Portrait of a Crashing LLLL.com Market

Ever since the historic highs of late-January and early-February 2008, LLLL.coms have been struggling. While the pronounceable LLLL.coms had initially been supporting the low end, artificially inflating the perceived value of “an average LLLL.com”, even that no longer seems to be the case, with what seems to be no LLLL.com no longer being immune to significant depreciation in these troubling times. Summer is a particularly difficult time when domains generally experience a significant drop in demand. Couple this with renewals occuring shortly thereafter and you have a Recipe for Disaster — a roller coaster which will see nothing but new lows for the next few months. The more and more each and every domainer undercuts the next, the graver the situation becomes. The end result is known — someone will have to pay all these renewal fees between now and November, and many people seem to be saying “That won’t be me.” But in a market which has taken a turn for the worst lately liquidity is a very serious issue and one which is troubling most 4 letter investors today, both big and small.

Where does an investor turn in these difficult times? Every time they come to 4 Letter Noob, they see the low end receding further. This I’m afraid is what I’ll have to report yet again. Between now and November there is no good news in sight for the low end 4 letter market and experienced domainers are very well aware of this, most having already sold out or trying their hardest to get out of the lower end LLLL.com market which, quite predictably, is going to be the hardest hit by these renewal fees coming due.

Domaining as a whole has been in a recession this entire year, with very little positive to say about the dismal sales which have characterized this year as a whole. Early on this year the 4 letter market seemed to have defied all odds and seemed to be a path towards year-over-year exceptional returns, much like it’s LLL.com brethren. Unfortunately, this wasn’t to be and what has followed has been one of the biggest depreciations seen in a domain segment this year outside of speculative gtld and cctld markets — A full 50% crash in value over the last 4 months which up until recently appeared to be slowing down, but unfortunately appears to be speeding up yet again.

Where does one turn today in the 4 letter market? Even the once thought unstoppable CVCVs have taken an absolute beating recently on Sedo. The times have changed and it’s time to brace ourselves for the worst. Investing in 4 letter .coms with the idea of quickly reselling them is largely no longer viable, with the exception of obtaining LLLL.coms through lowballing or whoising. The sad reality is that most domainers missed this gold rush. There was a time pre-November when one could mine gold for a dime on the dollar. We’ll soon hear stories of many domainers who spent a dollar to make a dime. These aren’t exaggerations… This is what happened in the past and this is what’s going to happen in the future. The get “rich quick with LLLL.coms” period largely ended in early-February, with the exception of pronounceables which continued to experience considerable growth well into March. And that was the end. A nice little timeline in history.

Where do we go from here? How do we prepare for the future? We brace ourselves. We have only seen the start of what will be a considerable depreciation from here until renewal time. Are you ready for the ride? I hope you are because if you’re an LLLL.com investor, you’re on it whether you want to be on it or not. It’s time to start thinking about long term strategies. Most 4 letter investors will agree the history favors the success of LLLL.coms long term. Will history repeat itself? Deja vu circa 2006 avec CCC.coms? What was once upon a time a struggling CCC.com market which many people questioned the long term viability of is now an industry powerhouse which has made a few domainers filthy rich.

I hope this has gotten a point across, if not, I’ll go on with examples — L-L.coms, LLL.net, even pronounceable LLLL.coms! The fact remains that those who want to get extremely rich in this industry need patience. You hear a few stories here and there about the lucky guy who found an enduser but most people get rich in this industry by playing the waiting game. How long can you afford to wait for your LLLL.coms to return the dividends they one day likely will? Are you willing to watch the value of your investment plummet, knowing it’ll be worth a whole lot more some distant day in the future?

Ask yourselves those questions. Answer them honestly. The LLLL.com Price Guide follows below and I hope you have all taken the time to read and carefully consider your positions in this market today. If you don’t believe in the long term viability of lower quality LLLL.coms, my best advice to you is to get out now while you still can if you haven’t done so already. It’s going to get ugly and I sincerely hope everyone still invested is able to minimize their losses as best possible. If you aren’t willing to hold until 2009, sell now — there will be no better time.

