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Do Domainers Block Innovation in the Domain Name Space?

This train of thought occurred to me while having lunch with another domainer and discussing a company that approached me about entering the domain space.

This new company was trying to innovate a way to sell more domain names. We discussed the idea, it wasn't novel in concept, but still hasn't been executed successfully. (Note: I am being vague and speaking in theory because I have no idea if the company has launched or if I am allowed to speak directly about them as I was approached privately)

I expressed my doubts about success and listed the reasons. The primary reasons were a lack of credibility and lack of their own portfolio.

Let's investigate those assumptions:

Lack of Credibility

Domainers are a pretty small group of people and it seems you're only ever 2 degrees away from virtually anyone in the business (a mutual acquaintance). Everyone knows everyone loosely. Reputations often precede any interaction. We are a fairly xenophobic bunch, don't trust people from the outside and have this view that everyone would like to take advantage of us, given the chance.

If you just look at the language used when talking about ICANN, Google/Yahoo PPC accounts, parking companies, there is this inherent mistrust that our interests aren't being looked after. I won't debate whether it's legitimate or not, but getting a positive reputation (credibility) is a difficult task in this business. The fastest route seems to be big sales or at least the claims of such.

Not Having Your Own Portfolio
This ties into lacking credibility, having good domain names and big sales generates credibility and trust. So if you don't have anything notable in your portfolio or didn't sell something that made headlines, it's infinitely more difficult to launch any domain related innovation. Who is going to signup and test you out? Not me, not other domainers. We are generally risk averse with our domain names (think the absurdly high reserves we see at auctions time and time again).

One of the biggest successes in recent years has been Rick Latona's mailing list. Who absorbed that initial risk and attracted buyers by offering good deals? He did. He sold his own domain names to attract people before anyone else would list with him. Once the sales were happening, I think he probably had more people interested than he could handle. What made it possible? He owns his own domain portfolio.

Innovating in the Domain Space
If we return to our original question/problem: do domainers block innovation in the domain space?

I think the answer has to be an unequivocal yes. I think we harm our own interests by being so risk averse and have created unconscious barriers to entry which prevent many people who might have entered from entering.

So what? Why does that matter?
The result of this system is that innovation is endogenous in the domain industry. Only domain industry players can successfully 'innovate.' Who has the credibility and funds to launch new domain innovations? A very select few that meet our basic criteria.

If you've been around the domain space for a long time, you may feel like I do (yes, I am getting personal now and it's anecdotal), there isn't much going on in the space. I often wondered why, but only now have I had the time to sit down and think about it. I am still using the same tools I wrote 8 years ago and they are still really effective. Perhaps that's a testament to my awesome skills or more likely, there hasn't really been any major waves in the business in a long time.

Don't you have a solution?
I don't think there is a clearcut solution for this problem. It's a systemic issue. Most successful innovations in the domain space are scalable and take advantage of economies of scale. Domainers will bandwagon any success and companies are generally rewarded by this bandwagoning. Thus, whomever takes the initial risk isn't disproportionately rewarded, therefore, let someone else do it is the consensus.

If we really want to see innovation flourish within the domain ecosystem was need to take more risks, try more new services and encourage outsiders to enter the space. SO next time a company approaches you, make an extra effort to help them. Also don't dismiss their chances because they don't have any credibility or their own domains to absorb the risk with. Maybe even lend them a domain or two!