In a scathing post on domain names as an investment written by Mark Jeftovic on Circle Id, said:
“This is the reality that domainers have to face: Most of the activity in the space that is considered “investing” isn’t.”
“”In the domainer space, it’s all about speculation. Not that there’s anything wrong with that. But let’s call it for what it is.””
“”I can’t bear to see the word “investing” misused any longer when used in the same sentence as “domains.”
As proof for this theory the author looks to Tucows selling its domains it acquired from its customers under YummyNames.com, the falling price of shares of Marchex, Dark Blue Sea and LiveCurrent and the Sex.com debacle, as indications that domains aren’t investments just “speculation”.
Mr. Jeftovic then goes on to call out Rick Schwartz; Used Airplanes, Inc (the buyer of flying.com) and Aron Meystedt at symbolics.com
Finally he goes on to say simply that “The smart money domainers are liquidating domains.”
“Founder and CEO of easyDNS.com, an outsourced DNS provider since 1998. Former Director to Canadian Internet Registration Authority (CIRA), 2002-2005. Guitarist & founder of The Parkdale Hookers, the open source punk rockers from hell.”
One man’s speculation is another man’s investment.
Where shares of Lehman Brothers that went from $70 a share to Zero an investment?
Are shares of Apple or Google anymore of an “investment” than a domain?
Shares of those companies pay no dividends.
You buy shares of stock from someone who is selling them believing that the shares will be worth more in 5 years, 5 months, 5 days or 5 hours from now depending on your trading strategy.
Mr. Jeftovic; Domains are traded in the same fashion, no?
You buy a domain for $1,000 because you believe it will be worth more in the future.
So if I understand Mr. Jeftovic is you buy stocks, gold, silver, art, real estate, vacant land, or anything else its an investment but when you it comes to domains its speculation?
If you want to prove domain names are a bad investment then you need to look at actual sales from a few years ago and then show me the same domains that sold for less.
Lot of them.
Then lets do it for real estate.
Then lets compare.
Lets do it for Shares of Google which are still well off their high of $740.
Lets do it for Citibank now sitting at $4 after being over $40.
Lets not forget about GM.
Yes those were fine investments.
Are the smart domainers liquidating domains?
Sure but we always have been.
But we also keep acquiring more domains than we “liquidate”.
That is how you make good investments.
The stock market and domain market are very similar to a casino… Many gamble and participate on many ends, some win while most lose. It’s just how it is.
What else is new…
This is not his first indictment of domaining. Strange for a guy in the dns business.
An interview with him here: http://luxsci.com/blog/interview-with-mark-jeftovic-ceo-of-easydns.html
Sahar has covered him: http://www.conceptualist.com/2007/05/24/mark-jeftovic-on-the-technopinkos/
and he even made it into BusinessWeek.
http://www.businessweek.com/magazine/content/06_02/b3966094.htm
Maybe he’ll respond here.
Hi guys.
The simplest way to describe the difference between speculation and investment:
Speculation: Buying something (anything) based purely on anticipation of the future price action.
Investment: Buying something based on the *current* value, especially if mismatched to the *current* price.
Value Investing (a la “Benjamin Graham”) – Safety of Principal + Reasonable Return.
And it’s not just domains: If you buy gold now because you’re pretty sure it’ll go to $2000/oz = speculation. If you buy Google because you think it’ll go to $1000/share = speculation (or for that matter, shorting Google because you think it’ll go to $200 = speculation)
By contrast, when you buy something like Tucows, you’re getting the entire aftermarket domain portfolio (Yummynames) – for free. The stock is completely reasonably priced based on the earnings of the wholesale registrar channel alone. Yummynames is a freebie. That’s textbook value investing.
I feel that most stock purchases are purely speculative, even though most people don’t realize it. Jim Cramer tells them something’s going to go up, and they run out and buy it. Same with house flippers during the blowoff stage of the housing bubble, pretty well anything.
I didn’t mean to imply that I was singling out domains. I feel this way about all asset classes. But given that this is the industry I really know well, this is what I write about.
Well since Mark and I have already discussed this earlier today, I’m sitting back, eagerly waiting to see this topic take off 🙂
aaaaaaand……. GO!
Aron
lmao Mark.
I cant believe You are dns provider, and thinks that way. I guess you just DO NOT OWN any PREMIUM DOMAINS like me.
It happens Mark. I and you both have missed that boat, now we should accept that fact and bit our nails. Although Person like you had been in the business, and did not believe in this, and did not own premium names back then, You would feel more bad than I do, because I got to know about Domains in late 2006.
