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We
usually send out our monthly newsletter just before
the end of each month, but I delayed this issue until
after the 1st so we could get in the final 2Q-2009
domain sales numbers and go over those with you in
this report.
As
this most recent quarter progressed I had the feeling that
things were going pretty well. The number of transactions
reported to us each week were holding steady and a lot of
small to medium sized business end users were clearly
fishing in the aftermarket pool. So, I was surprised when
I totaled up the figures this week and found the total
dollar volume of sales reported to us came in at just $21.1
million. Not only is that a $7.2 million
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While
the general economy is still a long way from being out of
the woods, the fear level is nowhere near as palpable as
it was six months ago. So why did we see a 25% drop
in the quarter just completed? A closer look at the
numbers shows that the decline was not as bad as it
looks on the surface. Total dollar volume is just one
measuring stick and it is one that can be heavily
distorted by less than a handful of sales at the ultra
high end of the market. Indeed, well over half of the
quarter over quarter $7.2 million dip can be attributed to
just the top three sales completed in each quarter.
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A
couple of blockbuster sales
(like Toys.com at $5.1 million)
can dramatically skew quarterly sales
results. |
The
solid first quarter of this year (which came in
higher than the average quarterly total registered
in 2008) was fueled by a trio of seven-figure
sales; Toys.com ($5.1 million), Fly.com
($1.76 million) and Auction.com ($1.7
million). By comparison the three highest
sales of 2Q-2009 were Candy.com ($3 million),
Webcam.com ($1.02 million) and Talk.com
($500,000). So, the top three sales of 1Q-2009
totaled just over $8.5 million while the
top three in 2Q-2009 came in $4 million lower
at a bit over $4.5 million. The bottom line
is that the difference in just the three highest
sales accounted for 60% of the $7.2 million
dollar decline in total dollar volume from the
opening quarter of the year.
A
more accurate gauge of the overall market is the median
sales price (the point at which half of all
sales were higher an half were lower).
That number also declined but by a much smaller
amount. In
1Q-2009 the median sale price in our database was $2,600
(down from $2,750 |
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year earlier). In 2Q-2009 it slipped again to $2,488,
but that represents a quarter over quarter decline
of less than 5% (keep
in mind that we track sales starting at $2,000 for
.coms and $1,000 for non .coms. As a result the
medians in our database are considerably higher
than they would be if we followed sales below
$1,000. As a point of reference, one of the major
secondary market venues, the AfternicDLS,
said their median price, including sales at all
levels, was approximately $1,200.) |
For
domain sellers, the degree of pain you feel is directly
related to the segment of the market that you target. My
focus has always been on the small to medium sized
business (SMB) market and I have seen no drop off at all
in my own sales results. In fact they have been up a bit
in 2009 as more people with business experience are
starting up their own companies after losing their jobs to
corporate downsizing. SMB sales typically fall in the low
four-figure range in the vicinity of median sale price
figures.
| If
you target the higher end of the market the
recession has shrunk your pool of potential buyers
considerably (especially if you are trying to sell
anything other than true top tier domains in the
five or six figure range). Just as we have seen
everyday consumers move down market (from
department stores to TJ Maxx or even Target)
we are seeing domain buyers still active but being
much more careful with their dollars. In addition
to more frugal end users, professional domain
investors have cut back because the huge decline
in their PPC income has reduced the funds
they have available for new investments.
Where
go from here is anybody's guess. Some economists
have been predicting the recession will end later
this year. With all of the financial ills we still
have to work through I have a hard time buying
that but whatever happens I remain |
When
times are
tough
opportunity often knocks. |
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confident in the long term value of good
generic domains and I have stepped up purchasing
as a result. The recession has forced people to
put a lot of domains on the market and drop many
more than they would have otherwise. I believe
that has created a real opportunity. It is worth
remembering that the biggest fortunes in this
business (the kind amassed by people like Frank
Schilling and Kevin
Ham) were made possible by the .com
bust in 2000. When everyone else wanted out, they
seized the opportunity to get in at fire
sale prices. |
A
lot of people are going through rough sledding right now,
but this too shall pass. When it's over many businesses
will have folded but at the same time new empires will
also have been created. I think most of those empires will
be built on the web because it is the most efficient place
to do business the world has ever known. Now is the time
to put yourself in position to profit when the smoke
finally clears.
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