Domain DevelopmentDomain NamesEconomicsGrowing up

The Pacific Century

By November 21, 2009 February 27th, 2017 13 Comments

This past week was historic.  For the first time in probably a century, the President of the United States was not the most important person in the room.  As a US citizen — albeit of Dutch blood — this is not exactly the easiest thing to watch unfold. While troubling on one level, it just might be good news for domainers with a global view.

obama-japan

Oh my, the US President bowing down to Japan’s Emperor Akihito -- this is the son of Emperor Hirohito of WW II!

My first encounter with the Pacific Century was in 1994
In 1994, I was based just outside of Frankfurt, Germany in the town of Schwalbach working for Procter & Gamble. My boss in Germany was a Polish-American named Jacek Kedziora. Jacek had just moved to Japan. We had a successful run working together in Europe.  When he invited me to come work for him again in Asia, I jumped at the chance. I moved to Kobe, Japan in January 1995, a few weeks after the Great Hanshin Earthquake. Kobe was ground zero.

Although the next 5 years were pretty demanding, working with the Japanese was an amazing experience as was traveling throughout Asia.  By 1997, I was working on some of P&G’s first global projects while still based in Kobe.  By 1999, I had become a global expert on developing better baby diapers having developed them for every region of the world, including Latin America. Around the same time, it was becoming increasingly apparent that the Internet was going to transform a lot of industries.

In 1999, most people in Asia had no idea about the Internet. I developed the idea of creating an internet company that would address the challenge of conducting multi-country market research surveys using the web as the platform for collecting survey data. The idea for Global Market Insite was born. I quit my day job on June 12, 1999, moved the family to Seattle, and then spent the summer of 1999 teaching myself Linux, Apache, MySQL and Perl, wrote the first version of the software, and filed 5 patents.

The decision to be based in Seattle was not an accident. Seattle has an important geographic advantage that I think many people have yet to realize. Seattle is about 8 hour flying time to Tokyo, 9 hours to London and about a 5 hour red-eye to the US east coast. In other words, in the Pacific Century, Seattle is a reasonably central location from which to build global companies that would be well-positioned to bridge the gap with emerging Asia, and in particular, Japan and China.

In economic terms, China is crushing it
China’s foreign exchange reserves hit $2.2 trillion in the 3rd quarter. While this number is huge, in all likelihood it understates the reality. The official pace of growth of foreign exchange reserves is on the order of $600 billion per year. That is actually what is left over after actually spending a large portion of the inflows.

Message in a cookie: How do you expect to pay back all the money you're borrowing from us?

Message in a cookie: How do you expect to pay back all the money you're borrowing from us?

A lot of this foreign exchange is held in US dollar denominated assets.  The Chinese have kept the Yuan pegged to the dollar at around 6.83 Yuan/Dollar since December 2008. The next big exchange rate reset is coming, likely after the Chinese New Year in January. In theory, the US administration wants and needs this revaluation of the Yuan. The downside for China is that it represents a step-wise discounting of the US debt, and will create further margin pressure on US importers of Chinese goods.

The revaluation writing is on the wall. China’s purchases of US Treasuries has already peaked. Moreover, the most recent purchases are short-term, in spite of the anemic interest rate of short-term US treasuries. The US will have no choice but to ask the US Federal Reserve to print currency in order to pay the debt. This practice is called Monetizing the debt. It is among the more blatant forms of Quantitative Easing.

china-treasury-flow-22

So, what is China doing with all those extra dollars that it no longer wants to hold?

  • China is buying vast amounts of arable land, notably in Africa.   The headfake here is that this is supposedly about securing the national food supply. In reality, the domestic food supply risk becomes a factor in about 2030 based on current projections. That alone would not justify buying 2.8 million hectares of sub-Saharan arable land. They are dumping dollars.

What are the implications for Domainers
The twilight of the American century, and the start of the Pacific century is not the end of the world, and certainly not for the prepared domainer.  Unlike physical real estate which has a finite number of potential users or acquirers, domains can be accessed by any of the nominally 1.7 billion users on the internet in a near-instant.  The universe of potential buyers for a given domain name is similarly global.  What are some things that domainers can do to thrive in the Pacific Century?