Cheers to MISSING THE BOAT!!
Regards
Your Best Friend
Sin
the capitalism allows speculations if the buyers and sellers know and accept the game’s rules
the speculations are unacceptable only if the seller gain money with things that have no value like done by some banks
I would say outside of Mark Jeftovic there is no one else on this planet who cares what he thinks. Another over inflated ego that is a nobody.
Seems like Mr. Jeftovic reads my blog. I’ve said that 2 months ago: http://www.blackhatdomainer.com/the-secundary-domain-market-is-a-giant-ponzi-scheme-pyramid
Mark
As I understand your position you are a value investor and classify anything anticipatory, like growth companies as speculative.
Nothing wrong with that except that the market generally does not reward such investment strategy as richly as those who go invest based on anticipated earnings or growth.
Less risk, less reward.
Everything is speculation! Why would you buy/invest in anything if you did not speculate your investments first! Mark apparently wants attention or a flame war. It is like saying people that buy cracker jack are just using the caramel flavored snack to get to the prize. It’s a ponzi scheme you guys, get out now, the caramel corn is useless I KNOW I run a small business online LISTEN TO ME… BLAH.
Domains ARE investments, they are not as secure and stable as perhaps real estate, but that’s why we aren’t in real estate… jackass.
He seems to not realize or know that there is substantial income from parking domains as well. I would agree gold is no investment, that’s joke. But domains are like plots of lands which are bringing rent.
@ Mark Jeftovic – First, glad you clarified your comments a bit. I think you overlooked an important distinction, Mark. Investing and speculation are really only separated by the degree of risk involved (and perhaps their probability of producing a real profit). I would agree that some domain name purchases are wild speculation with an infinitely small chance of significant return. The flip side is that high-quality (or premium) domain names present a much more intelligent & defensible investment grade opportunity.
To stretch the analogy, I can buy up lots of distressed property that has become near worthless … speculating that there will be a reversal some years down the road. Conversely, I can “invest” in a relatively unknown property (with some marginal worth, but not considered prime real estate), and 5 years later it has become widely sought for a variety of new business expansion. In the first example, I might lose a small fortune. In the second example, I retire early. Both situations present a uniquely different risk vs. reward scenario.
So, I think it’s rather a misstatement to categorize all domain name activity as purely “speculation” or purely “investing”. These are both points along a continuum with true investing being represented by actual due diligence, calculated risk, and allocation of your funds into domain names that have a proven track record, or that are generally regarded as good ROI opportunities by a larger group. Personally, my ROI for the domain names I have sold has exceeded any other investment I have ever made, or even know of. A good number of domainers can say this as well. And it must also be said that many dollars have been wasted on purchasing poor quality domains names. Such is the case with cars, homes, stocks, too.
This is a non-issue. It’s Semantics. Both sides are making an issue over the exact meaning of a term in the English language. The words in disagreement are “Speculation” versus “Investment”.
Both words are very similar, literally in the same family when you look at the English language semantically.
Invest > Spend > Pay > Give > Transfer
Speculate > Invest > Spend > Pay > Give > Transfer
The above is the hypernym relationship for each of the two words based on WordNet, which is a lexical database published by the University of Princeton.
The way the English language is structured…
If I speculate, I am investing
If I invest, I am not necessarily speculating
When it comes to meaning, “speculate” literally means to “invest at a risk”. It inherently means you are investing, but with less data to know the true outcome. The two words are tied together. One means to invest smartly, the other means you are making a slightly less educated decision.
Mr Jeftovic’s prior article was rightly written off because it was full of factual errors. This article is much better written. I’m a full timer domainer and I agree with most of it. I also agree that portfolio owners are selling far more than in the past. It is a fact. I’m doing it myself because of the state of PPC and contuining very lacklustre domain market.
The industry overall isn’t in a healthly state right now. You can see this most of obivously in the really speculative stuff, LLLL.com, alt extensions, people have been dumping alot of these types of names, with good reason. Get rid of the chaff and keep the wheat. Why hold names that aren’t earning their keep?
Speculation versus investing: When someone buys an asset mainly in the hopes of reselling it that isn’t really investing., it is speculation as he points outs. Personally I think investing means buying someone in the hope of making an ROI whilst holding it. Buying a gold bar and putting it in a valut is speculation, buying a house and renting it out because you can get 7% is investing.
