The value of domain name sales continues to grow, particularly in short domains, according to the latest, and fifth edition, Liquid Domains Market Overview, which covers the second quarter of 2017. For this report, 3-character (C) domains were added, but without the 3C transactions, the aggregate value of disclosed transactions grew 50%, from $8 million to over $12m.
The majority of this can be attributed to a notable $3m increase in 3 letter (L) sales, which featured this quarter a significant number of disclosed end user sales: xyb.com, pep.com, dcc.com, lev.com (all in the 6 digits) and most notably fly.com, sold for $2.89m. Escrow.com confirms this trend by reporting $4.7M in 3L transactions last quarter.
With the addition of 3C .com domain names, another 28,080 domains were added, roughly the same number of domains as 3L and 4 number (N) combined (27,576). 3Cs have been completely registered years ago and have traded consistently ever since, mostly on auction platforms. This category includes domains like sf8.com (LLN), 88g.com (NNL), and also alternating number/letter combinations like g7h.com or 9h5.com.
The newly added 3C category has a 13.81% development, the proportion that has been developed into a website, the second lowest in the liquid markets, but not too different than the more expensive 3N and 4N categories which present development indexes in the 15% range. LL domains remain once again the most developed category at 36.39%, followed by CC at 28.65% and 3L at 27.43%. Across the board, the second quarter saw a stabilisation of the development index, after the sharp 1% increase in Q1.
In terms of geographical distribution, the US continues to lead the way in the most developed categories (LL and 3L) with over 50% ownership. But China continues to dominate the less developed numeric categories, supporting the hypothesis that end users are often US based, while most Chinese owners are investors. According to our previous report, China owns about 37% of the liquid domains, followed by US (32%), rest of the world (22%) and Europe (9%). For this edition, a complete geo-distribution for the 4L, 5N and 3Cx was not possible because a large set of the data was not available in those categories.
According to Escrow.com, 3C domains rank surprisingly as the most traded category for the quarter with $5.8M USD in gross volume, which could be the result of large end user sales or portfolio transactions. For the same period, ShortNames.com reported over $700,000 in disclosed 3C sales, featuring the highest turnover per category ever reported at 2.70% (758 sales). The overall liquid market turnover is slightly up at about 0.9% (5,512 transactions) for the quarter.
Escrow.com also showed a decrease in transaction volume in the categories most affected by volatile end user demand (LL, CC), however, CC sales remain at a healthy $140k+ average per transaction as reported by shortnames.com. In terms of floor values, we saw a double digit decrease in the 5th percentile of 4Ls (-13.88%) and 5Ns (-11.64%), the least scarce and developed categories. 3Ls went slightly up with a +9% increase in the 5th percentile.
Looking ahead, unique .com domain names command and will probably continue to command amounts that are much above market averages. Freedom.com sold for $2M and Elon Musk repurchased x.com from PayPal for an amount that we presume is well into the 7 digits (z.com sold for $6.8M).
The stabilisation in floor values means that under-priced domains are becoming increasingly harder to find, and that the most successful investors will be the ones able to pick the right domains with end user potential, rather than purchasing in bulk and waiting for capital appreciation.
Buying a domain with end user potential in highly developed categories near floor prices, seems like a strategy that could yield good returns and reasonably contained downside.
With a 5th percentile at $220, high turnover and inherent scarcity, 3C .com domains seem an interesting category to invest, especially for combinations with high end user potential.
The report can be downloaded from: