Why Do “Good” Domains Cost So Much?
Tia Wood asks:
“”Frank, after looking at a thread at DNF titled “Why Domains cost what they do…Your Reasoning?”, I don’t feel anyone has hit the nail on the head. To me, why domains cost the what they do has largely to do with reverse branding: the ability to reverse brand a word for a company instead of a company for a word. The same goes for branding words for individuals or organizations, etc. But the value lies within reverse brandability, correct? Which brings in a higher quality of consistent and valuable traffic. What’s your take on it?”"
***FS*** I often hear secondary-market domain sales and names referred to as “powerful” or “expensive”. Not all domains are powerful of course.. And why exactly are the powerful ones considered powerful? Well.. As I’ve explained previously if you buy a good, meaningful, generic domain which garners some measure of organic type-in traffic for nothing more than the keyword weight of the name itself; you essentially have a storefront with guaranteed visitors coming into your door and strolling past the merchandise. Typing in a domain isn’t necessarily like a good storefront in a high traffic location, it’s more like the gift shop at the end of a theme park ride that you have to pass through to leave the ride. Only these visitors aren’t looking for the street.. they have self qualified the topic they seek by typing that particular domain name. In the real world you have to pay to lease the space, put in lease-hold improvements, etc, etc. On the Internet, window-dressing is cheap.. the storefront and improvements which bring the visitors in “are the name”.
People often tell me domains are “”soooo expensive”"… They ask: ”Why would I pay $10,000 or $20,000 or $50,000 for a great name when I can make up another name for less?!?”
Well if you buy a name like the one described above with organic, generic-intent type-in type-in traffic; 10, 20 or 50 thousand dollars is not a lot of money. Years ago I worked in marketing consumer electronics and we purchased full page magazine ad-space in “gamer” magazines for $15,000 for the month.. That’s one side of one page, for one-month… and that didn’t include artwork. It was just to build nebulous concepts like “mind-share” with the gaming public. You can’t put mindshare in the bank folks. Had we bought a great domain for $15,000 (and we could have gotten gaming.com or games.com for $15000 back then) we would have gotten millions of yearly visitors forever; for nothing more than the price of the renewal fees.
The other dynamic at-play is scarcity. With 100 million domain names registered how can they be seen as scarce? Well most registered domain-names are either “terrible” in quality or are specific to a certain branded product or service. On any given day, a random slice of the name-space expires for non-payment. 15,000, 20,000, 25000 names expire each day. I have watched these expiring name lists every day, for the better part of a decade. These lists are a virtual “boulevard of broken dreams” .. names which people bought with great hope, only to allow them to slip away after they had some emotional change of heart or after they forgot to renew them. 90-95% of these expiring names are complete and total crap. You could make-up better names in the unregistered available pool.
The remaining 5-10% are names which could have some traffic or some value to more than one person. Names which could be called meaningful, powerful or generic. That’s 5-10 million domain names globally. It doesn’t take a mathematician to determine that there are just not enough great names to go around. It’s not possible for every person or company to have even one “good” registration. That shortage of supply and global demand keeps prices high… and will for years to come. In fact if the examples above show anything, it’s that great domain names are “still” cheap.
I think a domain is ‘valuable’ if it increases advertising efficiency.
By that I mean, not how many type-ins it gets per day, although that is a huge plus. Rather, when a company runs an ad campaign, what is the response rate to the domain name used in the ad? And what is the return visitor rate?
Maybe someone has done a study of this, but I’ve never seen one as of yet. But they should. It would be extremely helpful to the domain industry if we could quantify exactly how much more efficient running an ad campaign is when a great domain is utilized.
For example. Lets say a manufacturing company invents a great new product. Let’s say its a new type of hair curler. And they run a million dollar ad campaign. And they use haircurler dot com in all of their ads, TV and print.
It seems to me there should be a way to measure the response rate to that ad campaign, compared to say advertising a url such as best-new-hair-curler.com.
I’m quite sure that a great domain, increases the response rate to an ad, and the visitor return rate. And therein either increases the productivity of every ad dollar spent, or lowers the overall advertising cost for that company.
If there is an existing study out there, someone let me know.
thanks
mark
Frank:
I couldn’t agree more, the value of an undeveloped domain name is absolutely tied to it’s intuitive traffic. And that value skyrockets exponentionally as its intuitive traffic is developed upon and monetized (we first experienced this with PalmSprings.com).
Pre-2000, “catchy” domain names with zero intuitive traffic could command fairly high prices (I won’t name names, but a couple of eDomainNames come to mind). Not anymore. We’ve all learned that lesson. Why start from ground zero when a name with heavy intuitive traffic instantly gives you a penthouse view?
Great answer! Thanks Frank.