Yeah, I remember speaking to a guy on the phone who has done domains, development and hosting since 1999. He is ICANN approved registrar, has his own data center and more. I was trying to track down his client to acquire a domain and he was like “your not the first person to write or call”
So I got curious and picked his brain to get what others were saying and or offering. He was telling me this one geo domain (the domain I was inquiring about) got offers in the $25k to $40k range on average. On top of that, he made a comment, “I don’t know who in the right mind would spend that much for a domain, or any domain for that matter”
Rather then educating the guy and picking up an argument. I formed a grin (kind of evil grin) smile and respectfully hung up the phone. All at the same time, shaking my head wondering whether he missed the boat and was angry at himself and the rest of the market or whether he just didn’t see when opportunity came knocking for almost 10 years.
I think the Business.com sale for x amount of millions should of been that world wide door knocker to almost any domain-soon-to-be-er (domainer).
Mark is more right than wrong…delusional domainers..
Using semantics doesn’t change the fact that buying/selling/holding/trading for whatever time frame is “speculation”.
Exactly the same as speculation in all the other traditional asset classes mentioned.
There is a school of thought that: Investment is a speculation gone wrong. 🙂
Y’mean if someone offered you a $1M for the hand reg from “yesterday” you wouldn’t accept?!
And yes to: “The smart money domainers are liquidating domains.”
Certainly the Schillings, Hams & others – while not wanting to flood the market or sell for peanuts – are certainly more open to listening to offers compared to yesteryear, as evidenced by their “broker” sites.
Some may have realised they missed out (during the peak window frame) for selling their portfolio in bulk, warts & all, to some big pocket VC/equity firm (couldn’t agree on price).
Forward to today, with no immediate endgame in sight thru bulk trade sale or IPO, and with PPC gone down in the crapper, they prefer to sell them (the dead weight or ones they can do without) individually.
These guys ain’t getting younger.
They’ve been doing it a long time.
They’re likely bored & want to do something else ie. run with the REAL big dogs (Wall Street).
Not a bunch of domainers on blogs & forums talking about $2000 domain auction picks or ICANN or UDRPs…blabla
(for those have been in it > 6 mths, it’s the same old schit that gets discussed…only the names change)
Likely, they would prefer to be VCs or money managers managing (their own) money instead of domains (with all the associated risks)!
As for many of the posters in this thread…they are relative newcomers & still at the early cycle of a domain “investor”.
They’ve not reached the “7 yr itch” stage yet..
Problem with domainers is many are so sensitive & defensive – always have to justify/legitimize to themselves & others what they do.
You know it’s true.
Thank you Andrew. It really is semantics. We could have gone in circles for hours here. And aside from the ridiculous purchase of Flying.com (sorry Used Airplanes Inc, you massively overpaid), the other parties are all highly respected investors AND speculators. Kudos to them.
Be real.
These asset classes are far more liquid AND have a readily available market to get a fair “market” price at ANY time.
They have proper ownership laws to back them up.
Plus they’ve stood the test of time for 100s of yrs.
In many cases, the only market for domains is from other domainers.
And try getting a ‘fair’ price in a short timeframe.
All arguments that lend support to speculation (domains).
(yeah we know domains can get income re: PPC…)
At the end of the day, when a domain sells for 6 or 7 figures, it all comes down to ROI. Very few domain investors or speculators will spend 6 or 7 figures hoping to get a higher return through resale. Look Candy.com bought for $800k and resold for $2 million after 6 or 7 years. Its a lot of money to have sitting there collecting dust, though some times we’re lucky and can resell for great profits. Mostly the ones spending big bucks are end users who look at it from a business point of view. How will it help their company and when will the ROI get back.
I don’t know how many domainer friends I have and each time I tell them I am getting xx domain for xx price, they say I am freaking nuts. I’ve bought and sold domains from $10k to $50k and up. However I originally bought them as I had plans of my own to develop these names into businesses that would produce a profit in due time. Unfortunately as time passes, other people with the same idea or thinking as I will often make contact and make offers for the domain. If the times has changed that I am no longer interested in pursing the project, I will simply sell them the domain. Like any business, I try to get as much as possible while they try to get as cheap as possible.
As a domain investor ~ speculator ~ developer and international business man, I will look at it like this. When time changes, so does the fashion, latest fads, technology, and more. Either you move along with the current trends or be stuck like most people are and continue speculating how domains aren’t worth what they are to end users (businesses with ROI’s)
I also think flying.com is a stupid name and over priced. While the jets.com acquisition was a steal, I think he could of got planes.com or should of just stuck with his original name which describes his company exactly, UsedAirplanes.com – which to me, is better search engine wise and makes more of an impression then “Flying” – to me, first thing that pops into my mind about flying is some ticket scalper (or travel agent) for airplane tickets :-p
The same can be said with stocks… Some people are speculating, others are investing. Can you say — Stocks Are Not Investments, They Are “Just Speculation”?
