Innovation tends to pick up during a crisis, whether it’s a recession or a pandemic. And even if people’s new ideas don’t materialize, at least in terms of their web presence, they are more real than ever.
Between 2019 and 2021, for example, domain names at auction — GoDaddy’s secondary marketplace where people can buy already registered names — saw a compound annual growth rate of almost 30% in units sold. People are keenly interested in domain sales on the secondary market: 80% of its retail inventory is picked up daily by contractors, which means people are taking already registered domains and can pursue them as their own business .
Paul Nicks, President of Domains at GoDaddy, has watched how slowdowns affect domain registrations and sales throughout his 15 years with the company. He said the number of people creating their own domain names or buying on the secondary market tends to increase during a downturn, and GoDaddy will likely see a similar trend as layoffs continue across all companies.
“You get growth in the number of people doing their own businesses,” he told Protocol. “And to do that, you need a domain name, you need a brand, you need an identity.”
This interview has been edited for clarity and conciseness.
What is the correlation between licensed people and the buying and selling of domains?
Whenever you have something, called an external factor, that drives innovation or entrepreneurship, you will get it. The big COVID quit is probably the best example we’ve had recently of people starting to work from home and thinking, “Wow, that’s a great idea. Maybe I want to stay there forever. And how can I do this? And that’s driving this wave of entrepreneurship from people starting their own businesses.
We have seen a correlation with COVID. Many years ago we had another recession and times when people were laid off, and the domains were strong through those.
Just to clarify, as the layoffs happen, do you see an increase in people creating their own domain names or buying them already on the market?
Yeah, absolutely. You get growth from people doing their own businesses. And to do that, you need a domain name, you need a brand, you need an identity. You see more of these businesses start up and build websites, connect all the other ancillary products to that email, and so on.
What are the advantages and disadvantages of buying a domain name in times of crisis?
There are few downsides to buying a domain name. The prices are quite cheap. If you say, “OK, I can get online for $20 a year,” that’s not a huge proposition. Most people we see who are serious about starting a business, if they are just looking for the right domain name, then often times they will go for a more expensive domain name on that already purchased aftermarket name to its current owner. And we can see there’s a bit more investment there.
If you opt for a name available to register at $20, it will likely be longer, potentially an alternative to a .com. So like a .co, or .net, or something like that. Whereas if you invest a little more, you will have a domain that may be shorter, more descriptive and that will end in .com. So it’s a bit of a dance between the amount of initial investment you’re going to spend and the long-term memorability and branding ability in the domain name itself.
So these are the kinds of trade-offs an entrepreneur would need to understand: how descriptive can their domain name be and how memorable is their domain name relative to their budget? And weigh all of these things together on their own risk tolerance.
You mentioned in a recent podcast this idea that some people tend to buy a bunch of domain names and then keep them, pay the renewal fees and not let them go. In a downturn, do people keep these domains or sell them?
Without going into 2022 numbers, but I can say from 2020 to 2021 – call it the COVID era – we’ve seen with domain names under $10,000 and domain names over $10,000 that the price average sales increased, as well as the unit sold increase.
I think as digital businesses become more entrenched in every startup, the value of a good, memorable business – short, good [top-level domains], which is good for what you’re trying to do — will only increase and has only increased. So when you see an influx of demand for these, you naturally also see an average sale price.
What do you think the buying and selling of domain names during this time tells us about the future of startups?
Internet adoption and penetration is certainly not 100%. So you still have this growth chart every new business, even if it’s a brick and mortar business, should have an online presence. Now it’s getting easier and easier to work from home and create an online-only presence and not have to do any bricks and mortar. So that’s the trend we’re seeing: when businesses start, they look online first and settle because you can set up in an hour, a full website with e-commerce capabilities and everything you would like to be able to sell a product. And then you work from there towards, “Do you want to have a local presence? Do you want to have a brick and mortar? So you see a lot more of these full-fledged businesses that start online first and then evolve into a brick and mortar.
Are more domain names currently being auctioned than being created?
We haven’t come across the domain where secondary market sales eclipse new domain registration sales. And we’re still a long way from that, because the understanding of the value of higher secondary market sales isn’t quite there. I think a lot of people will first dip their toes in the water with a smaller mark.
But along the same lines, you have a lot of people buying domain names not for a business but for a personal blog, or just to get the email. Think of all the people out of college with .edu email addresses. And now they need a way to sign up and register so they need their own something, and they want something other than a Gmail or Hotmail or whatever account, so they will set up their own domain, not with the intention of setting up a company.
So I think when you mix up personal online presence, business and all of those other things, it’s a little different mix whereas in the secondary market, 80% of our buyers intend to start businesses. The demand is higher for the new recording side, not for the secondary market.
What about websites that were created for businesses that don’t work? Are they looking to sell these domain names?
We have a lot of domains that relate to people’s ideas, and they’re not being used at this point. We try to proactively ask those customers immediately to try and make some money off this idea by putting it up for sale on the secondary market. And for the past two years, we’ve launched email campaigns, making it easy to click a button and go on sale.
Because the cost of ownership is so small, you see them clinging to it and because it was a spark of an idea, someone for $20 a year can say, “You know what? I may come back to this later. So we’re seeing a lot of holdings and a lot of retention on these names.
The main points that I generally emphasize are that digital identities are simply becoming absolutely necessary. And again, it’s not just for people starting businesses, but everyone needs some form of digital identity that they have. We are moving out of the world of walled gardens, where everyone has an email address and goes to their own name.
I think of Twitter handles, you think of everything else, you are identified in various areas. And you can have your own digital presence. I have paulnicks.com, and it just redirects to my LinkedIn, right? So you don’t really need to put a website on it. You can upload it to your Twitter, you can upload it to LinkedIn, but it’s up to you. And you can do whatever you want with it.
And we’re seeing more and more people get it, especially with millennials and Gen Z of the world who have grown up online. What becomes really important is what will my online presence look like in 20 years when the population continues to grow? This is the power of a domain name, and it grows regardless of the type of economic concerns. But especially when a surge of entrepreneurship happens because of something in the market, you get more of it, and that becomes more and more important.
This reminds me of creators and more people creating Linktree accounts for themselves. Are creators buying more domain names?
I think the creator economy is perfect for those websites that are good at whatever they do. When COVID happened all these Etsy stores started popping up and people were selling yoga mats and cloth face masks and early stuff and hand sanitizers. All of these businesses have popped up, and if people were able to do it well and advertise it well with a memorable name, that’s one way to start a business.
It’s not even about the big quit, but it’s the people who understand that with high inflation, sometimes you have to have multiple kinds of sources of income. And if you’re good at something, if you’re good as a graphic designer, or if you can do something as a web professional as side gigs, that’s super important and will grow in importance as that inflation will rise and wages will not. follow. It will always be important to have something online that you can call your own.