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choosing the right domain name: a marketing perspective
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book cover: choosing the right domain name

CHAPTER 1
the who, what, where and when of domain names

1.08 WHAT IS THE MONETARY VALUE OF A DOMAIN NAME?


Like houses and second hand cars, domain names are not necessarily worth their sellers asking price. Their value is only what someone else is willing pay for them. Since the mid-1990s, individuals around the world have registered domain names in the belief that the names would be purchased, at great profit, by businesses eager to obtain a 'good' domain. In reality, few speculators have made much, if any, money by selling on names they have registered. Indeed, it is the lack of regular trading that has prevented any kind of market price being established for domain names. There are numerous websites that advertise domains for sale, but the prices are invented by the sellers. There is no benchmark or guide to fixing selling prices. Of course, many names do change hands, but for so little that the sales do not make the news - and for every domain name millionaire that does make the news, there are thousands of others who lose their investment.

One of the first examples I came across of buying the name of an existing company was in the 90s when the British Broadcasting Corporation - know universally as the BBC - purchased bbc.com from (if my memory serves) a US organization called Boston Business Computing for 213,000. That bbc.com is not currently used by the BBC is a mystery to me - it simply redirects to bbc.co.uk - but the answer probably lies in future online sales for the corporation.

Whilst the BBC example is a case of the seller 'having a price', other investors have made a profit by speculating on their - hopefully rising - value. Some pay substantial sums for names that they feel will appreciate in value of time. For example, men.com was purchased in 1999 for US$15,000, reselling in 2003 for US$1.32 million. Similarly, business.com must have seemed expensive when purchased in 1997 for US$150,000 - but that is nothing compared to the US$7.35 million profit made when it was sold on later. Other domain name sales of note include loans.com, which was purchased by the Bank of America for $3m, pizza.com for $2.6m, fly.com for $1.8m, seo.com for $5m, candy.com for $3 and Toys 'R' Us paid for $5m for toys.com. From a business point of view, such sums are a massive expenditure to recover before any other profits are made. From a marketing stand-point, however, if these names increase brand awareness, then increased sales - and profits - will be the result. Compare these sums, for example, with those paid to sports and movie stars to appear in just one promotional campaign - and even these domain names look to be a bargain.

It is worth noting, however, that many of the domain names that sell for high sums have with them 'related assets' - normally functioning, profit-making websites complete with customer details - which is perhaps where the actual value lies. For example, a group of domain names including dictionary.com, reference.com and thesaurus.com were bought by Answers.com for $100 Million - but the websites hosted on those three domains were attracting 11.5 million unique visitors per month at the time the sale went through.

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Copyright copyright 2009 Alan Charlesworth. All rights reserved.
International Standard Book Number: 978-1-4452-0538-0
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