Scathing it may be, but Mark’s just called a spade a spade.
When the market was riding the wave buying domains were a good investment as you had the parking returns to back it up. Now while many domains still pull in a handsome quid, many small and large domainers are investing on the fumes of hope and fortunes. Sure Rick’s gonna make a big investor sale but they’re few and far between, in the general scheme of things. Think about it, the majority of buyers are domainers themselves looking to flip for an easy buck which makes it speculation.
Without doubt there are some uber smart domainers who are ‘investers’ but with the industry getting more mainstream it is diluting into ‘speculators’.
That said, it’s not as grim as it seems and with businesses going online, domaining will never die out because of the real success stories that invigorate the industry.
On all counts, a stellar comment on the industry by Mark who should not be seen as a doomsday soothsayer but a keen observer who should encourage other sharp minds to share their thoughts as well.
Investopedia explains Speculator:
“Speculators are typically sophisticated, risk-taking investors with expertise in the market(s) in which they are trading”. This description fits well also the world’s largest portfolio holders.
I believe that the term “reseller” would be more appropriate than “speculator” or “investor” or “domainer” to describe the domain industry prime customer.
Today the most desirable and most valuable domain names are not available for registrations to general public. The world’s largest ICANN accredited domain name registrars are involved in the highly questionable business practies, including hoarding and warehousing domain names and reselling (or “flipping”) them for profit. They present domain names in such a way that it stimulates interest and entices customers to make purchases of the names for investment and speculations. Their prime customers include the resellers presenting themselves as ‘domainers” or “domain name investors”. The resellers register and purchase domain names, build, monetize, and sell domain portfolios. We live in the world of “limited lifetimes” – everything is for sale. Some registrars and resellers (including venture partners and large portfolio holders) amassed huge inventories of names, had themselves acquired (e.g. ENOM, Dark Blue See,Fabulous), or have positioned themselves for the future mergers and/or acquisitions.
There are a lot of assets to invest in. Never has there been an asset priced so low that went up so fast and maintained that value. This opportunity in domains was open to every living and breathing person on earth and 99.9% missed it.
I have asked one question now for a decade. Can anyone name me an investment that was available to all and went up faster than domain names in value other than a lottery ticket??
Gold?? Took thousands of years to get to $1000 an ounce. Diamonds? Real Estate?
Like anything else, domains are a market. Markets go up and markets go down. But the foundation for premium dotcom domain names is more solid than any other single investment on planet earth.
I always qualify what I say with “Premium” and “dotcom”. I do admit that there is a significant amount of the industry that is tulip based. Means domains with no value are trading at prices that don’t justify it. But that happens in every sector. The domain industry is still very young and not yet matured. That takes time to fix. Only time can fix that. And it will.
But I go around all day looking where I can put cash to work. 1% or 2% at the bank ain’t gonna cut it. Real Estate is wonderful but it comes with taxes and maintenance. Not very portable. Gold? Very heavy. Hard to secure. Difficult to travel with. Stocks? I have made a small fortune in the stock market. But it is no longer for the long term. It’s a day casino at best. You can make lots of $$$. No question. But again, what do you do with those $$$ once you accumulate them? My answer for the last 15 years has been to buy great domain names and that seems to be more solid than anything I have ever been involved with. Just don’t buy garbage. I see investment quality domains laying around for $500, $1000, $2000 and I see domains with little or no value fetch much more. Thta’s what makes the world go round and the way I see it, domains and domaining have never been hotter. More shows, more auctions, more large companies getting larger. A guy could come into domaining today with a few thousand bucks and within a couple years time could be worth millions.
In most business you buy something for $10 and sell it for $20. Things have shelf lives and your job is to move it fast. Great domains are like fine wines, the longer you hold them, the better they get. It is an appreciating asset when you buy right and buy the right domain.
Where is the line between dreams and delusions?
Only a few domainers were true visionaries.
Most domainers are dreamers.
We imagine, we dream, we speculate.
And sometimes …we delude ourselves.
Someday, there will be market makers.
Someday, there will be uncountable end users.
Nothing has ever given me the hope that domianing has!
Great comments but I think Mark explained himself very clearly. To bad he doesn’t correct that on his post too.
