Why Would Anyone Pay Thousands for a Domain Name?
It’s not cliche to say that today every dollar counts. Times are tight — for some, times are very tight — and business owners across the country are looking at every dollar they spend to make sure they are getting the return they need from the money they invest.
So why then, in times such as these, would anyone be willing to pay thousands of dollars for a simple domain name? The answer is easy: because those simple domains (often called premium domains) can make a difference.
THE AGE OF THE PREMIUM DOMAIN
A premium domain is a domain that has been registered previously and is back on the market for resale (it’s like a used car lot for domain names … but these items have not depreciated in value — in fact, it’s quite the opposite situation).
You see, today there are about 76 million dot com names registered worldwide. That means the chances of finding a very intrinsic dot com (shopping.com, flowers.com) are slim. These names were snapped up years ago but now, these early domain registrants are increasingly willing to part with their prized domain names for the right price. Some of these sales live in infamy (consider Pizza.com that sold for $2.6 million in 2008 or Business.com that sold for $7.5 million in 1999) but the average premium domain price tag ranges from a few hundred to a few thousand dollars.
SO WHAT CAN A PREMIUM DOMAIN NAME DO FOR YOUR BUSINESS?
- The Impact of the Instant Online Brand: First and foremost, a simple domain name gives your online business an instant brand. Premium domain names are generally easy to remember, easy to type and instantly associated with a product or service (Cars.com, Meat.com, Vodka.com). A business owner need not invest much to help potential visitors understand what they might expect to find on sites like these. The domain itself creates an instant online brand that continues to define your online business for as long as you have it.
- More Traffic from Direct Navigation: Your instant brand will generate traffic from direct navigation. As surprising as it may seem to those of us who use Google multiple times per day — some internet users simply type what they are looking for into their internet browser address line (Shoes.com) … if your site resides at a no nonsense domain like this, you will reap the benefits of what’s called “direct navigation” (customers coming directly to your site because they typed you domain directly into their web browser) without spending one dollar on marketing your site.
- Increased SEO ranking: Your domain names do have an impact on your search engine rankings, so the more basic and easily associated your domain name is with the product or service potential customers are searching for … the more likely it is that you’ll rank high in the search results. (Just type hotels into your Google search bar … I’ll bet Hotels.com is one of the first links returned).
About 80% of US adults are online (that’s an audience size that’s hard to reach through traditional offline marketing). What’s more, the brand you build online can keep working for you long after your catalog or most recent flyer has been discarded.
So the bottom line is: what may seem like an extraordinary expense on first glance is actually not so outlandish considering the benefits you could reap from the right domain name.
My advice for small businesses is not to count out your domain name when you’re planning your marketing spend. Compare the return you could receive with your other marketing efforts (online and offline) and do a little research to see if the right domain name is available for your business. (Register.com — and other domain registrars like us — have search tools to help you understand what domains are available to best represent your brand). At a time when every dollar counts, a premium domain might just be the best way to put your marketing dollars to work for you.
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About the Author: Wendy Kennedy is the creator and editor of the Register.com Learning Center (an online resource site for small businesses). Wendy has also served as a consultant with over ten years of experience developing marketing and awareness programs with small businesses and entrepreneurs.
October 16th, 2008 at 10:27 am
Good point. You may have to pay a large sum initially but the gains will far outweigh that in the long run. With better visibility, you have the potential to significantly increase your sales and make that initial cost back quickly.
October 16th, 2008 at 11:18 am
Great article Amanda but this is probably only a realistic solution for only a few select business in America as the more generic domains cost several million dollars to buy as stated in your article. Small business owners might get more bang for their buck by buying domains that are more targeted to the products they sell then trying to buy their industry .com domain. Example instead of a car dealership trying to buy cars.com they may want to pick up carsforsale.com usedcars.com, by buying these more targeted domains they will spend a lot less on a domain and the returns tend to be higher in most cases since the visitors typing in the domain are more targeted.
Small business can start their research by using google kewyord tool https://adwords.google.com/select/KeywordToolExternal
Type in a word that describes your business and google will return similar words along with the number of times the word(s) are searched for in a month. This will give you a good idea of what domains may be worth buying and how much they may be worth.
October 16th, 2008 at 1:03 pm
It’s probably important to note what kind of business you’re in. Some businesses, like local service or store fronts, will probably not be able to justify the expense of buying such domain names. But it is definitely something to consider and weigh in on.
October 16th, 2008 at 2:59 pm
Interesting stuff. Seems like aggregators like Hotels.com fare best with the general URLs– suppose it all depends on what your brand needs. Jim Beam should be optimized for searches on the term “bourbon” but I wonder if Bourbon.com would be a true benefit to the brand. Thoughts?
October 16th, 2008 at 4:06 pm
A while back I wrote up the example of the Karcher Group. They snapped up a 3-letter domain they had been eye-ing for several years. They bought it on the after-market as a premium domain. One of the reasons they gave for investing $15,000 in a premium domain is to be able to put their domain name on printed documents and billboards, allowing people to easily remember the domain (rather than their much longer one which no one could easily remember).
http://www.smallbiztrends.com/2008/05/changing-domain-names-small-business.html/
October 16th, 2008 at 7:06 pm
Very interesting. It took me a while to come up with my domain name idea, but didn’t think to register particular product names or types in itself as well. (…wondering how much greenandchi.com is “worth”. – ha!)
