Generic Domain Names

Valuing a Domain Name

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There is much more that goes into determining the value of a domain name than a simple revenue multiple or traffic report. The value of a domain name lies in the name itself. The reason we have domain names is because the IP address system would be too complicated for consumers to remember. It’s much easier to remember ElliotsBlog.com than a string of ten random numbers. Because we use domain names as memory recall devices, the most descriptive, and easiest to remember domain names are best.

When I look to buy a domain name, the most important thing I evaluate is whether I believe a business can be built on that particular name. It doesn;t matter if it is a service or product based company, when a person hears a domain name, they should know what they will find when they navigate there. Nearly all of the domain names I purchase have this attribute, and I think it is important for domain investors to consider this when they are buying their next domain name.

Traffic and currrent/expected revenue are important, but the actual name is the most important valuation factor for me.

Branding vs. Generic Domain Names

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With few exceptions, company brands and generic domain names are opposites. The objective of a brand manager is to distinguish his brand from the competition. The objective of a generic domain name owner is to provide content or advertising links that are general enough to interest the visitors. A brand manager ultimately wants to build loyalty to his brand so the visitor becomes a customer and returns. A typical generic domain owner wants a visitor to click through and possibly provide enough interesting content that the visitor returns so he can click again.

An exception to this is Hotels.com. They have built their brand around a generic domain name. When a person wants to find a hotel at a good price or when they want to read reviews about various hotels, they specifically navigate to the brand, Hotels.com. When a person who doesn’t know about Hotels.com (the company) navigates to Hotels.com, they are looking to find a hotel. This is a prime example of a brand being built around a generic domain name, giving the loyal Hotels.com customer and the random visitor the same valuable information, while building brand recognition and loyalty for both.

In the case of Calvin Ayre’s Bodog brand, the company wants its clients and potential clients to gamble at BodogLife.com and partake in the “Bodog lifestyle.” When the brand was threatened recently, Bodog changed their domain name from Bodog.com to NewBodog.com and then finally to BodogLife.com. Although the domain name changed, the brand and messaging remained constant.

In his blog, Frank Schilling argues that “Calvin should have used this opportunity to buy InternetCasino.com from Xedoc.” As much as I respect Frank, I disagree with him. First, InternetCasino.com would have been a very expensive acquisition for Bodog – probably much more than the value they would receive in return. Not only would this have changed the domain name, but it would have completely altered the brand and the lifestyle portrayed. Visitors to InternetCasino.com are looking for a place to place their bets. Bodog customers are looking for Calvin.

Integrating a brand with a generic domain name doesn’t usually make sense. Yes, a brand can be built around a generic domain name, as demonstrated by the Hotels.com example. However, I don’t think a generic domain name should be used to rebuild a brand.

Location, Location, Location

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One of the first lessons in a real estate course is that the most important factor in site selection is the location. As the famous saying goes, “location, location, location!” If location is the most important factor in where to purchase real estate, why wouldn’t the domain name be one of the most important factors in where to open an online business? Why is it that most business schools merely gloss over the domain business?

I don’t believe a bad domain name can break a company with a good business model. I think a bad name can be detrimental, but it’s nothing that good SEO, Keyword advertising and old fashion marketing can’t fix at a high cost of course. I do believe that a great generic domain name can position a company much better, and it can make it easier for customers to find the company. If two companies offer the same product, same customer service and fulfillment, and similar advertising, I believe the company with the better domain name will see better results both in terms of search engine placement and natural traffic.

CuckooClocks.com & the Value of Domain Names

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New Domainer and Blog Reader Writes

As usual, Frank Schilling gives a great example of why domain names are such a great unique business opportunity. As a domain investor, I often look at domain names with “rose colored glasses.” I try to buy names that are popular and have the highest paying keywords to help offset the cost of my acquisition. When I make a few dollars on a click, I am happy. However, it is very probable that I am leaving a considerable amount of money on the table by selling a “hot lead” for such a small price.

Frank, who frequently uses his RumCakes.com domain name as an example, uses CuckooClocks.com to illustrate why a great generic domain name is so valuable to an end user in that particular business, rather than to someone in the domain investment business:

“My wife bought this cuckoo clock from cuckooclocks.com .. This clock cost $2,219.00 (we paid the old price :- / ) .. How many uniques a day do you need to close a clock sale?.. 2, 5, 7 ? How much could you make selling cuckoo clocks?.. — Source: SevenMile.com

Ordinarily, a domain name like cuckooclocks.com might be worth a few thousand dollars to a domain investor based on traffic and expected annual ppc revenue. The owner would hope some of the web browsers click on the paid advertising links on his site to make a few dollars. However, for a person who actually sells cuckoo clocks rather than advertising space, this domain name is worth much, much more. Instead of trying to convince a web user to click on his link to earn a couple of dollars (or less), he is trying to get that person to buy a clock for a few thousand dollars.

Instead of a domain investor hoping that 1,000 visitors click on a link at $1.00 per click, the owner of cuckooclocks.com only needs 1 person to buy a $2,000 clock with a 50% profit margin. This is why generic domain names are so valuable to companies, and it’s also why many domain investors want to create small businesses around their generic domain names.

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