CircleID

You know when the domaining industry has problems?  It is when people like Levine, who have zero stake in it and couldnt care less whether it thrives or dies, are quite certain that it will eventually die.

Forget Gandhi there, go look for what happened to the tulip craze and the south sea bubble as examples instead.

Hi Suresh, I've heard you analogize the domain industry to the "south sea bubble" and "the tulip craze" several times.  I'm always eager to learn and would love for you to explain how you justify that comparison.

Tulips and South Seas stock where manias built on things people didn't need and were not backed by the underpinnings of cash-flow. I think Google's stock (which pays no dividends and is held up purely by the expectation of an ever greater return) is a better comparison to those two manias. Domain names on the other hand are the foundational elements of the Internet. Good ones are coveted by thousands of different parties fueling a thriving secondary market. They deliver free cash-flow via paid search advertising served to organic type-in traffic; which comes despite browser gaming, at a bare din-level when users type the names looking for the subject matter that the names describe.

This has been going on in exactly the same way since the first version of Netscape in 1993 when porn site operators bought and sold merchantable traffic. This form of paid-search has evolved to encompass non-adult subject matter and continues to thrive. Thousands of companies pay tens of thousands of staff salaries, all on the back of this real cash-flow. How is it that this entire ecosystem, the foundational elements of the net is suddenly going to implode after nearly 15 years? I think you misunderstand how the paid-search industry relating to domain names actually works.

Indeed, I think he Tulip and South Sea analogies don't hold much water (bad pun, forgive me.) In fact, those "manias" were a reflection of false/perceived scarcity while generic, premium .com domains are unique and have a perfectly inelastic supply curve. Also, Frank makes a good point that there are economic fundamentals (namely, potential revenues) underlying these domain values, and that is what ultimately drives investment in domains.

Sure seems like a Tulip craze to me - or worse:

I'm wondering if there are a lot of SHAM domain name sales going on.

I came across http://dnjournal.com/domainsales.htm this morning and looked at the websites hosted on the domains listed.

Looking at the top 5:

1) Cardiology.com - trafficclub.com
2) bald.com - doesn't even have valid nameservers.
3) supplies.com - nothing but ads for domains.
4) Chinese.net - parked at GoDaddy (surely using CashParking monetization)
5) Ringtones.net - the only one that approaches being a 'real' website (their privacy policy indicates they think they're in the business of purchasing lists of email addresses and cell phone numbers and sending them solicited commercial messages - so I can see some revenue potential; lets ignore the plan's ethics.)

The websites at the top 4 seem to have such little chance of bringing in enough cash to justify their price that I'm convinced they were mostly sham sales - i.e. they didn't really take place.  Anyone have proof they really took place (I'm not sure what form such proof would take! Tax records? There should be taxes, right?)

I was skeptical, so that's why I did (a few minutes of) research - and that's all it took to convince me.  Look: #2 ($400k) doesn't even have valid nameservers, and #3 ($324k) is just an ad for two .coms that don't even make much sense - DVDCAM and BLUCAM.  Who would pay that much money and then not do anything that could reasonably be expected to make that money back with the domains?  Maybe monetization doesn't really work, so they haven't bothered.

If there's funny business there, I'm not buying these claims of high traffic and high conversions either.

And as for Google's stock value, like nearly all stock, its price is supported by discounted expected future earnings.  Its substantial and rapidly growing current earnings (backed by audited financial records) mean that its support is substantial, result in its high value.

Any of these domainers public companies with audited financial records showing income specifically from traffic or specifically not from domain sales?