With the Sept 1, 2021 increase in .com domain name prices, many are considering whether, or for how long, to renew names in advance. I take a look at a simple probability argument to help you decide if you should renew in advance, as well as some additional factors to consider.
The Argument to Renew In Advance
The case for renewing in advance is that you pay a lower per year amount now. This .com price increase is 7% wholesale at registry, and from the registrars who have announced their new retail prices, the increase ranges from slightly less than 7% to almost 14% increase. You can follow the announced retail increases in this NamePros thread.
The Argument Not to Renew In Advance
The main argument not to renew in advance is that you might sell the domain name, in which case you needlessly paid for a future renewal. There is also an opportunity cost argument. Even if it made logical sense to renew in advance, you can get better returns on your funds by using the money today for something else,, such as investing in additional domain names.
The Probability Analysis
Probabilistic thinking can help guide many decisions in domain name investing, including the renew now or not question.
Let’s for simplicity assume that the renewal price today is $9 per year, and at the registrar you use it will be $10 per year after the increase. That corresponds to the situation at some domainer-friendly registrars, where the increase being applied is actually more than simply the wholesale increase.
You will also need to estimate your personal retail sell-through rate applicable to this domain name. For this analysis I am assuming that it is 2%. If so, there is 1 chance in 50 you will not need to have paid the extra renewal, since your name will have sold in the coming year. This represents a loss of (2/100)*$9.00 = $0.18.
With our assumed sell-through rate, there are 49 chances in 50 that the domain name will not sell in the current year, however. Assuming that this is a name you would certainly renew, your extra cost by waiting to renew is (98/100)*1.00 = $0.98. Note that we use the price difference in the two renewal costs.
Since the second cost is higher than the first, these numbers suggest that we should logically renew in advance. See also the considerations in the next section, however.
You can readily do the numbers for any other scenario. For example, if the current renewal was $9.00 per year, and the increased renewal rate in the coming year $9.50, then the two numbers would be $0.18 and $0.49, closer but still favouring renew in advance.
The Sept. 1, 2021 7% increase is the first of four approved price increases in .com over the next four years, so if looking past one year one needs to take that into account.
Important Considerations
There are a few additional points to consider, however.
- Will you want to keep this domain name for multiple years if it does not sell? The above only applies to those domain names you feel confident that you will want to hold, if they do not sell, your so-called keeper domain names.
- Is this the best use of your money? As noted above, if you pay early renewals that will take away money that you could have used for investment in domain names. That opportunity cost is important.
- Are trends changing that influence the worth of this domain name? Even if you feel a name has keeper quality today, take into consideration that styles in branding, technological sectors, and societal interest all change, sometimes rapidly.
- Are you a new domain name investor and do not yet have confidence which names should be held long term?
There are, of course, additional considerations that favour renewing in advance. For example, it can simplify your domain portfolio administration, reduce chance of forgetting to renew due to some emergency at renewal time, boost confidence to hold out for better prices during negotiation, and simply give you peace of mind knowing that renewals will not come at a time when you are cash-strapped.
Even if you sell a domain name with prepaid registration, that may not necessarily represent a true loss. I recently negotiated to sell a domain name to a cost-sensitive end user. The fact that the registration was prepaid until 2024 entered positively in our discussion.
If you have a developed domain name that you plan to keep using long term, it seems hard to argue against renewing now for many years, perhaps even the 10 year maximum that ICANN allows.
Personally, I have renewed many, but not all, of my .com keeper domain names for several years in advance. That does not mean that is the right decision for you, of course.