October 17th, 2008 at 12:50 am
I am also surprised with this. Paying thousands of dollars for a domain name is really quite expensive. But of course, like YFCNG said, this requires a careful deliberation and research so that the cost is worth it.
October 17th, 2008 at 6:22 am
Wendy Kennedy: Could you please explain BuyDomain’s price strategy to give my expired surname domain Lindeskog.com a starting price of $688? I have written a post on my new domain name Lindeskog.name. Click on “Martin Lindeskog” Says:
October 17th, 2008 at 8:31 am
Hi Everyone,
I have been selling domain names and consulting for companies large and small for almost five years. The uncontested facts that no ad agency will tell you is that the money you invest in a keyword generic domain name that defines your products or services is the best investment in marketing there is.
A domain name is an “appreciable marketing asset”, which mean, you buy it for whatever cost ($100 - $1000 - $10,000, and higher) and that domain name will work for you 24/7/365. That’s one advantage.
Next advantage, the domain name defines your product online, and it literally eliminates your competitors from that market of ‘direct navigator shoppers’, internet users as Wendy pointed out, who just type in the word/phrase that defines their product they’re looking for, and add “.com, .net, .org” or other domain extension, including .us and .info. Once you own the generic description of your product, such as “audiocabinet.com”, your competitors selling “audio cabinets” can’t benefit from the specific demographics of those users who type the phrase as a domain name into their browser instead of “searching” for it on Google or Yahoo.
Third advantage, your domain, especially the longer you use it, gains value. Sometimes the value is so great that it becomes your main source of marketing return, and the domain itself could be more valuable than your company itself. This isn’t a crock, this is true. During the internet bubble burst of 2000, many domains were sold at prices valued more than the company that owned it. Your domain name, if it’s a true generic word or phrase, will continually appreciate in value each year.
The domain industry used to be secretive because a few hundred people who understood the value of domains bought up as many as they could. They didn’t want others to participate, thereby limiting the pool of possible domains to purchase.
However, domaining has gone mainstream now, and companies ARE looking to purchase domains that generically describe their product or service. If you had a business that sold advertising on candy, you’d do pretty good to own “candyad.com”, even if it cost you $3,000. If you spent the same amount of money on a newspaper ad, the ad would run, and a week later you’d stop getting responses, and your money would be gone. However, the domain CandyAd.com would be branding your company for as long as you kept it renewed.
Fourth Advantage: Spend a few hundred or a few thousand or more on a good domain, put it to good use, and reap the above advantages… but the best advantage of all is all those above advantages return for an investment of $10 to renew the domain the following year. As good advice, I’d just pay the aftermarket seller his price, then renew the domain for 10 years at $10 a year. So for the aftermarket price, plus $100, this domain will work for you at many levels for 10 years.
If you have doubts, first ask why Johnson & Johnson (baby.com), Proctor & Gamble (toothpaste.com), Barnes & Noble (Book.com and Books.com) and hundreds of other powerful companies invested millions into purchasing these domains.
Because these domains bring better ROI than any other marketing/advertising medium, AND they increase in value. So just look at buying a domain name as investing in property.
I would advise any business owner selling online to seriously consider using their 2009 ad budget to buying generic domain names, but first, learning about domain name value.
Stephen Douglas
Blog: Successclick.com
DomainRelevance.com
“Own Your Competition™”
October 17th, 2008 at 10:28 am
Nice article. A premium domain is like a prime location in the market. You do have the advantages.
But running after a premium name should be justified. It must suit your budget and more importantly it must add to your business.
People do good business in non premium locations too. If you are not getting a premium name for any reason, you can always take care of traffic with good marketing.
It is not wise to invest much in domain name if you are just starting. If you could save dollars here, you could use them to grow your business.
Try to find a unique name even if it is not premium. The focus should be promoting whatever you have secured.
October 20th, 2008 at 1:59 am
I agree, Arun Pal Singh. After have bought a premium domain name, it must be justified or else, you have put your investment to waste.
October 20th, 2008 at 10:40 am
Our new start-up just bought the domain Alice.com for six figures. We stayed away from generic names (like hotels.com) because they are way too expensive and way too limiting for your business. I’ve started three businesses and all three were different at year 3 than at launch. Domain name speculators have driven prices on names up to ridiculous levels and this is an expense that every small business is going to have to factor in. You can read about how our company struggled with the domain name industry and decided to go with Alice.com, here: http://flywheelblog.com/2008/08/we-need-a-company-name-part-i/
October 20th, 2008 at 3:49 pm
Good article.
Thousands would be cheap — unless we’re talking about runtogethernonsenselikethis.com.
Maybe a hyphenated keyphrase could go for thousands.
Generally domain names are still undervalued — CBS got a bargain for the CNet portfolio.
What most people don’t realize is that the vocabulary of “worthwhile” domain names is EXTREMELY limited. So eBay was also very smart to acquire shopping.com and rent.com several years ago.
Live will ultimately decimate Google.
OK, got naysayers? Bring ‘em on!
;D nmw
October 21st, 2008 at 2:21 am
I remember one tip Anita said in her article - The Unwilling SEO, is that Spend Money to Make Money. Well, this premium domains are just worth to spend for but in my case, for now… I can’t afford yet so I have to maximize what blogger can offer and other free hosting sites as well.
October 31st, 2008 at 2:19 pm
i need to sell my website , please contact me .
November 3rd, 2008 at 3:07 pm
Great idea for some, but worst-case-scenario for new-product-innovations and branding…