Thoughts

Andrew Miller

October 15, 2023

The Future of Domains: A Cycle of Opportunity

I wanted to weigh on different types of domain name assets and how I see things as of Oct ’23. It is first important to state my stance on the economy and investment climate. My domain name investing began in 1998, with the acquisition and sale of Beer.com. Since then, I have experienced the bursting of the .com bubble in 2000, the housing crisis of ’08, the Covid pandemic in ’20, the crypto meltdown in ’22, the repercussions of the Covid way of doing business ceasing, the supply chain crisis that followed, the frothy almost bigger than 1999 valuations that came crashing down, the wars in Ukraine and now the Middle East, and most of all, the unprecedented surge in interest rates in only 1 year time, creating a real estate, debt, and investment crisis. The price of all this is large, institutional investors had terrible years in ’22 and ’23, leading to a major slowdown in investments, a slashing of valuations, and very few exits. If you know me well, you are well aware that I am an eternal business optimist and believe strongly that there are opportunities in all cycles, and the most upside in down times. To be blunt, I am bullish on premium .com domain name assets and have advised on some of our largest transactions of all time in this window of time.  

So, how does this affect domain name assets? There are three main types of domains: exact match, category, and brandable. Exact match domains tend to be adjectives, words that are included in the brands of successful businesses, For example, Gala.com is the exact match domain name for Gala Games. Category domains are single-word brands that represent an entire industry, such as our sales of Football.com, Chocolate.com, and Chat.com. Brandable domains are domains that often have a mashup of 1-3 words.  Hilco Digital Assets is the lead investor in Squadhelp, the top global market for brandable domains. Examples of these domains are lululemon.com and JetNest.com. Of course, there can be crossover. I was the Founder of CreditCards.com, still the market leader in credit card lead generation. This was a category killer domain, and a brand. Exact match domain sales peaked during Covid, as venture money flowed wildly, and companies upgraded to their exact match domain names in droves. We handled many of these transactions. The market was so hot that I posted in 2021 that it was having an adverse effect on category domains, but that this was a cycle that I expected to normalize. We have seen a surge in category domain transactions and a recent ceiling on exact match. This is largely because the buyers of exact match domains tend to be venture capital firms and their portfolio companies, and VC’s have invested less and are tightly controlling the purse strings. Whereas a couple years ago, a VC might spend many millions on an exact match domain, today, they are more cautious. Yet, with category domains, there is only one .com and their investment ceilings are enormous.

So, what does the future hold? We are in a cycle. Soon enough, money will flow to new technology investments, exits and IPOs will return, interest rates will fall, and the most premium domain assets will become the most logical investment for a company to secure their exact match brand and category domain asset. As the purse strings loosen, valuations and prices paid for the world’s most valuable digital real estate will go up. Therefore, we see this as the absolute best time to be in touch with those companies and their investors to let them know that when they are ready, we can help them acquire the domain asset that they covet and add exponential enterprise value to their business.

Again, in this space where I usually opine on sports or daily fantasy, I am going to instead focus on the state of the world’s health right now, something much more important than any of this. It is scary times for all those on earth, and here is my eternal optimistic side, hoping that all people find a better and more peaceful way, for everyone’s sake.

Until next week.

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