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I’ve read an interesting article on the rise in LLLL.com prices on Elliot’s blog today. Prices of four-letter domains have indeed gone up faster than the values of most other domain names during the past few weeks. Reece of 4 Letter Noob observed that the minimum wholesale price for LLLL.com domain names rose by 10% between February 01-08, 2008 (the median sale price was up 13%). That’s just for the first week of February. I’m sure prices have climbed quite a bit further since then already.
I wrote about four-letter .com domains being a good investment opportunity in January 2008 and August 2007 myself, but now I find it hard to say that LLLL.com domains still are a safe investment due to the fact that buyers have driven the prices sky-high. Normally, this alone wouldn’t be a bad sign, but one must not forget that at least 90% of all LLLL.com transactions are sales between domain speculators and not end-user sales (the speculator/end-user ratio might be even higher).
So, a justified question arises: Do we have a LLLL bubble now?
There are both pro and contra arguments. I would say, however, that the situation looks more and more like a market anomaly. The price rise has been too high and even outperformed the best expectations I had had last year. Although it is no question that there is value in LLLL domains, I don’t think the rate at which four-letter domain prices rise is still justified. This would require a situation in the market for these domains that is far different from the situation before, but that’s not the case. The market for LLLL domains is almost the same with the sole difference that there are now hundreds of domain speculators buying these domains, because they can be bought for cheap compared to other types of domain names such as LLL domains and generics.
What we have is the buying and selling between domainers. So far, one domainer has just sold his LLLL domains to another domain investor who then resold those domains at a higher price to yet another investor. But prices cannot continue to rise in this reseller market forever. At one point there must be an end-user who buys the domain at its fair market value. If there is no end-user for a domain at the end of this resale chain, somebody is left holding the bag.
That’s why I believe we might see a market correction soon. Prices will start to fall when some of the bigger LLLL portfolio owners finally decide to sell their domains, until the rate of value appreciation gets back to normal. The value of four-letter domains in general will continue to rise in the long term. The rise in price would then be slower than it is today, though.
I don’t want to rant about LLLL domains and there are several reasons why they’re valuable: They’re short, easy to remember, brandable, possible acronyms, stock symbols and they’re rare. Still, LLLL.com prices look inflated to me increasingly often. At least if you look at them as a short-term investment. Therefore, they’re a much riskier investment than they used to be about two or three months ago, in my opinion. I still believe that 4-/5-figure average sale prices for good LLLL.com domains are very well possible in a few years, just not in a few months as the current value appreciation and ongoing high demand would suggest.
Anyway, the opinion expressed above is only my gut feeling. Nobody can say for sure what is about to happen and how long this steep price rise will continue. I would be interested in your opinions, though, as this is certainly a controversial topic that deserves discussion.
I also see real value in LLLL.coms but agree that the increases we’ve been seeing simply cannot continue… At 10% per week returns, we’d be seeing a min wholesale in the $X,XXX range inside of a year which is absolutely absurd to even imagine. As prices climb, the rate at which they climb will no doubt slow down. I believe the $100 mark (for any LLLL.com) will be a psychological barrier to many investors… As the prices start to increase slower and slower, we’ll no doubt see many more investors start looking for “the next big thing”.
I sold 1500 of my LLLL.coms between the end of January and the beginning of February. The time was right for me… I’ve continued to invest in the LLLL.com market on a smaller scale and purchase up bargains when I come across them, but feel a diverisifying is a good idea at this time.
Since the buyout on November 2nd, I’ve cautioned that people invest only what they can afford to lose… Unfortunately, as prices grow more and more, the amount at stake continues to grow - especially for new investors who didn’t purchase their LLLL.coms at regfee like I did.
I see the market continuing to experience strong growth in the CVCV, VCVC, and quad premium sectors at least for a few more months but am somewhat hesitant to suggest people invest in low quality LLLL.coms at this time unless they’re planning on holding them long term and are capable of handling the risk associated with their investment.
They may be overvalued, but as time goes on more find homes with end users and there are less available for domain speculators, so these are a good long-term investment even though they may be inflated right now. But I think NNNNN.com’s are currently undervalued, so I think the market for some speculators will be to move from the LLLL’s to the NNNNN’s. The NNNNN’s were just all bought ought a week ago and are much more scarce than the LLLL’s (100,000 compared to more than 450,000 NNNNN’s), and actually have very good development potential, many are US zip codes, foreign postal codes (Germany, Spain, Italy, Czech Republic, France, Kuwait, Brazil, Sweden, etc.) birthdays, part numbers, lucky numbers, and more. Numerics are also huge in the booming Asian markets, 173.com went for over $300k last week and 17173.com is one of the top Chinese websites.
I value my investment and consider 4 LLLL’s domain investment for the next 5-10 years. I think this is better compare to other extensions.
IMHO.
It’s Exciting times for all of those who have heavily invested in 4LLLL.com’s. I myself have just a very small potfolio of 50 mostly pronouncables here: 4ldomain.com but plan to sell most of these to end users.
Now domainers are panicking and can no longer buy them for mid ($xx) Today the price is around $65 or more for the ugliest LLLL.com. I can see these hit min $100-$200 in a very short time frame. The demand is only getting stronger for these names.
I am also quitely and slowly investing in some nice LL-L.com and L-LL.com and LLLL.net is also now on everyone’s list!
I just sold an ugly 4-letter domain name today for $175. The offer came unsolicited at $125 and we settled on $175. I’ve posted 8 ugly 4-letter domains today on 7-day auctions at TDnam.com (Godaddy’s auctions) just to test the waters and see what they do.
I placed a pretty good LLLL on TDNam.com last week and fortunately created a $100 reserve price, as it only peaked out at $80 with 5 bids. Some may consider it as ugly because it had an X in it, but in reality it was phonetically a great domain and brandable. The name, XIPM.com (xipm.com) — pronounced “zip-em.” I’ve since put it on eBay because I always sell my LLLL domains on eBay for over $100. I’m doing this more for research on another project I’m working on, comparing eBay vs Tdnam.com. But I’ve got 400 LLLL names I plan on keeping.
I don’t have any reserve prices set on the 8 I’m selling now and willing to take the risk. I started the bidding today at $15 each.
One problem I have with auctions like sedo.com, snapnames.com and tdnam.com is there is simply too much competition for your names to be seen. Do you have any pointers on your favorite places to sell domain names?
A final question I have is I own two 3-letter dot com’s that are combos of numbers and letters — 65Q.com and iy8.com. Any ideas on what they might be worth in today’s crazy market?
I would agree with your logic about a coming market correction except for one fact. The market is growing. Internet penetration is not yet saturated. As more and more people get online, more and more people will start up companies and need a short name.
I have a few choice names in my portfolio that I’m actually saving for my children’s college fund, and a few for retirement! Now that’s positive thinking
Gil: The web is growing, no question there. But I think that’s a negligible factor in this equation. Your “normal” Internet user does not really need four-letter domains, at least not all of them. Web surfers don’t demand them; it is domain investors and a handful of companies or developers who do. The number of LLLL end user sales might increase as well as the average sale price of this type of domain name, but that won’t happen quickly.
Why not think of it this way: The LLLL domain market grew both faster than the rest of the domain market and it grew a lot faster than the Internet itself. As said, I don’t believe Internet saturation to be an important factor yet, I’m just making this point so you see that demand for LLLL domains in general was, and maybe still is, unreasonably high.
The prices for 65Q.com and iy8.com in todays market are 225$ and 245 $ respectively.