Monocentric Cyberspace: The Primary Market for Internet Domain Names

One of my research paper has been accepted for publication in the
Journal of Real Estate Finance and Economics:

Abstract

Cyberspace is no different from traditional cities, at least in economic terms. Urban economics governs the creation of ew space on the Internet and explains location choices and price gradients in virtual space. This study explores registration dynamics in the largest primary market for virtual space: Internet domain names. After developing a framework for domain registrations, it empirically tests whether domain registrations are constrained by the depletion of unregistered high quality domain names. Estimations based on registrations of COM domain names suggest that the number of domains expands substantially slower than the growth in overall demand for domain space. Supplying alternative domain extensions can relax the shortage in domains in the short term.

Read full paper: Monocentric Cyberspace (PDF)

Expert Witness in Internet Domain Name Case

A few months ago, I have been retained as an expert witness in a case of allegedly false and misleading advertising by a new gTLD registry. I am now very happy to report that the Judge has granted the Defendants’s motion for summary judgement, deciding in favour of “my” side. The memorandum opinion, among other things, clearly reiterates that “correlation is not causation”, which obviously resonates very well with me.

A Hedonic Model for Words

I am pleased to announce that the paper “Pricing Quality Attributes of Internet Domain Names: A Hedonic Model for Words” has been accepted for the 2014 Americas Conference on Information Systems. It is joint work with Prof. Claudia Loebbecke from Cologne University.

The study develops a hedonic pricing model for domain names. The core findings are:

  • Domain prices depend on quality attributes and can be partially predicted based on factors like TLD, domain length, number of searches for keywords and many more. The model presented in the paper is far from being useful for practioners trying to value individual domains – it shows, however, that it is possible to build such models.
  • Domains that are sold at fixed prices are, on average, of lower quality than domains that are sold in negotiated deals. Sellers concentrate their attention on the high value targets. The study does not make any claims on which sales form provides better results for sellers.
  • It is difficult to predict which domains will be developed into full websites after a sale. Still, domains that are developed sell for higher prices than those that are not used or parked after the sale.
  • The price premium for domains that are later developed has the same magnitude for fixed price and negotiated deals. We find no evidence of sellers being able to discriminate between domain investors and domain end users.

The full paper can be downloaded here: Hedonic Prices For Words

Postdoctoral Fellow at MIT's Center for Real Estate

There are probably few places in the world that would even consider hosting a research project on Internet domain names as a form of virtual real estate. The Massachusetts Institute of Technology is one of them. I will start a postdoctoral fellowship at MIT’s Center for Real Estate. Together with prof. Albert Saiz, I will be working on primary and secondary domain markets from an urban economics point of view.

Expert Witness on Internet Domain Name Valuation

Today, I appeared as an expert witness for domain values at a Dallas court. The judge invited me to share insights on the valuation of domains in general, domain valuation principles and methods, domains as an investment and on the link between secondary domain markets and the overall economy. Furthermore, the court inquired about a industry best practices in monetizing and a the portfolio consisting of more than 150,000 domains.

Post on Financial Times Alphaville: Battlefield Internet – A Saga of the Year 2012

The piecemeal roll out of new virtual space is unfair, risky and detrimental to the user-acceptance of new space on the internet.

June 13 will host the next event in a sequence of steps that will eventually lead to a virtual Big Bang — the rapid expansion of virtual space, as envisioned by ICANN, the California based organisation overseeing the internet. Next week, this independent non-governmental organisation will publicly announce a list of applications for an estimated 2,000 new global domain extensions.

Read on why ICANN should rethink its batching process … [MORE]

IDNX update for April: Prices down by 2.1 %

After record-breaking highs in the domain markets in March, April 2012 experienced a decline of 2.1%. Traditionally, domain markets are relatively slow in the sedond quarter, in both price levels and number of closed deals, so the dip could be partially caused by seasonality. Still, the biggest drag on domain prices is the sluggish overall performance of the IT industry.

Compared to stock prices, the domain market saw a relatively small decline. The NASDAQ 100, which tracks the stock prices of the 100 largest IT companies, fell by 3.1%, Apple lost 2.5%, and internet giant Google gained only 0.4%.

The full index estimates are available on IDNX.com and through Bloomberg and Reuters.