  • Design global websites:  Founded in December 2007, Patents.com serves a global audience of nearly 1 million monthly visitors.  The site was designed to be global from day one because the addressable market for intellectual property is already global — to the tune of $500 billion per year.  Patents.com started out with a focus on global patent search. In the next phase, we’ll layer on efficient ways for global IP licensing and sale.
  • Learn to work with the Asians:  The Chinese term of Guanxi is not so different than the Japanese practice of nemawashi. Unlike the US, it takes a long time to build a commercially meaningful business relationship with a Chinese or Japanese partner. This can be a good thing if you are willing to invest the time to understand the cultural norms and differences.
  • Partner with Asia-based businesses: Epik recently agreed to develop 3 language-related domains — Japanese.com, German.com and Russian.com — in partnership with Brian Gilbert of Innovation HQ.  The first one to get developed will be Japanese.com using technology and content sourced from World Friends Network, a Shanghai based social network group that I first met in 2007.  The company is led by the talented founder and CEO, Dominic Penaloza.
  • Experiment with Drop-Ship:  As the international supply chain gets more efficient, I expect Chinese producers to start looking at ways to cut out the middle-man, a.k.a. WalMart and Amazon.com.  As part of this transition, I am convinced that there is a meaningful business opportunity to combine a network of product portals with an international drop-ship supply chain. Epik has released more than 150 product portals in the last 6 weeks and is producing new ones at the rate of 30-40 per week. And at $249 one-time setup fee, it is a domain development bargain.

In summary, I believe we have just experienced a seismic shift in the global economy.  What many economists predicted in the 1990’s is now a reality: the torch of global economic leadership passed to Asia — and specifically China — last week in Beijing at the Great Hall of the People.  The global Internet will be too important for China not to have a global strategy. How much longer before the Chinese start to acquire significant amounts of the raw land of the Internet? My prediction: it is coming in 2010.

Join the discussion 13 Comments

  • Bensen says:

    Great post. Does anyone knows any Chinese company that are buying .com domain names ?

  • fredp says:

    Visionary as usual! You’re right..all of those counterfeit cough cough I mean quantitative easing dollars are finding a home as we speak..and will continue to do so.

  • James says:

    Most Chinese people think domain names are useless, because they cannot remember or even pronounce them since they are in English (ascii). People seldom type in a website. They do search most of time. Expecting Chinese to buy English domain names is a long short. Just ask yourself, how many Americans get domains?

    Talking about foreign countries and domains, the real opportunity lies in Internationalized Domain Names (IDNs). IDNs will change how foreigners see domain names. Once their opinions change, they will spend money on domains. Of course, the domains in their own languages.

    Big Chinese companies do need English domain names. But that will not change the landscape of English domains much.

    • Rob Monster says:

      @James – The point here is not so much about China using English/ASCII domains not so much for domestic China as much as for global export, bypassing elements of the current supply chain (e.g. Amazon and WalMart). I see tons of margin pressure in the retail supply chain. At some point, more manufacturers will go direct to consumer — through the web.

      As for IDNs, would like to see the same outcome as you. FYI, I backed a group called IDN Options in early 2008 for this reason. That portfolio is decent, some of which is described here . Most of these names are available for development or brokerage.

  • fredp says:

    @ James

    Just like you may not type in characters in chinese for idns, but if you had trillions of dollars and treasuries (literally) in counterfeit digital money and wanted to target the chinese market you may acquire them.

    Vice versa..they may not use pinyin or English names themselves (which a lot do actually) but if they want to own a large part of the English speaking internet they would have buy them so it is somewhat of a moot point…

  • Patrick McDermott says:

    “Most Chinese people think domain names are useless, because they cannot remember or even pronounce them since they are in English”

    @james,

    That is true for individuals but may not hold true for Chinese Manufacturers and Exporters that have a global view and target
    the American market.

