Domain Due Diligence: Previous Marketing

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Before buying a domain name, it’s a given that you need to do your due diligence for a variety of reasons. The primary issue I want to discuss today is previous marketing attempts for the domain name. In my opinion, there are two reasons you will want to investigate how the domain name was marketed in the past: legal reasons and financial reasons.

Let’s discuss the legal issue first. For the sake of this discussion, I will assume the domain name that is being purchased is a descriptive keyword domain name. With most of these names, even the most commonly used terms, there are trademarks associated with them (think Apple). Although it’s clear that you can use names as long as they don’t violate someone else’s trademark, you want to make sure the previous owner didn’t do anything to put the name at risk.

Some things you might want to be mindful of from a legal perspective:

  • Did the owner try to sell the name to trademark holders?
  • Did the owner have anything potentially damaging on the website?
  • Did any of the marketing materials mention the trademarks?

The last thing you want to have happen after buying a domain name is to get a UDRP notice or a lawsuit notice. If the previous owner (or someone selling the domain name on his behalf) did anything to jeopardize the domain name, you’ll want to assess the risk before buying. I think a domain name lawyer would be better equipped to discuss all of the legal issues, but these are just a few to consider.

The financial issue is somewhat secondary because domain values are dynamic and ever changing, but it’s still important given that the domain purchase is an investment. You obviously want to get a good price, so you need to see where it was marketed before as well as prior sales.

Some things you might want to be mindful of from a financial perspective:

  • Was it up for auction, what was the reserve price, and were there any bids?
  • Did a broker try to sell it or list it in a newsletter, and at what price?
  • When was it last sold and for how much?
  • Was there a “for sale” landing page or other indicator that it was on the market?

You probably don’t want to invest in a domain name that has been on every single domain broker’s newsletter for several years. You also want to make sure you’re not overpaying on a name that hasn’t met reserve during several live domain auctions.

Due diligence is an important aspect of completing a domain sale. There are many reasons why you need to do your due diligence, and doing it will likely save you money and bring you a higher ROI.

9 COMMENTS

  1. I’d like to add, just because a domain didn’t sell on a newsletter doesnt neccesitate that the price was too high. Newsletters mostly go out to domainers and keyword domains outbound to domainers are pretty random. Domainers have a lot to choose from so unless some domainer had a special interest in the keywords listed or the price was basically less than free, the domain probably won’t sell.

    • Fair point, but I assume (maybe too optimistically) that newsletter owners also reach out to obvious end user buyers in an effort to close a deal. Once a name has been “pimped out” to everyone and their mom, it makes it more difficult for someone else to sell it at an optimal price.

    • I’d tend to agree with JP. A few of the big brokers who have newsletters might be reaching out to end users when their either a) their own names are involved or b) there are truly premium names to be shopped around. But in general, I think it’s mostly domain investors who read those newsletters, and a name that might mean something to a company in industry X might not mean anything to a random domain investor who’s looking for brandables or keyword domains in a different industry.

      If we’re wrong, great. But in general, I don’t think it’s worth it to the newsletter owners to do a massive amount of legwork finding and talking to specific end users for low to mid-level names. It’s a quick way to reach a targeted group of other domain investors (SOME of whom may happen to also be end users).

  2. Good advice!

    I also look at how the domain name was used in the past and what it’s reputation is, especially if it was once a website for a business. I recently had an opportunity to purchase a domain name for a website that I will eventually develop. It only took one google search to find out that a previous owner, who used the domain name to operate an online business, had a very large number of complaints alleging shady business practices and poor customer service. Since that reputation was going to follow my new venture (which would have been in a similar space) if I used that domain name, I passed and found another.

    • All good points. You may also want to check the link profile of the domain. If the domain has been penalized by Google in the past, you should proceed with caution or choose another domain.

  3. First thing that comes to mind is the owners of Cowboys.com. Instead of finding a common ground with the Dallas Cowboys Football Team, they decided to create a apparently gay dating site. Morals aside, there are a great number of people that disagree on that issue, especially the Texas fanbase.

    That is not an example of a problem with trademark violation, but illustrates just how different a name can be marketed and used by a previous owner. Due diligence is very important.

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