking to me about the domain industry and I told them like everything else in our current economy, domaining will be fine after the slump we’re in. I’m not sure how bad others have been hit, but my PPC has significantly dropped, but… adapt to survive, so I’ve been figuring things out slowly the last two months.
@Acro – “Purchases and acquisitions of intellectual property, including that of domains, show that corporations value the important role of domain names and invest in them for a variety of strategic purposes.”
Great point, and something which interests me quite a lot. I believe acquisitions by corporations will become less publicized than in the past.
Not sure what that means for aftermarket companies like Sedo. They’ll probably continue to serve the domainer-to-domainer market and small business. With domainers going direct to public in a big way, end users may opt to deal first hand with domain owners, especially in regard to purchasing multiple domains within a vertical. We’ll see.
Incidentally, really enjoying DNGator.com. Keep up the good work!