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.