Have you ever heard an executive state “Why would I pay a large sum of money just for a domain name”? I certainly have and every time it happens, I cringe. But like the millennials who got a trophy for simply showing up for class, it’s not their fault; they are a victim of their environment. Okay, not really . . . but let’s examine this thought process for a few moments.
Old-school executives were taught to value big things of substance, such as brick and mortar. Therefore, a domain name, which obviously has no physical value/existence couldn’t possibly have any value to them. Not until they become educated about the true value of and ROI surrounding a domain name could they ever understand this premise. With that in mind, let’s peel back a few layers of the domain-name onion.
1. A domain name has value because it has the capacity to direct a substantial number of customers to your business address, i.e. your website.
2. A domain name is a defensive strategy against a leading competitor.
3. A generic noun domain name is a MUST HAVE for a dominant industry leader.
Peeling it back another layer of the domain-name onion, let’s review www.cars.com and why that name was recently valued so incredibly high. After it was acquired by the parent company, an appx. 30% increase in sales happened and over a five-year period that added-up to over $2 Billion in new sales. Any CFO could extrapolate an incredible ROI based on this acquisition. See below:
Along with the above article, generic-noun .com domain names have been recently selling for millions of dollars. A few examples are:
- fund.com $9,999,950
- diamond.com $7,500,000
- slots.com $5,500,000
- casino.com $5,500,000
- clothes.com $4,900,000
- wine.com $3,300,000
- software.com $3,200,000
- whisky.com $3,100,000
- candy.com $3,000,000
This industry is exploding and we’re starting to see 7-figure acquisitions of generic noun domain names being bought and sold not for any reason but to profit.
What is your business about and what do you sell? If you are Bank of America, you basically sell money. With that in mind, they were smart and paid $3M for www.loans.com. Right with them is CITI who secured the name www.mortgage.com because, go figure . . . they sell mortgages. Discount Tire company owns www.tires.com and who do you think owns www.beer.com? An investor does not a beer company, so Anheuser-Busch InBev or Heineken, better rethink this before one of your competitors does. If not for an offensive strategy, for a defensive strategy to prevent the competition from getting it.
Don’t kid yourself into thinking that you don’t need or can’t afford to own the generic noun domain name of your core business. YOU CAN’T AFFORD NOT TO!