A panel of experts discussed the huge, important, and complex domain market that is China in a hugely helpful NamesCon 2017 masterclass. Bill Sweetman from NameNinja served as the session moderator, and introduced the panel:
- JQ Tang (CEO of 190.com)
- Simon Cousins (CEO of Allegravita)
- George Hong (founder and CEO of Guta)
- Negar Hajikhani (Senior Sales and Brokerage Consultant at Sedo)
- Ken Hansen (Founder of Zhongguo Ventures LLC)
It’s Not What You Might Think
Cousins said that a common misconception about the domain industry in China was that anyone in China wanted "any of your english.coms". They're not interested in English-language names: "Don't waste your time." Rather, he said, "Invest in Pinyin." Hajikhani said that you shouldn't expect all offers coming from China to be huge. However, she said that Chinese buyers are still in the market for short, easy-to-pronounce English-language .COM names. Hong said that Chinese buyers are very smart: “They’re doing this for a living.”
Tang said that the size of the Chinese market has been increasing, but it’s not easy to tell how Chinese buyers will react to price anymore. Auction platforms are popular in China, said Tang, including video auction platforms for domain sales. There are over 50 of them, said Cousins. Hajikhani said, “We saw what everyone else saw in the last two years,” that is, lots of premium and two-letter names, and then the big drop last year. This was because of the Chinese market drop and the devaluation of the yuan. “What I see now is that we have a lot of Chinese end-users, big companies that are approaching us.”
Easy to Get In
Hansen said that the barrier for participating in the domain industry is very low, and that “Chinese people in general are very entrepreneurial and very creative,” and that “entering into business is second nature” there: “People see opportunity, and they jump into business.” Still, he said to expect consolidation in the Chinese domain industry in the coming years. Cousins noted that there are over 70 million businesses in China, and “we’re still in the sunrise stage of the Chinese market.”
Hong said that there is no typical Chinese domainer: “There are so many smart people of different ages.” Sweetman noted “a lot of women killing it over there,” present in the industry in what seemed like larger proportions than you see in the US. “Anybody can start a company within a week,” said Hong, and that includes women. A lot of these online companies exist, he said, only to sell the name to the next company. Tang said that flipping was super-common, but buyers are becoming more cautions. “They’re more focused on .COM, .NET, and .CN at the moment.”
“Is there a Frank Schilling of China?” asked Sweetman. Cousins reckoned there are at least 20 of them, at least in terms of holdings. Domaining is very private in China, though, he said, so the most successful domainers aren’t working as publicly as Schilling: “ The more Frank-like, the less visible”, partly due to tax laws.
What Names Will Sell in China?
Strategy-wise, Hajikhani said that short and pronounceable .COMs and Pinyins are popular, but ".COM is king in China.” She added that numeric names with short extensions are key: “the shorter and more rare, the better,” depending on what the combinations of numbers and letters mean. Hansen said that the new gTLDs that have been successful are ones like .VIP and .CLUB: as recognizable to Chinese readers as they are to English-speakers. “There are a number of TLDs that have no meaning to Chinese people,” such as slang terms, that have very little value in China.
“It’s important to know exactly what domain you have,” said Hajikhani, since numeric names can have vastly different meanings. Six-digit domain names may end up having long-term value, said Hong, but for now the commerce around them is “just speculation.” Over all, he agreed with Hajikhani, advising the audience to look up the meaning of a Chinese-focused name before investing in it.
Hansen isn’t surprised by the nature of the names being bought, as many buyers are doing so on a wholesale level, but he suggested, “Give some thought as to who the ultimate retail buyer might be.” He advised the audience to select names based on larger businesses that might buy those names for direct use: “Broker high-quality names to retail buyers.”
Cousins reminded the audience that .CLUB, .VIP .SHOP .SITE, and .XYZ have recently become legal in China—the process to make that happen is quite complex and requires a lot of players and a big budget. If a TLD is not approved, a Chinese registrar cannot legally sell it: “It’s a very serious crime,” said Cousins.
Tang said said that when dealing with Chinese buyers or sellers, you have to make sure to find a trusted broker. Direct deals for premium domains are not really possible. Cousins noted that the Chinese government has strict limits on what its citizens can send: it’s only $50,000 per year. Hajikhani said that offshore banks, like those in Hong Kong and Singapore, come into play often.
A Question of Trust
Hong said that face-to-face transactions are important in China, because trust is valued so highly. He mentioned a large deal done directly with a buyer in which they exchanged the final price via their personal accounts, without escrow. “Reputation is important,” he said. Cousins said a trusted third party can also be key when the other parties don’t know each other. (Trust has been a recurring theme at NamesCon 2017.)
The Chinese market is less transparent than the US market, said Hanssen. He recommended finding someone in China that you can trust. Also, "look at actual activity in the market, rather than opinions."