The Amount of Chinese Investment in Domains Is Only Going to Increase and Here is Why

Oct 04 2015

We all know what is happening in the domain market to numerics and short domains.  They are moving up in price at an exponential rate.  And for the last 18 months we constantly hear the word bubble or top from many different sources.  And while that may be the case at some point, in my opinion, based on solid data, it’s not coming soon.  Here’s why

According to Newsweek

 “Chinese investors have also been looking to foreign property markets to stash their money, and the current market turmoil at home will only intensify that interest. According to the National Association of Realtors in the United States, the Chinese just became the largest foreign purchasers of residential property in the United States, accounting for 16 percent of all foreign purchases in the quarter ending March 31, compared with 14 percent purchased by Canadians, traditionally the top foreign investor in U.S. residential property. 

Given the constraints on individuals moving money out of China, that’s a remarkable development. And because China is gradually easing those restrictions, the dollar figures will likely increase. Beijing is preparing to launch a pilot program later this year that would allow individuals in six of the country’s wealthiest cities to invest in stocks, bonds and property abroad. The program comes as the government is trying to crack down on the gray market that helps funnel individual wealth overseas. But the politics of going after individuals evading the $50,000 annual limit is tricky

Anyone who deals in US investments have known this for years.  The Chinese are looking to buy anything they think they can get a good return with.  And domains is part of that.  For the last few years Chinese have been buying domains as a way to get around the annual limits of the Chinese government.  They are allowed to buy only one extra home and put only so much n foreign investment.  Domains are not seen as a foreign investment.  They are pretty much free to buy any approved tld and dot com is one of them. Dot .cc and .top are two other favorites.  As you can see from the above, many of the Chinese are buying California property that is much more than $50K.   Obviously there are ways to get around the foreign caps.   Ask any realtor in the hottest property markets and they will tell you that tech and China are driving these markets.  Take either one away and the market would certainly struggle.  Domains are no different.  All this money that is flowing in is driving the market to new highs.   And China is just getting started. Only the elite and privileged have been able to buy.  In domains, only the “in the know” people have been buying domains.  I feel that the floodgates will be opening and tens of millions of more people will be looking to invest. And that is the big difference now.  These “types” of domains are being bought as investment.  With no intention of ever being used or even sold to an enduser. They are merely for trading.

This is why the five and 6 number dot coms are getting purchased.  Nobody is going to put up a site.  No, they are buying it like a stock.  It only represents something that is limited.  The quantity of numbers give it a certain level of value with individual letters or numbers within giving it a differentiating value.  Chinese investors are now buying blocks of names.  Names that meet their criteria, no vowels, no Vs, no 4s.  They are buying them up by the tens of thousands.  They are even buying the “bad” characters but they are always worth less.    If you have a way to watch registrations in 6N.com and 5L.com then you can watch it happen in front of your eyes.  Brian Kleiner of Afternic and Godaddy alerted a few of us last week that the 5L.com were getting registered in packs of a thousand.  He was nice enough to send me a list of the last available 5L.coms with no vowels and V.    I went through the entire list of everything left and bought $1500 worth of what I thought were the best letters left.  Yes, for the first time ever I invested in domains like a trading stock and not because I felt they were going to be purchased by end users.

I know many people feel that this is a good example of what the end is going to look like.  That this type of purchasing is going to crash and burn at some point.  And at some point I do agree.  But my opinion is that there is WAY too much money coming in and this won’t be for quite some time. Even then, I think the price they settle to will be way above where we are now.  Again, its my opinion, but fortunately with domains I can invest in my opinion and others can choose not too.  I am watching Chinese investment grow and spread.  It started with 4N.com, then 5N.com, then 4L.com,  moved to .top, moving to .cc, and moving to 6N.com, 7N.com and to 5L.com.    All based on results from the auctions and new registrations.   People that have access to the new registrations and auction results can verify. Many of them aren’t talking publicly because they are trying to get out ahead of it.  I bought 200 random 5L.coms because I think there will not be one premium Chinese 5L.com to register by the end of the year.

“People like you and Brian Kleiner are only saying this publicly so you can pump and dump”  Wrong. This is way bigger than anything that we can do alone.  Sure we may be helping it move along in our own way, but the numbers of domains moving is in the tens of thousand and the auction purchases in the tens to hundreds of millions of dollars.  Brian and I are mostly followers and researchers.  I am putting my money where my ideas are and he’s trying to sell registrations for Godaddy.

And let me make myself clear. This market is entirely different than the one word dot com prices that have exploded.  That truly is enduser based. Either being purchased by the end user or being resold with the anticipation of an enduser coming up and purchasing the name at some point.   Yet these prices are certainly being affected by the rise in value of all the other types of domains.  One, its an overall market increase. If this is worth this than this must be worth more.  More importantly, domain owners are making incredible profits off their LLL.coms and numerics and reinvesting their name. In short, their flush with cash and they’re wanting to spend it.

There are trillions of dollars that are going to spent coming out of China.  I think domains will will part of that spending.  It already is part of that spending.   Picking the type of domain that this money will flow in to is going to make you a ton of money.   Is it rationale?  No.  Because its no rationale does that means its all gong to implode?  No.  Trillions of dollars will hold up a market for a long long time.

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Outsmarting the Dumb, Outworking the Smart

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27 comments

  1. Scott Neuman

    Shane, as an owner and broker of these names, I’m at the point of buying these types of names and watching the auction sites watching these names start to jump up. It will be hard for the buyers to lose money at the worst and if you get past the thought that 5 to 15% isn’t a horrible return on your investment instead of 500% and up, the shorts take on an entire new value. Good article and well written.

