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Domain Investors and the Coronavirus
Every time I turn on the television or check online news feeds, I get a sense the world is gripped in a palatable fear of the Corona virus pandemic. The virus is almost the ultimate incarnation of fear. It’s something that you can’t see and yet has clearly devastated families and loved ones around the world.
An irrationality seems to have gripped many people as they clean out the supermarket shelves of toilet paper, tissues, face masks and tinned staple food. The fact that the Coronavirus does not cause a person to have diarrhea has clearly been ignored.
Recently, the terror seems to be flowing through corporates as they are now asking their staff to work from home and have enforced strict hygiene guidelines for those that journey to work. This seemingly continuous diet of fear has spread like a contagion into the financial markets as they collapse around the world.
How is all this carnage going to impact the domain industry or is it business as usual?
I remember in the midst of the Global Financial Crisis reading a blog article by a notable domain investor declared that it was great to be in an industry that was immune to the world’s financial woes. I must admit that at the time I scratched my head and wrote my own article stating that if we think we are immune to a global shock then we are kidding ourselves. Shortly afterwards, the PPC rates tanked and amounts paid for domains dropped through the floor.
The fear associated with the Coronavirus that is VERY different to that of the global financial meltdown of 2008. On the whole, the global financial plumbing is working well (although it could be argued the repo market would be in a terrible mess if it wasn’t for the fed), and the various central banks have swooped in to support the shock to their various economies.
People have been told to what? Told to go and work from home. How are they going to do this? Most will work from home via the Internet…..which means, there’s going to be a LOT more traffic heading to domain investors. In addition, people are told not to congregate together and last time I checked the shops were less crowded then usual…..but people still need to buy stuff to live. Out comes the Internet and clicking to access the staples of life.
The challenge of course is whether all those online stores can fulfill the deluge of orders that would have normally been supplied by traditional brick and mortar businesses. Underpinning this situation is whether the PPC rates hold up. What’s the point of a marketer advertising if they can’t supply the goods!
But then I heard that China’s economy is once again kicking into gear and the people of Wuhan are back to work….yippee! This means the global manufacturing powerhouse is gearing up to supply the product starved markets of the world.
I couldn’t help noticing that President Trump recently banned travel from Europe but NOT cargo. This means, that even if the pandemic lasts for longer than first thought products from Europe are still making there way to the biggest market in the world…..so PPC has the potential to be healthy.
In addition, I’m absolutely convinced that in amongst all the buying of the necessities of life that consumers will dream of the virus ending and going on a holiday….and it’s then when they click on a PPC advertisement for a cheap cruise deal (this industry has a lot of marketing to do!). Sure, this is all hypothetical but if I do a survey of my own friends, I can almost bet this is what they’re up to.
The big caveat for many domain investors is whether Google will decide to take a bigger share of the PPC pie. They did last time so why not now? The reason why is because they can’t….while sort of can’t anyway. Let me explain.
If you have all your domains with a single Google backed monetization provider then yes, Google can hack into your revenue line. If you have your domains with a company like ParkLogic (full disclosure – I’m a founder) then if Google takes a bigger share it will have a minimal impact on your earnings, if any. Why? Because Google is having to compete for every piece of traffic rather than serving it up to them on a platter.
How about the domain sales market? Sadly, I predict this is going to be a really bad year for domain sales. Investment in buying good domains is going to contract as business hold onto all cash that doesn’t directly generate revenue. It’s going to be interesting to see some of the public sales numbers that are published by some of the markets over the coming months.
There’s one thing for sure, 2020 is going to be one heck of a year for the domain industry. In amongst all of the business ramifications we mustn’t forget that people are really suffering and sadly, some are and have, passed away. After reading this article I would encourage you to take a minute to reflect on this final point and to remember those that have paid the ultimate price due to an intractable foe.
I pray you and your familes remain safe until we meet again after this trying time.
