Chinese Domain Market Newsletter

April 13, 2016 (Wed)

Ripple Effect in Domain Investment

I recently read an article talking about what domain names to invest next in China. The reasoning used is that domain names up to 4L and 4N on .com and .cn are already too expensive. Therefore, the next move should be 5L, 5N, and 3-pin on .com and .cn, as well as very short domain names on new extensions. These names may see the greatest return on investment.

This reminds me of a popular strategy used in property investment called ripple effect. Like a stone which, when dropped in a pond, creates ripples that travel outward, property prices rise starting from the city center and then spreading to the neighboring suburbs. Savvy investors start buying in these suburbs before the ripple of price growth hits them. Underlying this price growth is usually increasing demand due to population growth.

This is similar in domain investment. When you look at .com, the demand is global and rising. I read Techcrunch everyday and am amazed that most Internet startups, regardless of which country they are located, prefer .com. In an unusual case, I've even read that among the top five Internet companies in Iran, four of them use .com and only one uses the .ir extension. This is the evidence of the ever increasing demand for .com.

So, it's totally logical to expect that if 4L and 4N become out of reach for many domain investors, then 5L and 5N will be next, and so on. Also, new extensions will have values in their very short domain names. However, this strategy may require the patience. So the question is: can we wait for the ripples to arrive?