Mark Jeftovic for
CircleID writes:
“I didn’t see the Fortune article Are domain names recession proof until the weekend, and being the author of the now infamous Domain aftermarket overdue for an asset repricing last year I feel somewhat obligated to comment on it.
There can be no doubt now that the recession is here. I went on record nearly a year ago that it was coming, so I nearly gagged when I saw Jim Cramer say something along the lines of “I told you all this was coming” over the Christmas holidays. So now it’s ok to say “recession” in polite company although the politicians and the pundits still try to soften it up by making sure they modify it with words like “maybe”, “slight”, “mild” and “possible”. Make no mistake, it’s underway and I think we’re far closer to the beginning of it than the end.
So, how will domain names fare in a recession? The Fortune article was upbeat:
“Global markets are in a state of panic. Credit markets are all but closed. And recession fears are everywhere. But at the conference I attended in Hollywood this week, called DomainFest, you’d have little clue that the financial world was melting down.
The domain world—the people that buy and sell names and make money from pay-per-click ads on their websites—is booming. Downturn? Bring it on…”
While the rest of the article is little more than a layman’s intro to the domainer business model, the question is timely. Now that the recession is here and, to paraphrase the old detergent commercial “we’re soaking in it”, are domain names as an asset class a “safe haven”? Will they in general terms produce “above average” returns compared with other places to put one’s money such as stocks, bonds, commodities or inflation protected t-bills?
I commented on that article a couple of days ago and said:
It was obvious to most professionals in the space the auction was not a success, far from it (wrote more about it on my blog)
So to answer your question, domains are not recession proof, and we can already see it.
This is a really good read for the domain investor, and to Mark, you were right. No doubt prices are going down for various reasons, such as PPC earnings for domain owners are down (less trust in domains as traffic earners), ,lack of history, lack of liquidity, and overall weak economy.
On the good side, now and in the near future cash is king. As Mark says:
Warren Buffet loves recessions because they enable him to pick up undervalued assets on the cheap. He’s parlayed $100,000 into a personal fortune worth over $30 Billion doing just that. What attracts Buffet to investments are what he calls “durable competitive advantages”, or what his mentor Benjamin Graham termed “moats”. In tech land we often equate this with “barriers to entry” but they are not exactly the same thing. The phrase I personally identify with it is “the ability to defend”. How defensible are domain names?
What is your take on the issue? Did you think Domainfest auction was a success? Do you agree with Paul Sloan and the Fortune.com article? Looking forward to reading your thoughts on this.
Sahar
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Read the complete post at http://www.conceptualist.com/fedclick.php?ref=http://www.conceptualist.com/2008/01/28/are-domain-names-recession-proof-probably-not-next-question/&id=1375