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AFNIC Publishes New Issue Paper on "the Secondary Market in Domain Names"

Loic Damilaville writes to report:

Today AFNIC is publishing its new issue paper on the secondary market in domain names. The paper — written to inform individuals as well as businesses — gives a detailed account of the concept of "secondary market", the valuation mechanisms used, and the main players involved.

The secondary market covers over-the-counter sales of already registered domain names, as well as the market in "second-hand domain names" and the ecosystem made up of the various players involved in these matters.

The secondary market in domain names is still regarded as "confidential". Just a few record deals, like the sale of "credit.fr" and its associated website for almost €600,000 euros early in 2010, have drawn commentators' attention to this strategic market. Those spectacular examples, though, give only a partial picture of the real trends in terms of numbers of deals.

The whole market is sometimes disparaged as "mere speculation", but in fact there are real economic issues at stake for businesses, which cannot nowadays afford to regard domain names as anything other than intangible assets of primary importance.

After all, it is one thing to know the price of a domain name, but quite another to understand its real value.

For further information about the secondary market in domain names, please download the complete issue paper here [PDF].

For further information about the issue papers already published by AFNIC, please visit:
http://www.afnic.fr/actu/presse/liens-utiles_en

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I confine my comments on valuation.The report Alex Tajirian  –  Apr 07, 2010 11:00 AM PDT

I confine my comments on valuation.

The report is promoting ignorance about valuations in general and domain names in particular. First, there are standard valuation models, you mention only one, namely, the comparables approach. However, the cost approach, for example, is not appropriate for valuing intangible assets including domain names. Thus, there isn’t necessarily one correct method, but there are a lot of wrong ones. Second, you ignore the fact that if the methodology is wrong, having recent data will still not generate any useful insights. You still get garbage out. Third, you are forgetting that an appraisal should reflect the value of the asset’s best use, not its current use.

“[T]here is currently no valuation method which is stable and shared by all players, with which to judge the value of a given domain name. This makes this type of investment as risky as it can be
lucrative …”
(1) What is a “stable” valuation method? Are you creating your own vocabulary to further confuse people? Is Google’s search-result ranking model stable?

(2) Is a valuation significant only if all players share it? No, again! You are claiming that since not all search engines agree on the same search-result methodology, there is no value in using search engines. Nevertheless, there are scientific methodologies for evaluating the accuracy of a model’s value forecast without the need to agree on the set of predictive variables/model.

(3) Aren’t investments (including 30-day U.S. Treasury Bills) risky by definition? What does value have to do with being lucrative? Moreover, lucrative compared to what?

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