  • Bill F says:

    You’re on target with the drop shipping. Just a couple years ago, that was hindered by the mentality in China. Very small companies that might be interested were unable to control product quality. Companies that understood product quality were simply not interested in anything but major deals – the whole concept of drop shipping seemed like a nuisance to them.
    On top of that, so many of these companies are making a big chunk of their profits from the Chinese government, in the form of cheap loans, subsidies, special foreign exchange credits, etc.

    Still, things change quickly. A reliable Chinese drop-shipper teamed with good marketers could really clean up.

    For Chinese IDNs, I’d be really worried about the government deciding one day that too many are in the hands of “parasitic” Westerners. A quick change in the law could be devastating. On the other hand, if you develop the names and maintain a real Chinese presence (office, staff, business connections), that would be a very nice position. Not for small pockets, though.

    I’m with you on the Asian/Pacific century.

    • Rob Monster says:

      @ Bill F, @FredP, @Patrick McDermott — Thanks for the comments. I think you all get the gist. Indeed, the question I am raising is what happens when we have the next revaluation of the Yuan. Amazon and Wal-Mart have 25% gross margins. Amazon’s net margin is an anemic 3.6%. Wal-Mart is about the same. If the Yuan revalues by say 20% and much of the goods being sold are sourced from China, the implications are significant. Somebody will get squeezed here — either prices go up, margins go to zero, or the middle man gets cut out of the transaction. I see a seismic shift coming in the global supply chain for non-perishable goods. In the case of Epik’s product portals, the back-end was designed to work with an unlimited number of direct suppliers, including drop-shippers. Using affiliate feeds is only a starting point. If anyone has a senior contact at Alibaba (or similar) let me know.

  • Steve says:

    Rob,
    Do you like idn.cn or idn.com? I noticed the Chinese government used the .cn with the Olympics. IDN Options has some .cn’s but more idn.com and .nets. Doesn’t google feed results based on the searchers location, .cn for China, .ca for Canada, etc? I remember reading the Chinese government was promoting the .cn extension similar to the way Russia will promote their idn extension. While I have some Chinese idn.com’s I really like the potential of .cn (idn). I noticed when I registered idn.cn’s I got all of the variations in Chinese including .cn and China in Chinese. 3 or 4 for the price of one. Great article, nice job with your networks!

  • domainshouse says:

    I am one between thousands or millions that invest to buy china domains related with .com extension. I also contacted really chinese domainers (through DNForum) and all of them told me that they believe the chinese investors never interested by dot com because it is “i quote) an “american” extension. I told them that even for chinese businessmen that want to export to other countries, dot com extension is like as an luxury suite compared with a cabana in the Amazonas and is hundreds of times globally speaking of course, more adequate for business than .cn that i think no one in the west will type to find a chinese firm or entreprise to find their products or servies and make some business. English language is global not the chinese. I m a portuguese (the 5th language spokan in the world) and i don´t see any american, french, german or chinese company try to find someone here to start a negotiation with a dot pt in the name. Never except if an official or governamental department. The same mistake is also committed by african countries most of them anti-american in its policies. As my mother dead recently, i couldn´t reply to the last postings of the chinese domainers in the DNForum and they banned me from there without any explainations an all pc does when do not understand what is over the table even for domainers. I didn´t offended not only one of them but the masters of DN decided that we have all the time of them to respond even when something close to us dies. When posting to them (the chinese that were very kind to replied my post), never showed any interest to discuss about some of my names like chinaforinvestors.com (that got a selection by Moniker) or even chinaeconomics.net or chinacelebritites.net as for example. These domains and the portfolio i have with China name, have a valuation of valuate.com as too low as the chinese “appraisal” sense of nationality (.cn for all), then we must to understand that one needs to expect that USA negotiations with China about the human rights and other matters could end in a big sucess and mediatic event. Maybe then domainers like myself that are investings in China names have the chance to sell it for a fair value.

    After all english is spoken by everywhere including the most usolated tribes of Africa and Asia. “Sorry Sir, do you have a king here…?”.

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