Market Trends Impacting Domain Prices

One of the common objections we receive in our outreach is that the market for domain names is dead.With the power of Facebook, Google, Twitter, and Instagram nobody needs a domain name.

Domain prices should be falling, correct? Actually…

It is the opposite.

The value of quality domain names are increasing.Companies are realizing that they are putting their revenue and traffic at risk if they build their business on a third party platform like Google and Facebook.  When you rely on these platforms, one algorithm change could drastically swing your sales in either direction.

As the internet matures brands are realizing that owning their branded domain name is critical to their success.

In today’s post we are going to look at the fundamentals that are driving the market for quality domain names.

While every industry and vertical will be different, when you look at the macro view there are three major forces that are driving the market prices.

These market forces help us to understand the levers that pull supply and demand.

• Social Trends
• Economic Trends
• Technology Trends

It is also important to remember that there is a global demand for domain names.

Social

The first driving force is the general business climate.

We call it the social force and it looks at how we do business and how this relates to domain names. Fifteen years ago you did not need to own your branded domain name.  Most businesses had a physical location with very few being online or virtual (mail).

Today most new businesses are strictly online.  How we do business has drastically changed.  Domain names are now the portal through which customers interact.

This shift is causing a global demand for brandable domain names.

Economic

The second driving force of is the economic factor.

Investors now realize that not owning their branded domain name jeopardizes their investment. We are seeing more brands buying their “Exact Match Domain” right after a big series round.

Different verticals will vary on the intensity of investment but overall investments are going up.  This is driving domain names that would not normally be associated with a growth vertical.

For example Fly.com sold for $2.800,000 and MyWorld.com sold for $1,200,000. This is raising the prices of premium domain names.

Technology

The third market factor is technology and relates to the supply.

As demand increases the supply of quality domain names is decreasing.The global move to strictly online businesses has limited what domain names are available. Finding a domain name that is available, price correctly and does not have a trademark is one of the biggest challenges for a startup.

Once a domain name is acquired and becomes a brand it is off the market.  The value for the domain name is now tied up into the overall brand and revenue of the business.  The cost of re-branding far outweighs the price the domain would achieve.

Business with large portfolios are also reluctant to sell.  Their motivation is more on risk reduction than profit opportunity.The combination of these factors is limiting the availability of premium domain names and driving domain prices higher.

Scarcity

I do want to talk about scarcity because this is an underlying theme in the major factors moving the market.

Only one brand can own the power position and exact match for a keyword.A brand passes on acquiring their keyword domain name either because of price or strategy is opening themselves up for risk.

They are leaving the opportunity open for another brand to come in and take the leadership position.

Overnight your brand can become irrelevant. All the marketing dollars you put into your brand could be wiped out. Any investment you put into new marketing will have a halo effect to the power position.

Let me explain with an example…

Let’s use the keyword Kraken.

Kraken Exchange owns the power position for this keyword because they own the domain Kraken.com.

But did you know that another brand called Kraken Rum was created 2010? This was a year before Kraken Exchange:

They also invested $10M in advertising in 2013. My point is that Kraken Rum had a massive branding head start. But…

They left the door open for Kraken Exchange to dominate everything Kraken.

KrakenRum.com show up on the third page of search for me. Kraken.com appears on the first page.

When you do not own the (.COM) domain you are leaving open the opportunity for another brand to make your brand and marketing investments irrelevant.

Only one company can own and control the power position regardless of vertical or industry.

One of the common ways to explain domain names is real estate. This really only scratches the surface.

Your domain name has a profound impact on the very foundation of your brand.  I plan on going into each of these areas in another blog and video but for now here you go.

Here are seven major reason why a brand needs to control their “Exact Match” or keyword domain name.

• Global positioning – owning the global messaging for your brand and keyword (ex: Kraken)
• Industry positioning – how your brand appears versus your competition
• Marketing– the effectiveness of you online marketing
• SEO – your ability to get backlinks and communicate leadership
• Email security – are you creating security issues with your domain name
• Product expansion – does your domain name allow you to expand and pivot
• Branding – how you talk about your brand

The overwhelming majority of businesses will never have the opportunity to own their “Exact Match” domain name. As we look into the major trends in 2018 we continue to see a strong market for quality domain names.

There are three market forces driving the market.

New businesses are strictly online today.  The internet has changed the dynamics of how we do business. This is driving up the demand.

At the same time investors and founders understand the importance to owning their positioning and are willing to spend the money.  This is driving up the prices for domain names.

The amount of quality domain names is limited because most are either brands or not available for acquisition.  This is limiting the supply and creating scarcity. This is a classic supply and demand model, we see domain prices continuing to rise in 2018.