The great thing about domain names is that most of the world still does not fully understand the true value a generic domains. Great time to be a domain investor and build your portfolio before everyone and their mom starts realizing the full potential of these investments.
I have heard the same story that domain names are a fad or that they cost too much since the early 90s. I have many stories but one came to mind when I read your post, Frank. One of the first names I registered for free was Whisky.com, not for the spirit but because of the Whisky a Go Go nightclub in Hollywood. David and I were promoting the music scene and playing in a band. Whisky.com seemed the obvious simple address for the nightclub. When I offered it to the owner he mentioned that he did not need it since he was going to register WhiskyaGoGo.com; go figure.
Later in 1996 a whisky connoisseur from Germany emailed me with a request to buy the name and I offered to sell it for $1,000. He balked and said that he could register any name for $100. He did not have a capitalistic bone in his body and abruptly ended the communication. The next year he once again emailed about buying the name and was now prepared to pay the $1,000. I explained that what was worth 1k the year before was now worth $10,000. Needless to say he ended the conversation. I was amazed once again to receive the next year a final offer of $10,000 and you can guess where that ended.
Just this year my brother and I were invited to a Whisky industry event in Los Angeles with distiller and distributors from all over the world. We had Whisky.com business cards made and attended the event. After visiting every booth to meet the top distillers and introduce ourselves we were amazed how they accepted us as knowledgeable and leaders in the field. Pictures were taken and those that asked “who are they” were told “they are from Whisky.com”; go figure. Just this week a major New York City newspaper called and asked for a quote on a 1926 bottle of The Macallam Whisky that was being auctioned off at Christies for $38,000 and they needed a quote from us.
We know our whisky because a domain name offered us an opportunity. These days some parents are even choosing their children’s name if the name is available as a domain name. Everything seems to work in reverse these days. The point here is that a premium domain name can create an immediate globally trusted brand with the public that would take normally years and millions of PR dollars. Can you put a price on that? Everything these days is about the public perception and we have the ability to now control it without the industrial grade payments of the past. What is that worth? I am humbled by the opportunities that we all have at this point in time, let us take advantage of it. Thank you.
So in the end how do you come to the conclusion of what’s a good domain name. I mean I own a few I consider to be great yet the most I’m offered for them is 50 - 200 dollars what’s that about. I’m not going to mention the domain names here in this post only because it’s considered spam but I would really like to discuss some of the possibilities I may have regarding these domain names.
Well I’ll look around you site and see if I can find a contact us form. maybe we can communicate that way.
Cheers and great blogs!!!
Michael -
Excellent comments about instant credibility when you own a powerful generic domain. I truly believe that since one word generics like whisky.com are so scarce - the long tail of 2 & 3 word combo’s will increase in value because that is the closest business owners will get (generic owners won’t sell or business owners can’t afford) to owning a powerful, brandable domain.
“According to the posts (which you must subscribe to read), if a domain expires, all the links and credibility the site has built will be lost. In his exact words, it said, “the authority for a domain will be reset when a domain expires.” Also, that the change will happen in “a few months.”
There is a dynamic marketplace for expired domains - people buying sites for their search engine value and rankings. People have purchased domain names after businesses have gone bankrupt or went out of business. If you are registering a new domain you’ll have to start over.”
http://www.marketingpilgrim.com/2007/11/google-to-kill-expired-domain-sales.html
Before this, faced with two similar domain names with the same price, a domain name buyer would go for the one with the highest PR. In this case, if both domains are expired, there is no incentive to go for the previously developed and therefore higher PR domain name. That should change the marketplace and put on a par say, parked domains with previously developed ones. Is this correct, or am I missing anything?
Regards
Javier Marti
Trendirama.com
Michael Castello post: Excellent story, Michael, about the cachet that comes with a high quality domain name. This story needs to be widely distributed as it’s a perfect illustration of what so many domainers know, but which the corporate world are just now beginning to realize. Domainers were/are well ahead of the curve.
Frank’s response hits the nail on the head in most cases.
A close friend of mine owns a company which sells kitchen sinks and accessories. She spends about $8k ++ per month on adwords campaigns promoting her site which does around $100k/month in revenue.
She made a $5000 offer on a very “powerful” keyword domain which was receiving about 1000 type ins per day.
She was countered with $25k which she felt was “way over priced”.
After reviewing her adwords account I found that she was spending about $1500 per month with adwords for just this one keyword and that was only getting her about 750 clicks!
Needless to say once she realized she was going to be getting more, qualified visitors in one day than she gets in a month for a one time $50k she saw the bigger picture.
More and more retailers are seeing the HUGE value in keyword domains which is driving the prices to levels not seen before. This trend will continue for the foreseeable future.
