While clearly an asset class, domains have not become a safe harbor investment just yet, despite growth of the industry.
Domains, as an investment class, have yet to garner the same kind of respect as normally seen in traditional safe harbor investments, as evidenced by the recent upswing in precious metals prices. Investors are running to gold and silver, particularly, and there are even flights to energy commodities, as fears of oil shortages in the future are driving the price of crude through the ceiling. All of this is transpiring in the wake of continued flare-ups in the Middle East, particularly in Bahrain, where a the U.S. consumer regularly dips its hands into a huge pocket of oil.
The summary of our blog notwithstanding, I love domains and domain investors. We own a few hundred domains, thought that is a pittance compared to the large investors and investment groups. Thank goodness for that cadre of large-scale portfolio holders, or else domain investors could easily be relegated to the pure legal status of cyber squatters. That is, of course, not the case, as many mainstream publications are now giving domain investors their due. A recent article in the Los Angeles Business Journal detailed some of the events of DomainFest, highlighting the investment strategies of domainers.
But the safe harbor factor could find greater perch in the coming years, perhaps even this year. The reason is the other traditional ‘safe investments’ are no longer as stable or promising as they had been. Start with a review of the housing market, which just posted another decline in existing home prices. I regularly watch CNBC and visit CNBC.com, which has the latest story about the housing market.
There is a commercial real estate bubble about to pop in Asia, and the United States commercial real estate market is recovery amid a vacuum of tenants. How can lack of tenants be anything but anathema to the commercial real estate market?
Despite uncertainties about over-zealous U.S. proposals for the seizure of domains, the recent seizure of 84,000 domains ‘by accident’, proposed changes in ICANN rules governing domain transfers and domain hijacking, as well as UDRP uncertainties, domains have become a viable safety net for investors. And domains are emerging as a long-term asset investment, not just a buy-and-flip class of penny stocks, though certainly the latter has been true of domains for a quite a number of years.
More domain investors are now developing their more valuable domain names or redeveloping them after the first effort fell flat. But development – significant development is not the same as picturesque parking pages – is still in its infancy, where domains are concerned. Few companies are actually providing full-scale development services, and many domain investors have yet to understand what real development entails. Morgan Linton noted, in a recent blog post, that he sees few domain investors will to spend large sums on development, though many are perfectly willing to spend their life savings on acquiring the domain.
But there are larger investment first, and large domain investment and auction companies, that will have the financial stamina to push domain investments and development to the next level, that of a safe harbor investment. What will be interesting to observe will be the hoped-for storyline on the mainstream financial websites and networks telling of investors ‘fleeing to domains as a hedge’.
Maybe iReit.com will have another day in the sun, after all.