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Sarcle said:
While domain speculation resembles the trade of commodities or stock, there are key differences:
1. No domain is a commodity. While there are many similar domains, no two domains are identical. Likening domain valuation to stock valuation is ridiculous, as a missed domain sale is quite possible the one and only opportunity to purchase that asset.
2. The ROI for of a domain may be different in the hands of different investors. With stock or other markets, the value of the asset is fairly constant, irrespective of its owner. Domains, on the other hand, have varying value depending on who owns, and consequently markets and/or develops the domain. A well-developed domain may hold additional extrensic value. In this industry, a good percent of domain investors are also developers and/or entrepreneurs, which means the value of the domain may double or triple in their minds, and rightfully so.
3. The P/E ratio for domains is much more attractive than for stock. Consider that a domain bought in the wholesale market will generally return its purchase price in 1-2 years in parking revenue alone, that's 1.0 to 2.0 P/E (not to mention aftermarket value). Stock is attractive as high as 20.0 P/E, yet for a domain with such a yield, most would say it is vastly overpriced. Some might say that this is due to the volatility of the domain marketplace, but I would differ (especially when it comes to certain types of persistent traffic, such as type-in and generics). Therefore the comfort level of each investor dictates his price, not some fixed price for all investors.
4. Finally, simply "selling" domains at an immediate profit is not what many of us are in business to do. If buying gold at $800/oz allows an investor to corner the market, or drive up prices on Gold such that the buyer can then slowly sell his assets at tomorrow's overinflated prices, then I would hardly classify this as a "big mistake". This appears to be the strategy taken by the larger domain aggregators such as BuyDomains -- and while cornering the .com domain aftermarket may or may not be their goal, it certainly isn't too far-fetched an idea.
I'm sure I can think of other differences too, but at 2:45 in the morning, this is about the best I can come up with.
I guess my point is, that as more and more domain buyers enter the expired domain marketplace, ratios such as ROI, IRR, P/E will approach values of other marketplace securities, but for now, well-chosen domains are still a profitable venture, even at today's sometimes-overinflated prices.
