Atom.com recently introduced domain name rentals. The idea is that a company might rent a domain name to start using a domain name with a lower upfront financial commitment. I have that option disabled because of the low risk/reward profile.
I have been in a fairly long negotiation for a one word .com domain name I own. I have been going back and forth with various purchase options with the prospective buyer, who uses a non .com domain. A few months ago, we both agreed that a lease to own deal would make the most sense for his startup. Finding terms that work for both of us has been the challenge.
I proposed an escalating lease to own deal. It would be something along the lines of this:
- Year 1: $5,000/month
- Year 2: $7,500/month
- Year 3: $12,000/month
- Year 4: $15,000/month until paid in full
The buyer was struggling with the first year’s monthly payments. His counterproposal was something along the lines of half of the initial payments for the first six months. This would allow him to get more traction. It would also be less financial risk for his business should it fail.
I passed on his offer for the same reason I do not like domain name rentals.
When dealing with a one-word brand name, there may be many companies that own trademarks for that term or similar terms. Companies need to be cautious to ensure they do not infringe on another brand’s mark(s). A business that spent a substantial sum of money to acquire a domain name will likely be more cautious about trademark infringement so they don’t impair their valuable asset. A company renting or leasing a domain name for a low cost may not be so mindful or cautious.
From what I can tell, the startup I am negotiating with is still iterating and trying to find product market fit. There is a non-zero chance they could grow in a way that another brand would believe is infringing on its marks. Should that happen, and the startup is using my domain name, it could put my domain name at risk. A UDRP or cybersquatting lawsuit could be a nuisance to the startup, but it could lock up my domain name for an unknown period of time. That startup could pivot to another brand name while my domain name is embroiled in litigation.
The less investment a startup makes in a domain name, the more cavalier they may be about using the domain name. A very low entry LTO cost could be as risky as a domain name rental. When there is more money at stake and the buyer has a greater vested interest in the asset it is paying to own, both parties are more aligned.
You’ll note I did not even cover the risk of a business renting a domain name to use for some sort of scammy or illicit purpose. I would imagine there is a greater risk of someone utilizing an exceptional domain name at a low rental cost for a scammy purpose – like spam or phishing emails – particularly if the homepage of the domain name doesn’t make that obvious. This, in and of itself, is also a dealbreaker for me.
At the end of the day, if a business or person can’t cover the minimum LTO amount I have set for many of my domain names, they should look at other domain names for their project and consider upgrading when they can afford it. I am okay with escalating LTOs, but only when the initial monthly payments make sense.