David Castello,
“I couldn’t agree more, the value of an undeveloped domain name is absolutely tied to it’s intuitive traffic. And that value skyrockets exponentionally as its intuitive traffic is developed upon and monetized (we first experienced this with PalmSprings.com).
Pre-2000, “catchy” domain names with zero intuitive traffic could command fairly high prices (I won’t name names, but a couple of eDomainNames come to mind). Not anymore. We’ve all learned that lesson. Why start from ground zero when a name with heavy intuitive traffic instantly gives you a penthouse view?”
I think your analysis here is spot on, but it begs the question why do so many domainers think that words in languages and scripts that are foreign to their target markets are going to be intuitive? English keywords are only ever going to be intuitive to English speakers, who will make up about one fifth of a fully mature internet. The vast majority of people in Asia and indeed much of Europe will not find ASCII keywords intuitive if they live to be a thousand.
ASCII is going crash and burn in Korea, China, Japan, Russia and most of its former satellites, The Arab World, and yes believe it or not India as well! Only IDN will provide a intuitive solution to these markets.
Michael’s little anecdote highlights how many on the periphery of this game, and I would include most “domainers” in that category, get it wrong time after time. Domainers follow the words of Guru’s but many of these Guru’s are one trick ponies that strike lucky, and then go on to mis-direct the market by their actions. I know for a fact that I will only be invited to give After Dinner speeches, long after the useful information that I have to impart is no longer very useful.
Michael,
Great story and great lesson.
Frank,
It’s funny that end user advertisers will still pay that $15k per page for one month but try and sell them a relevant domain for $50k and they think you’re crazy. I think THEY ARE crazy.
Anyway, if you are looking for more reasons to own domains, I wrote up a whole page worth at http://searchdomainsforsale.com/why-buy-domain-names.htm
I agree with the idea of type in traffic, however i am mainly in the dot ca arena for the opportunity to get into a market that is still in its infancy. Dot ca’s do not get nearly as many type ins as dot coms, but their clout is growing year after year in our Country. The response about Whisky.com is what i agree with entirely. People assume that if you have the money to get a great generic domain that you must have a serious amount of influence/understanding of the industry your name represents. I see this happening on the national level in Canada as well, not only will you be able to be an authority with a generic domain but with a generic cctld you will also be seen as local. I wonder if this will mean that in the future it will be necessary for international businesses to have the same generics registered accross muliple tld’s like .co.uk, .it, .de etc? At any rate branding and generics are obvious to me, what i want to know is your take on cctld’s???
Thanks,
Great post
What Dave Wrixon continually forgets is that the Unites States is the country that is the easiest to monetize. 10,000 United States eyeballs monetize better than 100 eyeballs in the places most IDN speculators play. IDN is all speculation, whereas much of dotcom is investment. If you don’t know the difference then your bankroll will eventually let you know.
How many IDN’s have ever been sold to an end-user who put up a functioning site? That is what eventually has to happen….ain’t gonna happen on a large scale in our lifetimes. How many American Schools require students to learn obscure languages from other countries? Not many, yet most other countries teach their children english. That is because it is the most powerful economic language in the world.
People in the United States spend money, and the Internet and dotcom are associated with this country more than any other.
Your IDN’s are a pipe dream, and if you live to be 1,000 yourself you will have to pump them every day. Very few people even understand domain names. There is a reason that most of the successfull people in the game have no interest in IDN’s.
Half the time you guys can’t even agree on what the name means…..and 99 percent of you have zero cultural experience in the countries you choose to invest in……typing names and trying to figure out what they mean in other languages is a laughable joke.
IDN’s are doomed. If they weren’t then you wouldn’t want anybody to know…you would just accumulate and be quiet.
“Whisky.com seemed the obvious simple address for the nightclub. When I offered it to the owner he mentioned that he did not need it since he was going to register WhiskyaGoGo.com; go figure.”
Nothing much has changed today eg cowboys.com versus dallascowboys.com. For the wiskyagogo whisky.com isn’t the most logical name. It will be coveted by a whiskey company or a domainer but not a company whose regular name is longer.
Pete,
On the contrary, if you visit IDNForums.com you will soon learn that most of our members actually live in the countries where the languages they are speculating are used. They are certainly not deluded or misinformed.
You perceptions of the importance of the US economy are certainly misplaced and the shift in global financial power is already apparent in the market. If most US citizens have the same perspective as you then the US economy is doomed. The US needs to compete in a global market. You don’t even recognise that market exists!
To understand the IDN dynamic a bit better, I would suggest you find out a bit more about what was happening in the English.com markets when most of the really successful players made their crucial investments. Today’s domainers twitter on about Overture and the like. When Rick Schwartz started investing Google had not even been formed as a private company!
