October 8, 2008
Financial Crisis Should Benefit ‘Internet Real Estate’
In the spring of 2001, the Internet address Inbox.com was listed on eBay at $4,000 with no reserve. Now, in a clear sign of the times, the auction ended without any bids or bidders. After the auction, an astute DomainConsultant.com analyst emailed the seller and offered him $2,000 for the name. The buyer accepted the offer.
Sixteen months later, that domain name was sold to an end-user for 150x its initial cost or high six figures -- far more than you can fit in a twin-size mattress.Point is that 2008 is looking, in many ways, like 2001-2002 except this time the crisis is larger, global and based in excessive debt outside the technology spectrum.
In response, DomainConsultant.com, a prominent collective of successful "domainers," has altered its client recommendations to promote domain names as an alternate hedge against a life-jacket economy, an option for a desperate populace.
People are moving money into no-interest T-Bills or simply holding tight to their cash and hoping their bank stays afloat and, if not, the FDIC doesn't crumble under the weight of its insurance pledge. Indeed, some are staring at their mattresses as the last bastion of 'safety.'
So what is an individual investor to do? If money is not safe in banks -- where to put it? One possible answer, like in the early decade, is domain names. For several, concrete reasons:
-- Domains are a global commodity. The Internet is not a singular institution, country or entity that can fail. It has a growing yet solidified place in a globalized, developing future. -- Domain names are not debt-based, benefitting from economic downturns and instability. -- Domains are inexpensive, intangible assets requiring little to no maintenance or overhead. Annual renewals have dropped to under $10. -- Unlike Lehman Brothers or Mac and Mae, the Internet is not going anywhere but up - especially with the next item as consideration. -- Energy issues/prices and depleted discretionary income will drive usage of the Internet as entertainment, news source, global connective, energy-savings source. -- The normal 'hedge' in these times is 'gold' but at nearly $900 per ounce, it is a prohibitive investment vehicle. And note, during the Great Depression, the government seized precious metals from its citizenry.
That is not to say that drops in domain value will not continue for a time -- it is a natural devaluation based on economic conditions outside the industry. Nor is it without risk -- cyber terrorism, fraud, spam and more conspire to define the 'web' in WWW.
No, it is to say that once and if this all shakes out, people will notice how the Internet weathered the storm and the idea of domains as 'investment hedge,' a place to put your money for tough times, may grow.
Now the key, of course, is to buy on the "low" side like Inbox.com. In down cycle times like 2002, the opportunities and deals appear all around. After all, those who survived the 'dot-com crash,' at present, make up a big chunk of the upper echelon of the domain industry and largely because they took advantage of the last, most recent 'crash.'
DomainConsultant.com recently updated its market recommendation to clientele from 'hold' to 'buy.' The change was made for many of the above reasons and based in no small part in current crisis events. Unless it all collapses, domains and the Internet are viewed as one of the most reliable and secure 'safe harbors' -- if the name is quality, acquired at a proper price.
Is the timing right? Like actual real estate, inventory lists have shown a distinct rise in quality combined with a drop in pricing. If one could conjure a symphony of elements to produce deals in the marketplace, this would be the result, exemplified by offerings great and small. In short, time to buy.
Besides, the only other real and viable alternative may be to stick it under your Serta, until the waters calm and the storm, hopefully, passes without sweeping it away.
M. Fiol is a long-time domain name holder, regular industry news contributor and DomainConsultant.com analyst. He also owns and runs HappyBirthday.com among others.
DomainConsultant.com is a 'success collective' made up of the brightest and best the industry has produced. For more information, visit www.DomainConsultant.com.
Contact: Mike Fiol Email Contact