Marks comment saying that “I feel that most stock purchases are purely speculative, even though most people don’t realize it”, might be true but when you say “I didn’t mean to imply that I was singling out domains. I feel this way about all asset classes.” – Well, that says it all.
You should fix your posting because this puts everything you said in a different light & perspective. What you wrote in your post specifically singled out domains. If people read your post knowing that that is what you think about the stock market in general, then your post would be taken in that context. That was a misleading post. Instead once again domainers are speculators and the rest are suckers to full for it. Just brilliant.
Thanks to everybody who commented. As with my original article, a lot of constructive discussion came out of it.
@snoopy Praise from Caesar. Thank you. In retrospect the original article was more of a rant (again, posted for my own blog and it got picked up). Not wanting to get burned/sloppy/careless again I’ve been working on this post since January.
@BlackHatDomainer, congrats to you saying it 2 months ago. I was searching my notes because I thought I had it among them but I do remember reading your post. Having said that, I said it in 2007, so, uh, there you go.
@Rick Schwartz, your comments pretty well hit the nail on the head. I left your name out of the legends who had amassed their portfolios at near cost-of-registration because I’m well aware you are no stranger to buying domains from the weak hands in the aftermarket. You know your business, and you are doing what any smart investor does: for the most part sticking within his circle of competence. I’ve never seen you on the buy side of any transaction that made me wonder “what the hell is *that* buyer thinking?”. When one hears about your sales it’s not uncommon to be some domain you did buy at 1K or even 10K years earlier. In other words, I think you qualify as a “domainer value investor”.
@MHB, if we want to accept that the market generally does not reward value investing, I suppose we need to leave out Warren Buffet, the wealthiest man in the world (depending on the day of the week), and other losers like Sir John Templeton. When you look at the wealthiest (self-made) people in the world, most of them are value oriented investors. There are a few “traders” in there, (George Soros comes to mind. )
Also, one commonality between both successful investors and successful traders/speculators is that they seek out “low risk/high reward” scenarios. They know that high risk/high reward is a fallacy for gamblers and dreamers. (A friend sent me an excellent article in the New Yorker by Malcom Gladwell on this called “The Sure Thing: How Entrepreneurs Really Succeed” and I think it’s a must read for everybody.)
In general, I find it humorous to read some of the more ignorant comments from people who either don’t know me or obviously didn’t actually read the article.
@fghfgh you’re one of the armchair critics who obviously didn’t read it, because only somebody oblivious to the content would say “he seems to not realize or know that there is substantial income from parking domains as well” because I talked about my own personal experience with parking revenues in the article.
@sil How hard is it to believe DNS providers can think like this? You think we care if we’re providing DNS hosting for “killer.com” or “gaworshensplat.biz” ? It’s all just names-to-numbers. We don’t worry about what names or what numbers, we’re just mapping it back-and-forth.
Also, I don’t recall writing that I don’t own any premium domains or have never sold any. Because one thing @aron from xf.com did get right in his article was that many large ticket domain sales are never disclosed. Believe me, I know.
If this is “missing the boat”, I’ll happily take it.
Finally,
@Moriel, your point is well taken. Perhaps if my original first paragraph (the one that still *does* appear on the copy on my blog) was left in, it would make more sense:
“This is the inaugural post of a new channel for my blog: The Web Value Investor, where I plan to write about applying a “value investing” methodology to web assets, internet companies and domains. Conventional thinking would suggest that the two are mutually exclusive. The Nasdaq bubble of 2000 and the current Web 2.0 phenomenon of “pre-revenue” companies gaining nosebleed valuations would leave us to believe this is no space for value investors. But there may be the odd value play to find out here in this space. Sometimes, value investing has nothing to do with publicly traded companies. We can approach any asset with a value mindset.”
Ali suggested we take it out for the CircleId copy, and I agreed. In retrospect I probably should have given him a one or two line substitute introduction to put in there.
Ok, that’s it for now. Thanks to everybody for their comments.
-mark
You forgot about Greek Government Bonds (I actually think this is good investment, I mean good place to speculate)
I guess he is talking about investments like Goldman Sachs were selling to their clients. CDOs and other bundles of crap.
Mark
I still find a basic flaw in your domain theory which is that all domain investors that are making “big money” are guys that registered domains for $70 12 years ago and are not selling them for millions.
Take Mr. Schwartz for example the last multimillion dollar domain sale he had was candy.com.
Its not a domain Rick registered 12 years ago for $70 but a domain he bought a few years back for six figures.
There are many other examples of much more recent purchases that were turned into a 3,4 5X or more return in just a short time frame.
