Domains are addresses – and good addresses will be expensive
August 4, 2018 (Sat). You may know Hangzhou because of Alibaba, but I know this beautiful city because of the saying "上有天堂,下有苏杭" (Heaven above; Suzhou and Hangzhou below). Recently, Hangzhou was in the news again -- not for its beauty but for an address.
The address Wulin Tianshui Unit XC0105A, Xiacheng District, Hangzhou was sold for a whopping 10.7 billion yuan or US$1.7 billion, the most expensive property sale in the history of Hangzhou. It has a land size of 45,000 m2 and total floor area of 194,000 m2.
Now, imagine that you are the new owner and you plan to open a mega store at this address. You'll have several limiting factors. Your customers will mostly come from Hangzhou and neighboring areas. The floor space may not be able to increase due to building code. Your trading hours will be restricted by the local laws and regulations. Finally, you cannot afford financially to hire too many retail store specialists. Addresses in the physical world have many limits.
However, (IP) addresses in the digital world are different. Once you secure a good digital address, your customers can come from anywhere in the world. The "floor" space can be expanded at will. Your trading hours can be 24/7. Finally, in the future you can create millions of AI-powered store specialists each catering to just one specific customer, using native languages of the customers to provide them recommendations based on their preference and purchasing history.
Compare these two business cases and the implication is clear. If a local physical address in Hangzhou can sell for over $1 billion, then a global digital address (.com) that you can still acquire for a few million dollars should be considered as being very cheap.