What will be the impact of the lower demand for domains on the secondary market? – Domain name thread
Demand for domains is starting slower this year.
Earlier today, I published the latest .com rankings, which assessed the performance of the top registrars in January of this year for .com domains. The numbers tell us something we already knew: demand for new .com domains is easing.
Last week, Verisign (NASDAQ: VRSN) lowered its forecast for the growth of the .com and .net domain base this year. It was a rare admission for Verisign, which has a history of setting low goals and comfortably hitting them. He has levers he can pull, including discounts, to make sure he sticks to his numbers.
But the return of the pandemic outbreak is inevitable. People registered more domains than ever during the pandemic as they moved their businesses online. We are now entering the sequel.
We knew a mean reversion was coming. Tucows noted this in his earnings reports. Last August, GoDaddy tempered expectations for the second half of 2021. It ended up having a strong fourth quarter, but warned that 2022 growth would be slower.
Two factors are at play here. First, comparables from pandemic years will be hard to beat as things normalize. Second, some demand for domains has been driven by the pandemic. Once a small business is online, it usually doesn’t need another domain.
So what does this mean for the domain secondary market? I think it will be bifurcated.
At the bottom of the scale, a certain slowdown in sales is to be expected. We’re not talking huge differences here; January .com registrations were down just 6%. (I use .com as a proxy; although different TLDs grow differently, the overall market was probably slow in Q1.)
The high end depends a lot on the state of venture capital funding. As long as the money keeps flowing in and the economy stays relatively healthy, expect valuations for one-word domains to stay high.