Pete,
You are a bit out of touch with what is going on with IDNs. I could fill a couple of pages but you can google Wall Street Journal, Washinton Post, CNN, New York Times etc and read their articles.
Why in the world would any advertiser in China, Korea, Russia etc. not want to use a “domain name” that 99% of the population can read, understand and remember, not just 10% or 20% of the population that reads English.
Regarding translations, there are extensive and correct online dictionaries. The large overseas domain forums idnclub.com, IDNF.com, are filled with international speaking members who will do appraisals for free. Overture covers most languages, and other tools like google trends, bid tools etc. do as well.
IDNs are already in use as idn.com, .net, .tv, .jp, .cn and soon to be joined by idn.idn. Root tests are being done as we speak by ICANN. You can view IDN sales at dnjournal or easier since it is compiled nicely at idntools.net.
In some respects it is like being back in “1997 all over again” …only this time its with international domain names. Many “Successful Domainers” are indeed buying IDNs…you would be v-e-r-y surprised if the who’s who list was published.
People are getting a little too emotional these days. Christmas is near, you guys should relax.
>People in the United States spend money, and the Internet and
>dotcom are associated with this country more than any other.
People in the United States WERE spending money, but for most of them it was by converting the unprecedented (and unsustainable) rising value of their house into an ATM.
If you don’t think that party just ended, you’re getting your news from someone who wants you to keep spending like there’s no tomorrow for the US economy.
The USA has sold itself to foreign debtors. Debtors who will take to IDN’s like ducks to water.
Hey Pete,
Did you take your investment advice from the long haired hippy on this Fox clip from 2006 who has since been proved to be totally WRONG?
http://www.youtube.com/watch?v=yoZV5jt9puc
It would not surprise me, of course, if the majority f people featured on this clip , who proved to be completely wrong (Hi Ben Stein!) are still taken seriously by the Fox News Generation.
Pete,
What planet are you actually from ???
“How many American Schools require students to learn obscure languages from other countries?”
- Probably none. Does that mean though that unless something is spelt out in English, its nothing important or worth spending time over ??
“Not many, yet most other countries teach their children english.”
- Maybe because other countries around the world have a much better understanding of education, and don’t brag about their language being the only way that matters !!!
“How many IDN’s have ever been sold to an end-user who put up a functioning site?”
- Why does an IDN have to be sold to an end-user before it can be accepted as being useful ?? What about the people who develope their own sites for their IDN domains ?? I have developed several websites in a language other than English using an IDN name. Just because I haven’t sold that domain to an “end user” why does it make IDNs useless ???
How many ENGLISH ASCII names are there that have not been developed ??? F**king millions of them. That doesn’t mean however that ASCII domains are useless.
“There is a reason that most of the successfull people in the game have no interest in IDN’s.”
- And what is that reason ?? They were only ever taught English at school. Do they have no idea whatsoever that people in Japan speak Japanese, In China they speak Chinese, and in Russia they speak Russian ?? Or is all the world backwards, and should every country around the world drop their own languages, and try to use just English because it is the language of business ???
“Half the time you guys can’t even agree on what the name means…..and 99 percent of you have zero cultural experience in the countries you choose to invest in”
- Says who ??? Shouldn’t a Japanese person know the correct words / domains they want to register ??? Who says that IDNs are being registered by non-locals ??? If anyone has a better understanding of just how important and useful IDNs are, then its the locals of those countries.
“IDN’s are doomed. If they weren’t then you wouldn’t want anybody to know…you would just accumulate and be quiet.”
- And because you think that IDNs are useless, and that you can only speak English that you are a person that we will all look up to and admire ??? IDNs are doomed ?? Care to elaborate on that a little more for me. How can something that is and have been working for several years now be DOOMED ???
Anyway, I guess you probably won’t have time to reply here, as you are too busy looking for new names to register such as IthinkIknowitAllbutbasicallyknowj**kshit.com
( And look - its available to register, and without the hyphens !!! )
Lets see where you stand with IDNs in the near future. Will you be saying the same thing, or will you have the balls to admit that you didn’t know what you were talking about, and just acting like a wannabe domainer ??
Pete,
I welcome your point of view and am glad even folks like you get a place to say anything you like. What you say comes across as culturally insensitive to most of the world, your logic is seriously flawed and your facts are just plain out wrong. In other words, you must suffer from the American disease. But to my mind your words pose no threat, I welcome your opinion as pure entertainment for the viewers at home. Please don’t stop!
To Alex_d1
Now don’t mince words, tell the guy how you really feel!
Pete,
Please continue posting more of your messed up comments. It will make you look like an even bigger loser.
Why would a company pay A Million of dollars fo a 30 second ad in the SuperBowl when they could pay a few thousand for the same ad on another game anytime?
It’s the TRAFFIC stupid!!!