I believe I could start from scratch today all over again without one domain, and within a couple of years have a nice portfolio of domains generating monthly revenue and significant sales
MHB, Rick Schwartz
Perhaps you both should form an alliance partnership to sell your portfolios today for several billions of dollars? Life is short. Would few billions make the difference?
RL
I can’t speak for Rick.
My asking price is well below a billion
“I believe I could start from scratch today all over again without one domain, and within a couple of years have a nice portfolio of domains generating monthly revenue and significant sales.”
That’s the point in a nutshell that so few get. Plus it is a great feeling to know you could actually do it. That is true self sufficiently. Like knowing how to fish or hunt. You will always be able to eat, trade and thrive no matter the conditions.
Most of us still will not understand what we are investing in. We should not make investments that we do not understand. Given our limited valuation abilities, there will always be domains that are undervalued and domains that are overvalued. If we own domains purely as a desire to make money, and if that doesn’t work out for us, well, we are pretty much stuck.
@MHB So, basically, you’re finding a “flaw” in what I’m saying, which included this:
“If you know what you are doing, it is possible to buy domains at a higher cost basis and either develop it into something productive, or sometimes you just know that you’re still getting a deal at xx,xxx or possibly even xxx,xxx depending on the name involved.”
I’m beginning to suspect that you’re another person here who decided for themselves what I said in the article without taking the time to read it. I also acknowledged in the comment follow-up that Rick makes a lot of buys in the aftermarket and does well with them.
My assertion that many of the largest fortunes in domaining were accomplished via the accumulation of many great names at rock bottom (near registration) prices isn’t a theory, its what happened. And continues to happen via the portfolios built by registrars who cultivate the expiry channel.
@Owen Frager For some reason I never saw your comment originally. The three URLs you posted weren’t exactly “indictments” of the domainer industry, in fact “Attack of the Technopinkos”, which Sahar covered came down squarely on the side of Kevin Ham.
@Frank don’t worry, I didn’t go near the stuff Goldman Sachs was peddling, although I guess in a super miniscule way I ended up owning a piece of Goldman Sachs itself through my Berkshire Hathaway shares…. BH went in and scooped up GS preferred shares yielding 10% a year and warrants to buy another $5B worth at $115, ($45 below the current price of GS) – and they got it for a song, but as you genius domainers say, Warren Buffet doesn’t know what the hell he’s doing…. (he would have been better off buying INVESTING.COM, right?)
“Most of us still will not understand what we are investing in.”
RL, that is spot on. It is really obvious to guys like Mike and myself. We discuss this all the time. Put 10 domains out there for sale, and all things being equal, many of the folks will pick the ones with limited or no value over ones with obvious value because they don’t understand the elements that make one domain have value now and in the future as opposed to something worthless. That pisses off folks more than anything I say since day one. But the truth is the truth.
i think there is a disconnect with casual domainers and professional. we all hear bout domains like poker.org, and drive the market to new highs. i believe 99% of all domains name are worthless. only person running to bank are the registers.
Mark
You keep comparing your investment strategy to that of Mr. Buffets.
How many shares of your top stock pick Tucows does Berkshire Own?
“”My assertion that many of the largest fortunes in domaining were accomplished via the accumulation of many great names at rock bottom (near registration) prices isn’t a theory, its what happened.””
Can’t you say this just about with every investment?
Didn’t those who invested with Microsoft on day one make the most?
Didn’t those who were in on Google pre-ipo or even IPO make the most?
Sure everyone that is in an investment at the beginning makes the most, the biggest return for the least investment.
That doesn’t mean there isn’t still a lot of money to be made.
MHB, the reason I bring up Buffet a lot is because Buffet is the icon of “value investing”, and the entire premise of my article was that it was the inaugural post of my “Web Value Investor” channel. (That this sentence was omitted from the copy posted on circleid is probably skewing the context of what I said big time, now that I see it in retrospect).
Conventional wisdom says that value investing highly unlikely in tech. My entire approach is to peel away the speculative activities, and look at the space from a value perspective. I think it can be done, but a lot of domainers seem to be awfully threatened by it.
Berkshire doesn’t own any shares of Tucows, because Buffet is the first to tell you, he doesn’t do tech. However, since I posted this, I have been contacted by one other value investor who also holds Tucows. In fact he wrote it up here:
http://widemoatinvesting.wordpress.com/2009/07/31/three-cheers-for-tucows/
A central tenet of value investing is circle-of-competence. You are in best position to understand your investments when you remain within that circle.
