IDNX is a Price Index for Internet Domain Names

howHow is the index estimated?

IDNX is a constant quality price index that takes into account the huge variety in domain names. The quality of the domain names is controlled for by empirical estimation techniques called hedonic regression and hedonic repeat sales regression. The empirical work is based on more than 200,000 real domain transactions from Sedo.com, the largest domain market place, spanning the years 2005-2011.

Why is it essential to consider the quality of domains when estimating an index? Taking the average of transaction prices gives a first indication of price developments but does not control for quality differences in the domains sold. If there is a time period in which more high-quality domains are sold, the average transaction price will increase, regardless of any true trend in prices. Putting it differently, one is comparing apples to oranges.

Two general methodologies are commonly used to price non-standardized assets like real estate or art. The first one, the so-called hedonic regression analysis, explains the price of an asset by a set of quality variables that describe the characteristics (hedonics) of that asset. Alternatively, the repeat sales methodology traces individual domains in time, comparing each transaction to previous transactions of the very same asset. While this is probably the most direct form of making sure to "compare apples to apples," it is disregarding all information on transactions that are sold only once. IDNX combines the advantages of both methodologies and relies on a so-called Hedonic Repeat Sales methodology, using a hedonic classification of the TLD and otherwise a repeat sales approach.

A full discussion of the method and the data can be found in the accompanying working paper.

tldRanking of Top Level Domains measured

The market's relative ranking of Top Level Domains (TLD) is obtained as a by-product of the index calculation. The empirics confirm a domain trader's mantra: .COM is the most valuable TLD, followed by .DE, .CO.UK, .NET, .EU, .ES, .ORG, .INFO, .BIZ, and .MOBI.

The table below shows pairwise price differences (in percent) for identical SLDs under the 10 most frequently traded TLDs. DE domains trade for 24 percent less than COM domains (for identical SLDs), the discount for NET is 73 percent, ORG is worth less than a quarter of COM, BIZ less than a tenth.

In the current econometric setup, the TLD differences are assumed to be constant in time. Furthermore, the language of the SLD is not considered. This might lead to lower estimated discounts for ccTLDs from non-English speaking countries vs. COM whenever the SLD carries some meaning in the local language.

For more results, check out the working paper.

newsNews and Tweets

IDNX in the media (selected articles)

• Financial Times Alphaville: The Price of Land on the Interweb
• Fox Business: Could Domain Names Predict the Next Recession?
• Blog Scientific American: On Rushes and Riches: The “Wild West” Era for Internet Domain Names Is Over as Efficient Markets for This “Virtual Land” Have Emerged
• ReadWrite Enterprise: How Much Would You Pay For Your Next .COM?

IDNX on Twitter

Follow @idnxcom

faqFAQ

• How often is IDNX updated?
• New index figures are released on a monthly basis. Follow IDNX on twitter and hear about any updates first. Follow @idnxcom
• Is IDNX a Sedo initiative?
• No, IDNX is independent from any party in the domain industry. Sedo has been extremely helpful, though, by granting access to their data. I would be very happy to work together with other domain market places, registrars and researchers as well.
• Will IDNX share any transaction data?
• No, sorry. I had to promise to respect the privacy of the parties involved.
• Is it OK to quote the index?
• Yes, of course. It would be nice, however, if you included a link to IDNX.com whenever you use the index.
• Is there an easy way to include the index graphs on other websites?
• Yes, just copy and paste the code below. All monthly updates will directly display on your site. This code is still pretty experimental. Use at own risk.

  <!--load libraries (in case not already loaded) -->
  <script src="http://ajax.googleapis.com/ajax/libs/jquery/1.7.1/jquery.js"></script>
  <script src="http://idnx.com/js/libs/chosen/chosen/chosen.jquery.js" type="text/javascript"></script>
  <script src="http://idnx.com/js/libs/dygraph-combined.js" type="text/javascript"></script>
  <!--load IDNX -->
  <script src="http://idnx.com/js/inline.js" type="text/javascript"></script>
  <script type="text/javascript">
           _idnxDisplayGraph('g1',['IDNX','NASDAQ 100'],true);
  </script>
  <noscript>Please enable JavaScript.</noscript>	
  <!--adjust css, if needed -->
  <link rel="stylesheet" href="http://idnx.com/css/inline_idnx.css" />	
  <link rel="stylesheet" href="http://idnx.com/js/libs/chosen/chosen/chosen.css" />
  

• Can individual domains be priced based on IDNX?
• Yes and no. Automatic domain appraisals are currently not precise and reliable enough to be of much help when pricing single domains. IDNX, however, shows the general market trend, which is the best estimate for changes in value of single domains (e.g. price changes since the last sale of the domain).
• Which TLDs are included? Will there be subindices for single TLDs?
• IDNX is based on transactions from more than 100 TLDs. It is therefore a true global market index. For the most popular TLDs like .COM, .NET or .DE, separate sub-indices are estimated.
• Does a hedonic regression have anything to do with hedonism?
• No, unfortunately not.