While 5th percentile values keep declining, Escrow.com reported nearly $20m in transactions in the quarter, suggesting a strong start for domain investors in 2018.
Welcome to the 8th edition of the Liquid Domains Overview (LXDO), which focuses on the 614,928 .com domains we call “liquid”. The objective of the report is to present key statistics and generate a debate amongst the industry stakeholders about the fair value of such domains. We hope you enjoy it and we encourage your feedback and participation for the next reports.
DEVELOPMENT INDEX AND OWNERSHIP DATA
2018 starts with a continuation of the trends observed in our past reports: China continues to gain market share, especially on the 5Ns front where Chinese registrants added almost 4,000 domains, bringing up the total domain count up to almost 200,000 or 32.12% of the total market.
The US also gained 1% of market share, ranking as second behind China with a total of 18.54%. Europe and the rest of the world continued to hold a stable market share of around 7.5%, while domains under privacy grew slightly to 21.67%. There seems to be: 1) a positive correlation between the average domain value and domain privacy, and 2) an inverse correlation between domain privacy and the development index. In other words, the more valuable a domain is, the more likely it is that it will be under privacy if it is not developed. This translates to record privacy numbers for for Tier 1 categories like 2Ns and 3Ns, with nearly 50% of domain names under privacy registration.
The overall development index went down by 0.5%, with 4Ns domains making the biggest negative jump from 15.5% to 11.3%. 2Ls remained the most developed category at 35.95%, followed by the 3Ls (28.46%) and the 2Cs (28.08%). With the exception of 2Ns at 18%, all the other categories register development indexes between 10% to 15%, with 4Ls being the most developed (14.4%) and the 5Ns being the least developed (10%). 3Ns, 4Ns and 3Cs rank somewhere in the middle, respectively at 12.2%, 11.3% and 12.9%.
2Ls .com domains registered a record $6M in escrow.com transactions, by far the best result since the publication of the report. 4Ls kept a consistent $4.8M in turnover, followed by another strong quarter for the 3Ls at $3.5M. 3Ns and 4Ns also posted good quarters, respectively with $2.8M and $1.3M in escrow.com sales. While escrow.com did not record any 2Ns transactions, the other categories (5Ns, 2Cs and 3Cs) posted an aggregate of almost $1M, respectively at $225k, $143k and $562k. The total amount of sales reported by ShortNames.com was $7.7M, with 4,108 transactions and 0.67% turnover.
The negative trends came from 5th percentile values which kept registering double digits losses: 3Ls -21.46%; 5Ns -16.93% and 3Cs -11.11%. 4Ls lost only -3.13%. The positive note came from the median values (not present in our report) which showed significant increases for the 3Ls, 4Ls and 4Ns. This disparity in performance could be interpreted in two ways: 1) the domains sold in Q1 might have been of superior quality compared to last quarter, or 2) the value ranges of liquid domains are starting to polarize again. Lower liquidity in the second tier categories might also play a factor.
The key question for investors is when to buy batches of domain names at floor prices, as opposed to cherry picking ones with the highest end user potential, or selling their existing inventory altogether. The mix of positive signals (high sales volume for valuable categories) and negative signals (constant descent of 5th percentile values for the least valuable categories), can only mean that investors should continue looking at fewer but higher quality domains.