Michael
Comments
"An irrationality seems to have gripped many people as they clean out the supermarket shelves of toilet paper, tissues, face masks and tinned staple food."
That isn't irrational. Those items are in short supply and now being rationed or not even on the shelves. The people who stayed calm and didn't panic buy are now driving around to 10 supermarkets trying to get stuff.
If there is lockdowns it will be far more difficult to get basic supplies. Do not listen to politicians and the Coles CEO. Those guys have unlimited supplies already. Stock up like no tomorrow! A months worth, higher for stuff that is in short supply. Do it now because you won't want to do it in a month when more people have Corona and supermarket access may be more limited.
This won't be good for domain investors in my view. Funding will dry up and PPC bids will drop because many parts of the economy will close for a month or two. During the the GFC PPC earnings dropped very rapidly, it was 10% monthly declines from what I recall and it never came back. I think it won't be as serious at that though but expect declines.
If everyone didn't panic then all would be good....it's the classic case of FOMO. My point on toilet paper is because it has nothing to do with the symptoms of COVID-19.
It will be interesting to see what happens with the PPC rates. I actually think they will remain healthy as long as manufacturing is not disrupted and keeps up with the online demand. The reason for my thinking is largely due to the fact that its a medical emergency rather than a financial one.
If people weren't panicking over this we'd all be screwed! People typically do panic when faced with a crisis which results in fast action being taken.
People need toilet paper and it is an obvious one to stockpile, ditto for pasta, hand sanitiser, flour etc. Think about all the things you'd definitely need if you couldn't get supplies for a months. Those are the things to stockpile. My advice is stockpile some of these whenever you see some on the shelves.
The big mistake made is that supermarkets didn't ration straight away, they happily kept selling until they had supply issues. Even when they had no supplies they didn't restrict. Instead they blamed the customers.
This will morph into a financial crisis, particularly in Europe, expect Italy will end up like Greece, maybe Spain as well. These are very large economies.
If no one panicked then there would still be supplies on the shelves and we'd all be able to buy the products. Since there is panick, a lucky few now have these supplies stockpiled and doing nothing in their garages.
It will be interesting to see the financial fall-out. I think the jury is still out on the Spain but Italy and Greece are going to have a tough time.
It is a given that people will panic during a crisis. Human nature can’t be changed.
In my view the government should hold an inquiry into the supermarkets handling of this. Did management knowingly risk food security?
Supermarkets need to be responsible in how they allocate essential items during a mass spike event. What happens if Corona gets worse and people start buying baby food or meat on the mass? They are going to sell people trolley loads of it then blame customers when it’s gone?
Supermarkets clearly have no policies here and government needs to legislate to ensure they act in an appropriate way.
Actually diarrhea has been reported as a symptom in some cases. But in general there's just not enough data yet to have a complete picture.
We went to our local WalMart today just to pick up a few routine things and holy crap... never seen anything like it. 1:45 in the afternoon on a Friday and the place was PACKED, people with carts overflowing with massive quantities of stuff, 30 minute checkout lines... it was crazy. Panicky people worry me more than the virus quite frankly.
I think the diarrhea is a bit of fake news or from people that just ate a can of beans before getting COVID-19. Here are the symptoms that the CDC is reporting: https://www.cdc.gov/coronavirus/2019-ncov/downloads/COVID19-symptoms.pdf
Do your mental health a favour, don't watch the news. It's a major control mechanism.
Thank you!
I will agree with what was said here, Do not watch the news. We are being media controlled as they feed us more information on a flu virus and watch all the people freak out and run amuck. It is sad that our world runs ok as long as people don't feel threatened. Take away the safety net and the world goes crazy. I would just as soon we all get the virus and be done with it in one fell swoop, then we can go back to whatever normalcy we can achieve. No need to create financial crisis or food shortages and panic. What a mess, people should be ashamed of themselves for being led like sheep. Some are comparing this to Death Stranding and private delivery instead of shopping in public. We shall see.