Facing economic uncertainties and concerned about declining stock markets, many Chinese investors are looking to short domain names in the hopes of reselling them for a profit.
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E-commerce boom is driving the hunt for short domain names
Short domain names, those with five or less numbers, are heavily sought after in China this year. According to DomainIQ, Chinese buyers/investors were responsible for 75% of all short domain names purchased worldwide in 2015. Additionally, Chinese buyers accounted for nearly half of the most expensive reported domain purchases from existing owners of a wanted name.
For those that lived through the early days of the Internet, domain name investment is hardly anything new. I’m guessing Yahoo was not the company’s first choice but rather an available name. Investors were snapping up domains like beer.com, cars.com and others hoping to offload them to someone who were building e-commerce sites in those industries.
However, the Chinese have been taking that to new heights and perhaps well beyond the aforementioned sales numbers. As many sales are never reported and kept private, those statistics might not paint the whole picture. Porno.com, not surprisingly, was the most expense purchase in 2015 when it went for $8,888,888. If you’re familiar with Chinese superstition/numerology you’ll know that the number eight is believed to bring money, hence the private buyer of porno.com was likely Chinese.
Domain Day of China
On December 19th last month, Shenzhen played host to the first “Domain Day of China where somewhere around 200 investors spent nearly $25 million buying, generally speaking, short domain names. And the Chinese are not afraid to pay a middleman to make the transaction go smoothly.
The chaiman of 190.com and one of the sponsors of Domain Day, Chen Xuedan, recently told Quartz that, “Most large deals are done via agencies.”
Again, domain name investment is nothing new and began on the other side of the Pacific, but you really have to know the Chinese mindset in order to be successful in turning them over for a profit in the short or long term. And once again, it returns to numerology. The number four just doesn’t sell as it’s associated with death due to its pronunciation. Zeroes don’t work either but not do to an associated with “death” or anything unlucky, it’s just easier not to use it given its similarity in appearance to the letter “O” and if you want to drive someone to your e-commerce site you don’t really want to confuse them.
When I lived in Shanghai and needed a first or a later SIM card, you were allowed to choose your number. Rather, you were allowed to choose your number at a kiosk based on what was left. Anything with multiple 8’s was gone and 4’s were everywhere, which I had no problem with as 4441-0444 is pretty easy to remember. Now, convincing someone to call you was a bit of a task. You know Death-Death-Death-1-0-Death-Death-Death is a bit of an ask for a highly superstitious student of yours.
The domain name bubble is coming?
Surely this domain registration investment will come to an end or rather simply pop, as bubbles have a tendency to do, and will leave a number of people holding the bag. While there are surely winners in the game, there are also going to be losers. But in the shame/face that China plays as well as any Asian culture, you won’t likely hear about these failures anytime soon.
What could also be driving the market is the fact that unlike a stock sale, there is nothing regulating the market or making sure that profitable investors could potentially avoid paying any taxes on their gain.
“For most domain names the only key regulation is that you must provide accurate WHOIS information and verify an email address,” Alan Dunn, the managing director of Florida-based NameCorp in an email exchange with Quartz. Pointing out that domain investment is “still only a small fraction of the financial ecosystem,” he was clearly alluding to the fact that profits can be squirreled away by investors.
Dunn continued, “great domains like HongKong.com, Taiwan.com, DD.com and others” have been bought and sold with no public records. The same is true for the brokers of these sales.
But more than trying to avoid paying taxes, the buying and selling of domain names is a fantastic way for Chinese citizens with significant savings to get money out of the country. Chinese who are lucky enough to be granted the ability to travel abroad are being increasingly restricted in the monies they can pull while traveling. Additionally, they are limited in what can be transferred out of the country via wire transfer.
So, buy an overpriced domain name out of country and have someone hold your money for you. There is a staunch belief by many that this bubble is being driven by those looking to get money out of the country not the fact that the domain name will ever sell for a profit.