According to a press release today, Sedo, announced that Bloomberg and Reuters have added IDNX, the industry’s leading domain price index, to the financial markets covered on their respective Web sites.
“”IDNX provides critical insight into the current market value of domains, domain industry trends, and the risk-return ratio of domains as a financial asset. Using real estate economic methodology to index more than 200,000 domain transactions since 2006, IDNX exhibits strong correlation with broader economic indicators, substantiating the long-held assumption that domains are as much an economic asset as real estate, stocks or shares.”
““It is gratifying to see people realize that domains are a valid investment option,” said Thies Lindenthal, the MIT researcher and economist who created IDNX and serves as Product Manager for Pricing at Sedo.com. “Internet entrepreneurs and domain industry professionals have long recognized fluctuations in domain value that parallel the economy as a whole, but unlike most other markets, these changes were not being tracked. IDNX provides the insight needed to make educated investment decisions. I am thrilled that Wall Street is taking the virtual investment space seriously, and that they are looking to the domain market for insight.”
“This is the first index of ‘virtual real estate’ constructed using the same types of econometric techniques that have been pioneered for tracking prices of ‘real real estate’ and that work well in that context. I think this is a great next step into the new frontier!” said Professor David Geltner, Director of Research at MIT’s Center for Real Estate.”
“IDNX is currently available on Bloomberg and Reuters under IDNX <Index> and .IDNX, respectively. As with all indices featured on their sites, IDNX can only be viewed by those with valid Bloomberg or Reuters accounts. To view and interact with IDNX now, go to http://sedo.com/idnx.”
This is great news for the industry – especially if the Nasdaq goes up. 🙂 Congratulations to Thies for having his work recognized like this.
Very interesting news…
I guess, it’s developing news.
Wow – Well done Sedo & Thies
The acceptance of Domains as a legitimate investment vehicle by conventional financial markets.
A Landmark Event.
I wonder what sort of metrics the index uses to calculate the idnx.
Assuming they’re credibly market-specific, it’s very interesting (and telling) to see it loosely track the US Nasdaq.
It’s kind of like when people started to realize the gigantic implications Google Insights could yield to certain business and political interests, in terms of predictive power and quantifying organic sentiments.
If that’s an objective metric, then it is pretty actionable. The implication is that its wise to expand or limit our exposure to speculative domains on the basis of what we believe the broader economy will do.
Its great to see the domain industry to grow into the financial sector, something we are working on for many years now and we honestly congratulate IDNX to be included in Reuters and Bloomberg this is a big achievement.
On the other hand I must say that from an investors perspective I am afraid the promotion of the IDNX might cause more harm then good, in fact I know from my own experience selling and promoting the DDF that this is already the case and this is why:
First let me be clear and disclose that we are publishing and calculating indices for domains since early 2009 on domainindex.com, long before Sedo´s IDNX, however promoting domains as an investment is always welcome even by competitors and its not out of jalousie that I am writing this.
There is in fact nothing wrong with the methodology of the IDNX itself, the problem is created by the set of data used for the calculation: Sedo´s sales data from 2006 to today. So the first and obvious argument against this is that I only look at a very specific marketplace, it would be a little like creating an index for antiques by only looking at antiques sold on eBay.
Sedo has created a great marketplace, the best and biggest in the world for domains, however there are certain domains that are simply rarely or never traded via sedo, with a commission between 15 and 20%, an escrow fee 3x higher than escrow.com it attracts a very particular crowd that will purchase domains. It fits the names in the range of 100 to 10.000 usd and usually again to domainers or webmasters and rarely to high end endusers in this price range. We have bought and sold many domains over 50K USD value in the last 2 years and only a single one was sold via Sedo. So what happens is that domains are simply growing out of the Sedo market once they reach a certain value. Yes from time to time Sedo will broker a huge domain like sex.com, but most big deals are made without any of the marketplaces or brokers, most endusers will simply contact owners via the whois and so will most domainers and webmaster and lawyers acting on behalf of big buyers.
So Why does it matter ?
1) Over the longterm, the IDNX would suggest only a very little growth in value for domain names, for .com´s 20%, .net 20%,.mobi 15%, es 20%, so from an investors perspective domains would therefore represent a horrible Investment because this means only about 2% revenue/year but in fact what we look at is that Sedo has managed to keep their average sales price increase at inflation level.
2) What do we see in the IDNX ? We see what we see all over, if the economy is doing well and the consensus is bullish, people buy more, when the sentiment is bearish people buy less (in this case domains) and pay less for them on this particular market. This is the worst case for domains as an investment, because the main thing every professional investor will look at if it comes to alternative investments is the correlation to the market. If an alternative investment is correlated there is usually no point to invest in it because you are inheriting additional risk and reduced liquidity and if you can achieve the same goal by buying an established financial instrument you will simply buy an index.
These 2 issues will make it harder for us to sell the DDF and domains as investment in the future because we will be benchmarked against the IDNX within the Reuters and Bloomberg systems (and all other systems using the data) from now on.
I think it will add substantial credibility to the the concept of domains as a hard core asset.
I think it will add substantial credibility to the the concept of domains as a hard core asset.
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I think there are some statements that people look back on 20 years later and really laugh at.
Is it true that the IDNX data only uses Sedo’s data of sales? I realized that the IDNX Index relied a lot on Sedo, but I assumed that to make the model as accurate as possible that it would have assembled all publicly available data.
First of all, thanks for the all the comments and feedback.
Yes, Jeff, IDNX is currently relying on Sedo’s data only. With this data, I am 100% confident that the sales have not been tampered with. This is essential for consistency. It is safer and more accurate to work with a clean and consistent data set (that comprises of more sales than all other published sales combined) than collecting bits and pieces from different platforms. Still, in an ideal world, I would like to have access to more sales in a robust, unfiltered, and VERIFIED way.
Thanks @Mike for his comments. I have posted a longer reply at my blog (http://www.lindenthal.eu/2012/05/04/does-idnx-spoil-the-sales-pitch-to-investors-a-response/).