Problems With The Domain Industry

Problems With The Domain Industry

I published an article about ChiP (Chinese Premium) domains yesterday and received a really interesting comment from a reader that I would like to unpack. For a start I would like to thank them for the effort they took in writing the comment as it’s clear they are really passionate about domains.

Escrow.com

As the comment is public, here is what they wrote:

Your advice to sell is terrible advice. And then you offer to help CHIP owners liquidate. Four-letter .com prices are positioned to move up substantially in the coming years and you recommend getting out now. You obviously needed a better translator on your China trip. SELLING CHIPS NOW AT LIQUIDATION PRICES IS TERRIBLE ADVICE. PLEASE DON'T HEED.

Yes, my advice may be terrible for a subset of the domain community that is wanting to hold their domains in perpetuity but here’s the thing. The whole point of having an asset is either it produces dividends in the form of an income stream (eg. Monetisation) or you sell the asset for more than you paid for it (ie. capital gain).

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Selling Domains Part 2 - What to do with ChiPs

Selling Domains Part 2 - What to do with ChiPs

With the incursion of the Chinese domain buyer ChiP (Chinese Premium) domains have become all the rage and are typically hot items. ChiP domains are domains typically 4 letter domains without vowels or the letter v. The definition of ChiP domains has broadened to include 4 number domains without a 0 or 4. The one thing that both the letter and number variations have in common is they are all .coms.

Escrow.com

In my recent trip around the world attending the Dubai Domainers Meeting etc. I began to dig into what was fuelling the interest in ChiPs. I spoke with one prominent domain owner and he indicated that a lot of the money being invested in ChiPs actual come from margin loans underpinned by stocks on the Shanghai stock market.

What Chinese investors are doing is taking RMB (Renminbi – Chinese currency) and buying ChiPs on websites like 4.cn. They are then either flipping the domains to other Chinese investors or planning on selling them for $US at a later date. In many cases, as ChiP domains are quite liquid they have become an effective medium for converting RMB to $US.

It just so happens that there are some well cashed up Chinese investors (ie. not margin loan backed) that are buying the domains in $US because they can resell them for more in the Chinese market or believe that their value will increase over time.

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