Today’s conversation is about 4 letter .com domains (the little brother of the more scarce 3 letter .com). As a preface, I started domain investing many years ago through buying 4 letter .com domains and it proved to be a good entry into the market (it let's you learn scarce domains without risking large amounts of capital). Overall, 4Ls have similar growth rates as rarer domains (like 3 letter .com) while they come to the market at a fraction of the price which makes them ideal assets for the beginner domain investor.
For anyone not extremely well versed in pricing of scarce domains, it is actually surprisingly easy to understand it. You see, scarce letter domains often go off of a multiple of 26 of the value of their lesser or greater form - in this, a 2 letter .com domain is worth 26 times a 3 letter .com domain and a 3 letter .com domain is worth 26 times a 4 letter .com, etc etc. Why 26? Because there are 26 letters in the alphabet and that equates to the comparable scarcity - there are 26*26 LL .com domains, and there are 26*26*26 LLL .com domains, and there are 26*26*26*26 LLLL .com domains. Given this, it makes sense that every time you take away a letter, the price rises 26 times because they are 26 times more rare. Surprisingly, the market is actually very efficient with this as if you analyze the following data from NameBio.com, you will see this idea in practice:
1. Over all time, the average sale price of 4 letter .com domains is $2.16k
2. Over all time, the average sale price of 3 letter .com domains is $52.3k
Although the data is not a perfect factor of 26 (as it would be if 3Ls were at $56.16k or if 4Ls were at 2.01k), that data is almost too perfect (especially considering how many outlier sales there has been on both sides, both extra high and extra low). When you take it to the next step with 2L .com domains, it falls apart slightly (as there is a lot less data for 2Ls than there are for 3Ls/4Ls) as the average 2L .com price is $577.1k while it should be about $1.36M (according to this pricing logic).
To give some perspective on pricing for 4Ls specifically, here's some data showing 4L .com sales over the last 5 years, the last 3 years, and the last 1 year:
From the perspective of the 3L .com data that I showed a couple weeks ago, this data doesn't look that lucrative BUT this would be misleading as just because there are so many 4 letter .com domains, the market has been picky about which are valuable and which are not. In this, there are 450k+ 4 letter .com domains while there are only 17k 3 letter .com domains so they need to judged differently even with the 26x multiple trick at play. In this, to really understand 4 letter .com domains, you need to pick a segment of them and investigate.
Probably the most popular segment of 4 letter .com domains has been CVCV (standing for 'Consonant Vowel Consonant Vowel' format Ie. Roku.com). The reason this format is so valued is that they're a lot of historical precedent for companies choosing brands that are in CVCV format so they are highly demanded. Beyond this, there are only 20*6*20*6=14.4k of these so they are valued as scarce resources almost like 3L .com domains.
Although these haven't exploded in growth over the last 5 years, they still have been proven to be very profitable assets to hold as they are highly demanded in both end user and investor markets (which allow them to get quite the impressive prices). From my perspective, I have seen non-pronounceable 4 letter .com domains drop slightly in value over the last couple years while pronounceable + 'brand-able' 4 letter .com domains have excelled. For a little perspective on CVCV .com domains, here is some past sales history:
If you are a end user looking at this data trying to figure out pricing, you may want to take this data with a grain of salt as although the average price of a 4 letter .com domain is only around $2k-ish, most of the public sales that go into the sales average come from expiring auctions where investors place bids based on whatever domains come to market (they don’t intend to use the domains). The consideration of this is that if an investor is spending $2k on a auction domain they don’t want to use, they must think that it has a ton of investment potential so they are likely looking for a 10x on their investment if not more. Beyond this, the bad 4 letter .com domains sell frequently in the market at around $500/piece while the very best 4 letter .com domains sell intermittently in the $50,000+ range. So if anyone is trying to figure out pricing, it is in your best interest to enlist a expert to help you understand what is a fair price to pay for a given domain (and how to get a deal!).
If any further questions, don’t hesitate to reach out to our team at sales@qeip.com for a free consultation.