Data derived from TDVR.com, the largest LLLL.com database. LLLL.com segment data used to aid in the valuation process derived from LLLY.net.  Numbers in parentheses reflect Apr 18, 2008 statistics. Current prices reflect results observed within the June 01 2008 through June 13, 2008 timeframe with an emphasis on capturing the market’s true value.

Minimum Wholesale : $25.00 ($33.00) -> 21%
10th percentile:  $30.00 ($39.00) -> 23%
25th percentile: $42.00 ($55.00) ->24%
Median: $78.00 ($87.00) -> 10%

The minimum wholesale on quad premiums has fallen to $300 per and higher quality quad premiums are fetching less than they used to. Rares are down about 10% across the board, aside from AABA and ABAA (triple non-repeat LLLL.coms) who have experienced considerable losses on the order of 30-40% over the last month. CVCVs are beginning to struggle, having appreciated considerably faster in value than the bank accounts of investors interested in investing in them. Pronounceables as a whole and especially “fringe pronounceables” are struggling. The summer is now upon us and deals are to be found whereever one looks.

Source: LLLL.com domains

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~ by Reece on June 13, 2008.

18 Responses to “Portrait of a Crashing LLLL.com Market”

  1. hmm, that is interesting Reece. However, what does 10th percentile,
    25th percentile and Median mean?

  2. I think in order to make a claim that the market is crashing, you should be doing a more in depth analysis of the TDVR data.

    There was a change made on TDVR on or around June 1 that resulted in a significant increase in the number of sales reported from the TDNAM marketplace showing up on TDVR (perhaps they got a direct feed).

    Here are the percentage of reported sales that came from TDNAM each month on TDVR:

    12/07: 28%
    1/08: 23%
    2/08: 22%
    3/08: 39%
    4/08: 27%
    5/08: 24%
    6/08: 67%

    As you can see, in all previous months an average of 27% of reported sales occured on TDNAM, whereas this month 67% have come from TDNAM.

    In analyzing all reported sales on TDVR by venue, TDNAM consistently reports below all other venues. It is this huge increase in reported sales from TDNAM that has caused the sudden “crash” that you are reporting.

    In my own analysis, which I have been conducting over several months now, if you remove all TDNAM sales to get rid of this skew due to the change, prices have in June are pretty consistent with those in May, if not a very slight increase.

    Of course, which of these values are the true values (those containing mostly TDNAM sales or those before?) is up to debate, but the fact is that there has not been a sudden “crash” in the last couple weeks. Rather, it is due to a change in the TDVR data which is what your price guides are based on.

    Perhaps Antonio could comment on the increase in TDNAM sales reported since the beginning of June.

    *As a disclaimer, I am invested in LLLL’s, take this post for what its worth, but it is based on my honest and in-depth research in the TDVR data.

  3. Hi Russell,

    Comments are always appreciated. I noticed that as well and that’s why there’s nothing about “based on XXX number of sales” in my post.

    In the defence of low end LLLL.coms, the entire market (not just LLLL.coms, but domaining largely as a whole) has crashed pretty hard since March.

    TDVR was supposedly sold on Sedo recently, so I’m not sure if that has anything to do with the increase in TDNAM sales data. Forum sales data is scarce on TDVR and we do have to remember that most forum sales aren’t coming with domains 1 year away from renewal — in many cases the LLLL.coms are 3-4 months from renewal, so I take $5 off their sales price to represent it’s value as compared to Snapnames, etc where it comes with a fresh year’s registration. If you do that forum sales and sales on TDNAM are often quite similar.

  4. My point was that when the data shifts from being 27% from TDNAM, which mostly sells lower end LLLL.coms as compared to other venues represented such as Sedo, Snapnames, and Namejet, to over 67% from TDNAM, of course all the percentiles will drop. If you suddenly included a bulk sale of 1000 single premiums at $20 each the 90th percentile would be <$50.