  2. Robb

    Any interest in China for the .co extension yet? Seeing as they go after .cc domains. Dot co is close to both .com and .cc so I’m guessing it’s just a matter of time. Some numeric .co’s already land on Chinese webpages.

  3. Vincent

    Speaking of short domains, is this the reason why? I see random 4 letters that use to be for sale at $25 at dnf and namepros, and similar type of domain is now on sale for over $1k. At first I thought why are these sellers so greedy? But now, it might of the reason you just brought up. The same thing I notice on eBay.


    1. Post author
      ShaneCultra

      Vincent,

      Demand is driving up the prices. “Used to be cheaper” is a term that been heard since the beginning of domain investing and will probably continue to be used

  4. Leon

    Hi Shane, thanks for another great article.

    Are you applying the same valuation criteria to 5Ls as you do to 4Ls?
    Eg No vowels, no Vs, ending in certain letters etc?

    As an analyst by day and domain investor by night the problem I see is that adding an extra letter means increasing the number of possible combos by a factor of 26, so you’re talking 11,881,376 potential 5L combos Vs 456,976 4L combos. That’s a difference of 11,424,400 extra combos just by adding another letter into the mix. Clearly this just doesn’t equate to the kind scarcity that has made 3L, 3N, 4L and 4N so valuable.
    Therefore, just from a common sense perspective, I’m struggling to see just where the opportunity for returns is in 5Ls right now. I kinda think that to see returns on the scale of 3N, 4L and 4Ns you’ve have to be doubly shrewd because, proportionally, you’ve got far fewer diamonds to mine (diamonds being combos of premium letters) in an absolutely epic tonnage of dirt. What are your thoughts on this Shane?

    This doesn’t mean I’m not in though!


    1. Post author
      ShaneCultra

      Leon,

      You are very correct. The availability is much much greater than LLLL.com I do not expect 100 times return. I am looking more for an option type return of 300% or so. And yet despite those millions of names available to register, there were less than 65,000 no vowel, no v 5L.coms and that is being reduced by thousands a day. I still like the billions of people wanting millions of domains play. But always, everyone needs to do their own due diligence

  5. Daniel Pfanzagl

    Shane, you are exact to the point with this article! And guess what, i have been doing exactly the same these past 1-2 weeks.. buying up and/or regging mostly good 5-7N combo/pattern domains merely as “trading stock”.. lots of folks right now are missing a big chance to hop on that train that’s leaving to China..

  6. Mitchell

    What do you think will happen to the names that do contain a vowel, a V, or a 4?

    Does a rising tide raise all boats?

  7. Edward Trustham

    Thanks for the great article. If you exclude vowels and “v”‘s I calculate that there are still 3.2 million such domains not 65,000. Please correct me if I can’t count properly.


    1. Post author
      ShaneCultra

      Edward,

      Your math is correct. I was speaking of the total left to register. My availability list had 65K left as of Friday but much less than that now I imagine.

      Edit: I think Brian’s list was of the “best letters” so there are more. My apologies. But there are certainly less than 3 million left to register

  8. august

    Last night i had a dream someone bought a domain name from me with unusually very very nicely packaged proposal. It was for $20,000 and it was for a generic .net domain. I don’t know what to make of it and I have several short .com domains….

  9. James

    Shane

    What letters do you consider premium now in the 5L space? If you discount the vowels and v are you applying the same principal of
    premium letters in the U.S. or do the Chinese look at Q, X, Z as premium letters?

  10. Jim Holleran

    Shane,

    Sold off all but 6 of my llll.com in the last couple months, make a great ROI, and putting that money into the 6n.com market and bought over 2,000 of those. If I held llll.com for another year, might of 3x my price, but IMO 6n.com will 5-10x my price within the next year.

  11. Aeroname

    Hi, Shane.

    I wonder why you listed all type of investment (4N.com, then 5N.com, then 4L.com, moved to .top, moving to .cc, and moving to 6N.com, 7N.com and to 5L.com) except .net extension, when Chinese LLLL buyout first happened there? And only few months later, when LLLL.net investment proved itself with reseller prices rising from $6-9 to $35-45 LLLL.cc and LLLL.top buyout happened.

    And it didn’t stop there.
    Here’s the list of almost 1200 LLLL.net names that were registered within 1 hour today.
    http://pastebin.com/ZtyQH9ZZ
    Pattern was A + 3 Consonants.

    Also price, number of sales and usage by real companies for Chinese pattern LLLL.net is higher than price for the same LLLL.cc and LLLL.top.

  12. Konga

    Great Article Thanks for sharing your opinions.

    Would really appreciate If you can share with us your thoughts on LLLL . net domains as well. It seems to me the values are increasing too.


    1. Post author
      ShaneCultra

      Konga,

      There values are increasing but in my opinion are not at the levels of the others. It could be because so many are held and not put up for auction that I don’t see very many selling. Over the last month not very many come up for sale. That could be a good thing. But I have never been a huge dot net fan. Just a personal thing. It’s the middle child syndrome

  13. James

    Shane, what are considering the best letters in the 5L space? I looked at what you registered and I see you went with a lot of repeating letter either at the front or back of the domain. Do you consider any non vowel letters stronger then others? Thanks

  14. James

    Hi Shane – you did not reply to my last 2 comments, trying to get your insight on this. I also see Mike Berkens registered over 100 of the 5 l’s.

  15. Dave

    Not sure if you have seen this, but ALL LLL.co and NNNN.co are now bought up and market for these is jumping just in the last couple weeks. (Auctions are now starting to get action)

    It seems .co, .info, .biz and .me are all set to jump with Chinese and American interest.

    From everything I have read and am seeing in real time .co should make a run considering inventory is now all taken up and the LLL.co’s you could find for pretty much the reg fee and or in the closeouts in Godaddy are all but dried up.

    Especially the Chinese variety.

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