Innovation tends to pick up during a crisis, be it a recession or a pandemic. And even if people’s new ideas don’t pan out, at least when it comes to their presence on the web, they’re as real as ever.
Between 2019 and 2021, for example, domain names sold in Auctions — GoDaddy’s secondary market where people can buy names that have already been registered — saw a nearly 30% compound annual growth rate in units sold. People take a keen interest in aftermarket domain sales: 80% of its retail inventory is scooped up daily by entrepreneurs, meaning people are taking already registered domains and may pursue them as their own venture.
Paul Nicks, GoDaddy’s president of domains, has been watching how downturns affect domain registrations and sales throughout his 15 years at the company. He said the number of people creating their own domain names or buying ones in the aftermarket tends to rise during a downturn, and GoDaddy will likely see a similar trend as layoffs continue across companies.
“You get a growth in people that are doing their own ventures,” 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 brevity.
What’s the correlation between people getting laid off and the buying and selling of domains?
Any time you have something, called an external factor, that spurs innovation or entrepreneurship, you'll get that. The Great Resignation from COVID is probably the best example we have recently of people that are starting to work from home and thinking, “Wow, that's a good idea. Maybe I want to stay there forever. And how do I do that?” And it spurs this wave of entrepreneurship of the people starting up their own businesses.
We saw correlation with COVID. Many years ago, we had another recession and times when people were getting laid off, and domains were strong through those.
Just to clarify, as layoffs happen, you see an increase in the number of people who are creating their own domain names or buying ones already in the market?
Yeah, absolutely. You get a growth in people that are doing their own ventures. And to do that, you need a domain name, you need a brand, you need an identity. You see more of these ventures starting up and creating websites, hooking up all the other ancillary products to that email, et cetera.
What are the upsides and downsides to buying a domain name during a downturn?
There's little downside to buying a domain name. The prices are pretty cheap. If you say, “OK, I can establish myself online for $20 a year,” that's not a huge proposition. Most people that we're seeing that are serious about starting a business, if they're looking for just the right domain name, then often they'll go to a more expensive domain name on this already purchased aftermarket name from its current owner. And we can see there's a bit more of an investment there.
If you're going with a name that is available to register at the $20 it'll likely be longer, potentially an alternative to a .com. So like a .co, or .net, or something along those lines. Whereas if you invest a little bit more you'll have a domain that may be shorter, more descriptive and ends in the .com. So it is a bit of a dance between how much initial investment you’re going to spend versus how much long-term memorability and brand ability is there in the domain name itself.
So those are the kinds of trade-offs that an entrepreneur would need to figure out: How descriptive can their domain name be and how memorable is their domain name versus what their budget is — and weigh all those things together on their own risk tolerance.
You mentioned on a recent podcast this idea that some people tend to buy a bunch of domain names, then hold on to them, pay the renewal fee and won't let go of them. When we're in a downturn, are people holding on to those domains or selling them?
Not getting into 2022 numbers, but I can say 2020 through 2021 — call it the COVID era — we saw with the domain names that were less than $10,000 and domain names over $10,000 that the average sales price has increased, as well as the unit sold increase.
I think as digital businesses become more and more ingrained in every startup, the value of a good memorable one — short, good [top-level domains], a good match to what you're trying to do — will only go up and has only gone up. So when you see an influx in demand for those then you naturally see an average sales price as well.
What do you think the buying and selling of domain names during this time tells us about the future of startups?
Adoption and penetration of the internet is certainly not at 100%. So you've still got this growth curve of every new business, even if it's a brick-and-mortar, should have an online presence. It's easier and easier now to work from home and create an online presence only and not have to do a brick-and-mortar. So that's the trend we're seeing: As companies start out, they're looking online first and getting set up because you can set up in an hour, a full complete website with ecommerce capabilities and everything you would want to be able to sell a product. And then you work from there toward, “Do you want to have a local presence? Do you want to have a brick-and-mortar?” So you're seeing a lot more of those full-on businesses starting first online and then moving into more of a brick-and-mortar.
Are there more domain names that are being auctioned at this time than there are ones being created?
We have not run into the area where aftermarket sales eclipse new domain registration sales. And we're still quite a ways away from that because understanding the value of the higher-dollar aftermarket sales is not quite there. I think a lot of people will dip their toe in the water first with a smaller brand.
But in the same vein, you have a lot of people that are buying domain names not for a business but for a personal blog, or just to get the email. Think of all the people coming out of college that have had their email be .edu. And now they need a way to sign up and register for things so they need their own something, and they want something other than a Gmail or Hotmail or whatever account, so they'll set up their own domain, not with the intention of setting up a business.
So I think when you mix personal presence online plus business plus all these other things, it's a bit different of a mix whereas in the aftermarket, 80% of our buyers intend to start ventures. Demand is higher for the new registration side, not aftermarket.
What about the websites that were created for companies that don’t pan out? Are they looking to sell those domain names?
We have a lot of domains that are attached to people's ideas, and they're not being used at this point. We're trying to proactively ask those customers at once to try to make some money on this idea by listing it for sale on the aftermarket. And in the past couple of years we've launched some email campaigns, making it easier to click a button and list for sale.
Because the carrying cost is so small, you see them hold on to it and because it was a spark of an idea, somebody for $20 a year can say, “You know what? Maybe I'll go back to that later.” So we do see a lot of holdings and a lot of retention on these names.
The main points that I typically harp on is that digital identities are just becoming absolutely necessary. And again, it's not just for people that are starting businesses, but everybody needs some form of digital identities that they own. We’re moving out of the world of the walled gardens, of everyone having an email address and moving toward their own name.
I think of Twitter handles, you think of everything else, you're identified in various areas. And you can have your own digital presence. I've got paulnicks.com, and it just forwards over to my LinkedIn, right? So you don't really need to put a website on it. You can forward it to your Twitter, you can forward to LinkedIn, but you own that. And you can do whatever you want with that.
And we're seeing more and more people understand, especially with the millennials and Gen Zs of the world that grew up online. What's really becoming important is, what is my online presence going to be like in 20 years when the population continues to grow? That's the power of a domain name, and it grows regardless of sort of economic concerns. But especially when a wave of entrepreneurship happens because of something in the market, you get more of that, and it's becoming more and more important.
That makes me think of creators and more people creating Linktree accounts for themselves. Is there any shift to creators buying more domain names?
I think the creator economy is perfect for these websites that are bespoke to whatever it is they're doing. When COVID came around, all these Etsy stores started popping up, and people were selling yoga mats, cloth masks and things in the early days and hand sanitizers. All these ventures popped up, and if people were able to do it well and advertise it well with a name that's memorable, that’s a way to create a business.
It's not even about The Great Resignation, but it's people understanding that with high inflation, you've got to have sometimes multiple sorts of sources of income. And if you're skilled at something, if you're skilled as a graphic designer or you can do something as a web pro as side gigs, that is super important and it will grow in importance as inflation goes up and wages don’t follow along. It's going to be ever important to have something online that you can call your own.