    When you exclude the skew of more lower end domains being reported from TDNAM, prices are fairly constant.

    At the least I would think you should inform your readers that the data you are basing your price guide on has changed, as calling this a “crash” is very misleading, although it may benefit buyers like myself.

  5. How many names were registered in November 2007? I thought it was less than 10,000. And out of 460k+… would that really make so much of an impact considering renewals?

  6. where is the price guide lol ? too much to read

  7. Hi Ty,

    About 25,000 were bought up largely by speculators in the August-November timeframe. Hard to say whether anything drastic will happen but I see no reason for anything positive to happen until these domains find their way into stronger hands. Many already have but many still are itching to be flipped.

    Time will tell 😉

  8. The good LLLL.coms will end up in price eventually, whether it is 6 months or a year from now. So now would be the time to watch for good deals if you can afford to carry the domains for a while.

  9. Agree 100% Ryan. There will be some very good deals to be found in the coming weeks and months leading up to renewals. Those who can afford to hold for 6-12 months will be more than happy they did.

  10. I disagree this time Reece. It`s the posts like this one that invite the market to crash. Snoop`s posts alone on NamePros damage more than $10 rise in oil prices. Then people read this coming from you and they`ll panick selling.
    Then smart buyers will pick up their LLLL.com for less than what they are worth and in a year time they`ll make a 300 % return minimun.

    I can`t post on NamePros currently but am reading a lot of crap while people are not realising that it`s not just the LLLL.com struggling but ALL the domain industry and not only. It`s all the world, everybody is careful at any cent these days.
    And if we look it deeper, the LLLL.com are actually surviving pretty well. They do sell at many venues. They are liquid investments as much as houses can be. Surely prices go up and down especially in the short term. But in the long term, I see no troubles.

  11. @ItalianDragon: I think he was clear that the whole DN Industry is in a recession.

    The people who are about to sell in a scurry are the weak hands. They are the people that hurt the market. The sooner that those names get into smart hands, the better. Its something that will happen eventually so we might as well get it over with.

    It will better the market as soon as the “get-rich-quick” guys are mostly out.

  12. i agree with italiandragon

    it’s time to buy now

  13. The good LLLL.coms will end up in price eventually, whether it is 6 months or a year from now.
    Now it is time to buy good domain ande good stocks

  14. Here is the power of the self fulfilling prophecy. Big names talk up their investments and slander the rest of the market. I think it is amazing how attitudes can change. These short calls are hurting us all taking advantage of the trusting noobs while power sellers dictate the next big thing as they sell out. Not to be rude but I think the advent of new services such as BQB.com which are undexposed are hurting the market. You can only stretch yourself so thin. Once the name gets known I think it will be a different story. My sales in low end LLLL.com actually increased and hovered around 35-40 so I am unsure about your prediction.

  15. @Italiandragon, it might be time to admit your predictions for these names was badly wrong. Not sure why you’d still be striking out at me for warning people what lay ahead.

    “I can`t post on NamePros currently” weren’t you banned?

  16. Where some see adversity others see profit… its all a question of perspective.

    I’ve seen names I like get dearer, dumping at the low end of the market will/should continue till november… which is great imho.

    I agree with the general downturn in domaining bit, but its restricted to the low end of the market, easier to sell a 5k name today that a $50 one…

  17. Develop the 4L while waiting the price to increase 🙂

  18. I agree 100% with what I posted above. But here is a little bit of another perspective.

    Do you guys know how Warren Buffet makes a living?

    He buys businesses, everyone knows that. But here is what most people do not know. He buys almost ALL of his businesses when the market is in a downward spiral. In the last year he has bought many many many businesses. He has recently slowed his buying down. “Its all about to rise back up.” he said in an interview. So, I say right now is the time to buy because within 3-6 months I predict we are going to start rising (economically) rapidly.

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