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In Case You Missed It

January 22, 2013

There were a couple of great comments in defense of domain investing the other day, on TheDomains.com, in response to .Gay TLD applicant Alexander Schubert’s call for ‘dead domainers’.  Here is the original article, for reference, in case you missed it.

The focus of that article is not a subject I wish to dwell on here, but one particular comment stood out and I thought was worthy of wider reach.  That comment came from Joseph Peterson.

I’ve had a chance to converse with Joseph privately in the past, having done some business together, and have found him to be an articulate thinker whose discussion and feedback I have both enjoyed and benefited from.

Joseph has indicated he may be starting his own blog at some time in the future, and I certainly hope he will write on domaining.  There are some really good points in his comment below, and without further ado, here it is, re-published in its entirety:

Setting aside the inexcusably hostile tone and the hypocrisy of Mr. Schubert’s position, let’s examine whether there is any merit to his claim that domainers are pests that adversely affect a new gTLD’s crop. This is a claim about an economic reality — a false claim, in my opinion.

It should be publicly refuted. Not because Mr. Schubert deserves an answer (he doesn’t) but because many people who — unlike Mr. Schubert — have no association to the domain industry feel a similar ill informed resentment to domain investors, often lumping us together with cyber squatters and accusing domainers of mischief, waste, or theft.

Suppose a domainer registers and re-registers a domain over the course of 5 years. Suppose that this domainer seeks to sell the domain for 20 times the purchase price. From the perspective of an end user who resents paying “extra”, this appears to be a scandal. And from the perspective of a registry that wants its best domains to go into use immediately as high profile websites, this delay could be interpreted as a waste.

Obviously, it is quite likely that a domain — if not registered by a domainer — would not be registered at all. Or it could be registered and sit idle in the hands of a non-domainer whose half-baked entrepreneurship never sets sail. In both those cases, the registry loses out and the general public gains nothing.

But if a business had bought this domain on Day 1 for reg. fee and instantly used it, there is no guarantee that it would have been the company best suited to develop the domain. In actual fact, the website they create may be a third-rate and embarrassing site that does no favors to the registry’s public image. After all, no premium value was placed on the domain to deter mediocrity; so the domain would be awarded to the first ticket drawn out of the raffle bucket. For a better candidate to come along and pry this domain out of the hands of an incompetent businessman or webmaster, much more money would need to change hands than would be the case if a domainer held the domain. After all, the domainer has only acted as custodian and can relinquish the domain without past business expenses and rebranding costs getting in the way. But the lousy first developer would see “added value”, for which the next owner would have to pay extra. And that’s the true waste.

If a domainer’s asking price is really exorbitant, then nobody will pay it. Eventually the price will fall to fair market value because domainers have no rational interest in spending money on registration fees without a counterbalancing income. As soon as the price comes within reach of the business with the biggest plans for the domain, then the domain is sold or leased and developed in the most effective way.

Domain investors actually serve a beneficial role within the domain ecosystem. For natural reasons, domainers safeguard the most valuable real estate for the builders best suited to develop it. Without domainers setting prices according to the natural equilibrium of supply and demand, the registry itself would be forced to step in and arbitrarily fix prices at higher amounts — in other words withholding premium domains from businesses for the very same reasons domain investors do so. Such opportunism and hoarding ensures that unequal ideas do not get equal access. And that’s a good thing. The best domains should go to the best ideas, and price is one sensible way to promote survival of the fittest. Otherwise, unprofitable business models with poorly executed designs, inferior content, and bad customer service would take up space on premium domains — spreading like a fungus.

Few people object to land owners reselling acreage for a profit or holding out for developers with the right budget for the job. Domain names are not public beaches. There is no way for all mankind to own equal shares in a domain name. At best, we can only facilitate getting our empty acres noticed by the developers who make the best case for using them.

And that is another reason why domainers provide a beneficial service. We actively network with end users. No registry could possibly duplicate the marketing efforts of all domainers combined. What we do gets better brands to businesses that picked junk. What we do gets businesses to notice domains. What we do gets projects up and running, since many of us finance our own domain-based projects with other domain sales.

Domainers aren’t parasites that waste resources and extort money. Domainers raise funds for registries to operate in exchange for speculative profit sharing in the success of the registries’ TLDs. Domainers actively market domains and educate the general public, which is free marketing that the registries cannot afford to undertake themselves. Domainers enable the market to set fair prices rather than watching the registries impose artificial premium prices on the market. Domainers promote survival of the fittest when it comes to end user ownership. And that enhances the web landscape for everybody.

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