Domains Take On the Economy - On The Bright Side

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Here are two reasons Mark Jeftovic gives that could breathe life into those still clinging to some sliver of hope that domains will retain their worth as an “asset class” just a little longer:

• Domains in general are not leveraged. This quite possibly can make the difference between suffering through a few lean years and going bankrupt. If there is a defining character of this financial meltdown it is illiquidity. The damage is coming from overleverage and compounded by the fact that in many sectors (mortgages, LBOs, etc.) too much debt has been issued, and then packaged up and resold. The result is a flurry of crisis moments where entire books of instruments can’t be marked to market and liquidity totally seizes up.

• There may be a reciprocal effect in advertising mediums to the benefit of domain names. During recessions, many businesses rein in their marketing budgets. (This is often times a mistake but in many cases they don’t have a choice). Institutional advertising may suffer declines and as companies pare back on, say, Superbowl ads, they sustain or even increase their online ad spending because ROI can actually be measured. Also, online spending tends to be more accessible to small businesses than institutional advertising so the more savvy small businesses may actually step up their PPC spends. But I must stress, I think all this happens against a backdrop of overall falling budgets and falling spending, lower bids. Good for the buyers (recessions always are), but bad for the sellers (which is what the domainers are).

Because banks haven't really gotten into the game and started financing domains themselves, things aren't like the mortgage industry where an overwhelming amount of people are saddled with so much debt that many won't be able to pay it off. Most people own their domains outright, so if ad revenue falls and their online business tanks, they can still start over with a blank slate and only have the minor hassle of being labeled a colossal failure looming over them. You won't be hearing about a domain crisis on the news.

The thing is, people on Wall Street tend to overreact at the slightest hint of a downside in the economy. And because the economy seems to be catering to those degenerates, an entire industry can fall because of what these people think might happen. So now that you've read this article, I think you should be able to make some kind of inference about the fate of domains based on the information given. And no I don't think you're a degenerate.

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