I own a registrar, I’ve been in the DNS business for a lot longer than the whiny punters calling me a jackass have been “domainers”, so that’s what defines my circle. If I want to be a value investor (and I do), I have to work within that circle.
The other thing about value investing, is you have to be willing to look stupid in the short run and I have no qualms with that.
I got called an idiot a lot back in Feb 2007 and I came out alright.
I find it sort of weird this tension that erupts between domainers and the observers who watch domaining from a distance. Having invested (speculated) in domains myself, I still cannot see (after years of this back and forth bickering) why sideline observers typically gravitate toward a negative or critical view of domaining.
Domain name investment & return occurs at many levels and is not just about million dollar sales. If a domainer buys $1000 – $10,000 domains and reliably resells them for 3x – 10x, then domaining has just surpassed most other known forms of investing. There should be no negative sentiment attached to this whatsoever. It is an exact parallel to other common forms of investing.
Jeff seems to be most perturbed about the use of the word “investing” in regard to domaining. But I can’t agree with his rather restricive definition of investing when the term is widely & commonly used for many other forms of investment in real estate, fine art, collectibles. None of these necessarily produce a cash flow or yield a quarterly dividend, yet they are “investments” nonetheless and considered so by nearly everyone. Seems like Jeff has hijacked the general term investing and confined it to “value investing” in an effort to argue down the viability of domaining as a legit enterprise. Jeff does make some valid points about not losing your *ss in domain names, but I think he goes too far in his criticism and in his insistence that domaining be described as no more than “speculative”.
As a side note, I get his disgust when high dollar domains become no more than parking pages. But that doesn’t negate the value of those domains. It most likely means they have not been properly utilized, yet. A domain name’s value to a business is really only realized when the domain has been well integrated into the business’s operations and marketing. Hotels.com, Homes.com, Apartments.com, Cars.com, MiamiRealEstate.com could all be PPC parking pages. But they were taken to a whole other level. There is zero doubt that the brand enhancement of these generics is enormously valuable to the success of these companies.
hehehe, I think MHB paid off Mark Jeftovic to say the opposite just to see how crazy these discussions would get…
**note to MHB** next time don’t pay Mark so much, just pay me half and I will jump in and stir things up! Even if it is a $1 – after paypal fees and taxes, I would have about $0.23 cents more then I do now…
oh wait, I forgot, I don’t pay taxes…guess be about $0.98 cents leftover after paypal fees
If you buy Google because you think it’ll go to $1000/share = speculation ….
By contrast, when you buy something like Tucows, you’re getting the entire aftermarket domain portfolio (Yummynames) – for free. …. That’s textbook value investing.
Is the whole article simply link bait to encourage other people to buy Tucows stock? Mark do you hold Google stock as well as Tucows stock?
@gpmgroup another one commenting without reading the article, otherwise you would know that I did disclose owning Tucows. Google, wouldn’t touch it at these prices. I did short it around August 2007 though.
Sheesh. You guys, very testy testy. One can always tell when you hit a nerve.
I guess what I’m not communicating very well is that speculation is based on anticipation of future price action vs. investing is comparison of current price against some kind of valuation methodology (current price vs current value).
Ordinarily not a “hot button” issue, except when you try to explain it to a domainer.
(and yes, when I shorted GOOG, it was speculation)
“I guess what I’m not communicating very well is that speculation is based on anticipation of future price action vs. investing is comparison of current price against some kind of valuation methodology (current price vs current value).”
I think domaining is both. I speculate and I invest. My investments have given me the wherewith-all to speculate. But it was my speculation that had to occur before the investment happened. Chicken or the egg? Does it really matter when there is no answer? All investment is speculation but not all speculation is investment. Is that the point?
Either way, domains were one of the greatest opportunities in history with almost no barrier to entry. The tension comes from sectors that work by the hour in an entrepreneurial based medium. Great disparity in earnings and lifestyles.
Its why there will never be love or peace in this world as everything has to be “labeled”
But hey, who I am to call it out how it is and at the same time be a hypocrit!?
Hey Rick, I didn’t know you were Canadian, eh! Yeah, I said eh!
I can get away with saying “eh” as I am a canuck too :-p
Actually I read the CircleID article first and wondered at the time if your intention was to promote your analysis of Tucows stock to a wider audience. Especially the “More disclosure rider of the missed opportunity to buy more when they bottomed at .22”
When I saw you post comparing speculating in Google & investing in Tucows here [and without disclosure here] I thought it worth asking the question if you held Google stock too.
If I buy Tucows stock am I speculating or investing?
