As I write this piece, many premium domain speculators are scratching their heads and somewhat frustrated from watching NFT (non fungible token) digital artwork sell for astronomical amounts of money on marketplaces like OpenSea and in live auctions. Meanwhile, what some in our industry dub the original NFT; domain names, which provide their owners a lifetime of utility, SEO benefits and brand alignment, in most cases struggle to get offers above the liquid value.
This is not to say that domains are on the decline, in fact, good ones have never been more in demand. The domain market is extremely hot! However, as brokers, we still spend a great deal of time educating potential buyers of the importance and value in owning the exact brand matching .com of their business or domains represent the name of a product or service they offer.
We do not expect our job to be an easy one and this is not a rant about NFTs. I actually think that NFTs are intriguing and am excited to see where the whole non fungible digital ecosystem will be in another couple of years. That said, it appears we are in a hype cycle for NFTs as they begin to carve out a whole new digital asset class.
At the moment, digital artwork and caricatures are what is bringing NFTs to the public spotlight as some pieces like Beeples’ “Everyday” that brought in $69 million from a Christie’s Auction. The driving force behind the value of the NFTs, like fine art and premium domain names, is scarcity. When a new NFT is minted, the creator gets to decide how many digital tokens they want to assign to each piece. So, an artist can create scarcity of a digital piece simply by minting a piece of artwork as a 1/1 or 1/5 limited edition, etc.
Not just any NFT is selling for mega money, the ones bringing the highest paydays are created by established artists who had a large following leading up to the craze. That said, there are many different types of NFT art that are selling for a lot of money. It is difficult to comprehend even with the scarcity aspect, why someone would pay so much for ‘rights’ to a digital file. Afterall, there isn’t any utility to NFT artwork other than being able to enjoy and share it. There are other types of NFTs coming that will provide utility down the road, but for now I am comparing NFT art valuation to premium domains.
When considering domain name valuation, the extension, length, pronounceability, keyword search volume and other factors help determine what the domain ultimately can sell for. The highest ‘recorded’ domain sale of Voice.com for $30M is less than half of the highest NFT sale, which given the extraordinary utility of domain names is quite mind boggling. With a domain name, you own digital property that you can build on for a lifetime, use as your brand, email and basically entire digital identity for an individual, organization or company.
Premium domains are amongst the most scarce assets in the world. There is a finite supply of words in our lexicon and a small percentage of the words or word combinations actually hold value when it comes to domains. That is why one word and short .coms are continuing to command higher and higher prices. However, we feel that domains are actually still severely undervalued and overlooked. Even with a big uptick in the market and many great sales being booked this year, it is still an uphill battle to get a proper retail price for a domain. If the most sought after NFT art pieces can sell for tens of millions of dollars, should be seeing domain prices in the hundreds of millions of dollars given their utility and importance in business and commerce?
In any case, it is a very exciting time for digital assets. Many domain investors are starting to reassess the pricing on their best domains. As more and more money flows into the digital world, we expect to continue seeing valuations of on the rise as well. That said, if you had $100k to spend as an investment and had to choose, do you think you would go for an NFT artwork or a premium domain? We’d love to hear your thoughts in the comment section below!
Beeples’ $69M NFT - Source (WP:NFCC#4)