Internet Domain Name Index
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IDNX is available on Bloomberg and Reuters under IDNX <Index> and .IDNX, respectively.
The latest estimates for the Internet Domain Name Index (IDNX) show a 2.4% increase of resale prices in April as compared to March. The number of sales remained at similarly high levels to March.
Obviously, we will never know whether prices would have gone up even more if new gTLDs were not being released in just a few months. Nevertheless, these figures indicate that the massive expansion of the domain name space happening with ICANN’s new gTLD program is not depressing domain markets. Are the new extensions an addition to rather than a substitute for existing domains?
After several months of weak prices, March brought fresh dynamics to domain markets. Not only did the number of transactions increase by 11 percent over February’s values (March being 3 days longer did help), but prices also went up by 3.7 percent.
Domain prices continued to show weak returns with resale values in February trailing January estimates by 1.4 %. In the same time period, the total number of sales remained strong, documenting a healthy market environment.
As a side note, the average sales price at Sedo went up in February, which means that, relatively, many high quality domains have sold this month.
The Internet Domain Name Index (IDNX) estimates prices for domains in January 2013 to be 1 percent below its December 2012 values. Over the last 12 months, re-sales prices decreased by about 1.3 percent. This sluggish performance makes domains more affordable in comparison with IT stocks tracked by the NASDAQ 100 index, which appreciated by 5.4 percent in the last year.
I have the honour to present my research on domain name valuation at the annual ASSA/AREUEA meeting in San Diego. I would be delighted to see you there!
Friday, January 04, 2013
Time: 10:15 AM
Location: Marriott Marquis & Marina – Rancho Santa Fe 3
It is the last day of the year – a good time to take out the crystal ball and to make some wild guesses and bold predictions about 2013.
Read my thoughts on domain markets in the new year at Elliot’s Blog:
During October and November, prices for domain names cooled off, as the newest updates from Internet Domain Name Index IDNX show: Overall, prices for domains fell by 3.6 percent since September. This below-par investment performance of domains is similar to … Continue reading
How many domains do you need to sell food supplement pills? More than 40,000, it seems. The multi-level-marketing network distributing “Juice Plus+®” is following an interesting domain strategy by registering individual domain names for each of its sales representatives. All … Continue reading
Core resultDomain prices are as real as stock prices
Domain prices have an economic foundation. They are not detached from the economy in general. On the contrary, domain price changes are very similar to changes in the NASDAQ 100 index, the stock prices of internet giant Google or total revenues from online marketing (US). The strong correlation shows that domain name buyers and sellers make economically motivated price decisions. Domain markets are not a cloud-cuckoo-land where dreamers trade esoteric goods at imaginary prices.
For further analysis, the index estimates can be downloaded here.
Download full study for free: "Valuable Words: Pricing Internet Domain Names"
whyWhat is a domain name index good for?
The internet domain name index IDNX brings more transparency to domain markets. It provides a reliable benchmark for domain name traders and investors looking for information on price trends, returns and fundamental risk of internet domain names.
IDNX helps domain owners to track the value of their domains in time.
Furthermore, it can serve as a fever curve for the internet economy in general, covering small enterprises as well that are currently excluded by stock-price based indices, which by definition focus on the large corporations only.
“Lindenthal’s domain name index is on a very exciting frontier: that of virtual space. Just as the physical 2-dimensional (or 3-dimensional) real surface of the earth was the arena for mankind's progress until now, and the development of markets to trade ownership of that space separated civilized and modern man from his more barbaric ancestors, virtual space will allow mankind to grow and flower in this new millennium. In this frontier it is vital that we have good metrics, and Lindenthal's domain name index is computed in an econometrically rigorous manner as pioneered in the real estate investment industry. I am very pleased to see this development.”
- Prof. David Geltner, Director of Research, MIT Center for Real Estate
“We at Sedo.com believe that Thies’ excellent work on domain pricing is extremely important in order to establish a professional domain name market in the long run. Only a market where fair and transparent prices exist can be liquid and efficient. The domain market is on a good way towards that, and any Domainer who uses Thies’ insights and ancillary domain pricing tools to set fair and fixed prices on his or her domain names, helps to make our industry more professional and will sell more domain names.”
- Tim Schumacher, Founder Sedo.com
An index brings transparency to domain markets.
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 2005-2012.
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.
IDNX is based on a large sample of real domain transactions.
The empirics account for differences in the quality of sold domains.
Download the full report here.
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. NET domains trade for 75 percent less than COM domains (for identical SLDs), the discount for ORG is 84 percent, INFO, MOBI or BIZ trade for less than a tenth of COM.
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.
TLD pecking order: COM > DE > CO.UK > NET > EU > ORG > ES > INFO > BIZ > MOBI
- 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.
- 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.
Hi, I am Thies Lindenthal.
IDNX is my newest project, linking two of my dearest intellectual play-grounds. I hold a PhD in Real Estate Finance and I have been an internet entrepreneur since 1999.
You can contact me at email@example.com.
More research projects of mine can be found at my homepage.
newsIDNX in the Media
Selected articles covering IDNX
- 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?
- CircleID: All Quiet on the Virtual Front: Why Domain Investors’ Fear of the Feds is Irrational