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Are Domain Names Recession Proof?

We’ll only be able to tell whether domain names are recession proof by waiting for the performance of e-commerce sites during the holiday shopping season. Domain name owners and buyers have to remain in suspense a while longer.

Some domainers are experiencing drops in sales and prices. (Note: Not all economic sectors experience slowdowns simultaniously. Thus, domain name prices of healthy sectors should not be negatively impacted. For example, the NASDAQ Clean Edge U.S. Liquid Series index was up 66.67 percent in 2007, compared with 3.53 percent for the S&P 500 index and 9.81 percent for the NASDAQ Composite index.) However, it is not clear whether those drops are because of changes in valuations by buyers, sellers, or both. Right now not enough sales are being done for the observed price drops to be statistically attributed to diminished valuations. Moreover, the recent 26% surge in Google’s profits does not automatically translate into e-commerce profits: Ad spending is not the same as conversion of visitors to sales.

The sellers’ experiences may be due to sticking to their motto “the price of a domain name is what a buyer wants to pay,” a price that right now is most likely to be low. And the reason sales still remain scarce may be that buyers are waiting for domain prices to fall even lower. Or it may be that both sides are waiting for evidence of domain names being recession proof, and thus the felt drop in sales.

E-commerce profits are a much better barometer of domain name resilience. A strong showing during the holidays would give domain names, which are vehicles of e-commerce branding and traffic, more plausibility as recession-proof assets.

For now, any view regarding future domain name values is purely speculative. We just have to wait.

By Alex Tajirian, CEO at DomainMart

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