Having read your analysis that I’m “getting the entire aftermarket domain portfolio (Yummynames) – for free” Is this sufficient mitigation of risk to qualify as investing?
FWIW I think some investments are more speculative than others, and if you’re not highly leveraged then it’s rarely a problem just a matter of good investments and bad investments.
We all have different acceptable risk thresholds and often these thresholds vary over time with circumstances or personal perceptions. The same investments can feel more or less speculative on different days.
Given the wider nature of the audience at Circle ID (ICANN, IP Lawyers, Academics etc.) I was struggling to see the motivation for posting the article hence my question about your investment/speculation comparison of Tucows/Google stocks.
It is certainly difficult to see how your article was intended to help the domain industry in anyway shape or form moreover is simply seems to serve as an opportunity reinforce the audiences’ perceived prejudices of the domain industry.
[corrected]
It is certainly difficult to see how your article was intended to help the domain industry in anyway shape or form, moreover it simply seems to serve as an opportunity to reinforce the [Circle ID] audiences’ perceived prejudices of the domain industry.
“Sheesh. You guys, very testy testy. One can always tell when you hit a nerve.”
Ironic. You can also tell when the fallacy of one’s argument has been exposed. 🙂
Good thread, discussion.
I don’t think the article is really that “scathing.” In fact, it should probably be required reading for anyone thinking of “investing” in domain names.
Why?
#1 Because he’s right, the vast majority of activity is pure speculation closer to buying lottery tickets than stocks.
#2 Domain names (even good ones) are anything but liquid.
#3 It’s deceptively difficult (understatement) to be successful in the space.
#4 There’s a lot of unqualified hype by people pushing their own vested interests.
Just the thoughts of a rookie here, though.
“A guy could come into domaining today with a few thousand bucks and within a couple years time could be worth millions.”
could ? what are the chances ?
I’ll front the few thousand for a 5% stake in the first million.
“I believe I could start from scratch today all over again without one domain, and within a couple of years have a nice portfolio of domains generating monthly revenue and significant sales.”
Sure you have 10+ years of knowledge, insight and experience and have learned from yours and others mistakes.
Could a guy who walks in off the street do it ? Is there enough info for average Joe investor to pull that off w/a couple grand and some midnight oil to burn ?
You clearly have no idea what you are talking about. You will not be successful in any business with that attitude.
There are many, many letter combinationed “BRANDED” .coms that are not yet leased. The .com universe is abundent with opportunities. The only thing limiting anyones future success is their minds.
Gratefully,
Jeff
@Mark Jeftovic
I’m sorry my friend, you can’t come up with Bushism Wallstreet bullshit jargon to define the difference between “speculation and investments”. They’re both the same. Period. You invest, you take a chance, by SPECULATING that the investment you made will grow and make you more money than you invested.
Period. All the other “terminology” is just game playing, Goldman Sachs style.
When you buy domains, you’re investing in them. When you buy land, you’re investing in it. When you buy stocks, you’re investing in it, and for all of them, you are “speculating” that they will pay off.
Semantics doesn’t define a dollar amount when you’re making money on a good “investment”, my friend. Everything that takes your money and doesn’t guarantee you’ll get it back, is a “speculation”.
thanks for admitting this, and quitting the semantics marketing game. I’ve been there, I think you should be in politics! 😉
Mark Jeftovic is talking out of his rear end
also a domain has the possibility to dramatically go up in value once developed
all are pieces of land in the first intance. land.com would be the equivalent of a nice plot next to piccadilly circus in london. that land is so valauble you can’t even buy anyway, just lease at astronomical rents, so it’s possible in the future the absolute cream domains are only available to lease, let alone buy
obviously something like land1.com is a piece of land in a cheap neighbourhood
landvffd.com is a piece of nuclear radiated land lol
weird thing about domains though is something like ‘myland.com’ can sell for a kings ransom if someone already had built up the .co.uk say or just had this name in mind and had to have it
or the owner really wanted to run with the name and built a kick ass site
one week earning $1 parked, next week earning xxx, 6 months later x,xxx
totally possible
thing is there’s too many factors to even factor in!
so to summise, if you never plan to develop you are just hoping you can sell for more than you bought, so , yes, an investment, like any other really
but imho the best thing you can possibly invest in
Provides premium domain name broker services to businesses, Specializing in premium domain names. Name connect is your choice for premium domain name brokerage services. We help our clients acquire domain names they desire.
There are many aspects in this content that I can relate to and appreciate. The specifics are solid, interesting and well-written so as to make them easily understood. Thank you.