domain-name

The Importance of a Domain Name

Your web business’ domain name is your first impression with users and potential customers.  The right one can give you instant credibility, succinctly express what your business is all about, or go viral.

That said, buying an eye-popping, expensive domain name is far from necessary to start a successful business, and in many cases can be a poor use of capital.

Keyword Domains

A keyword domain is a domain name that includes a keyword that your website will be targeting.  For example, if you are starting a web business that will be selling blue widgets, some keyword domain names would include:

  • BlueWidgets.com
  • BestBlueWidgets.com
  • BlueWidgetsHub.com
  • Blue-Widgets.com

Getting Technical

Google used to heavily reward “exact match domains,” or “EMD’s” in their search algorithms. Getting a top ranking for “blue widgets” was much easier if you were building your business on BlueWidgets.com.

This effect has been dampened with various tweaks to Google’s algorithms, but it is still present.  Let’s take a look at the SERPs (search engine results pages) for “credit cards” and “online universities,” two of the most competitive sectors in internet marketing.

credit-cards-serp

online-universities-serp

As you can see, CreditCards.com and OnlineUniversities.com dominate the results for their respective searches.  A stellar keyword domain name doesn’t guarantee amazing search results, but it does help.

Terran Marketing

This past summer I became involved in the creation of a boutique internet marketing firm, Terran Marketing, alongside Taylor Caby, Mike Jackness, and Jim Varnon.  We’ve focused on picking up keyword domain names and creating content-rich affiliate sites in industries we believe we have a solid edge in.  We’ve picked up some great properties including IRA.com, OnlineStorage.com, and GraphicDesign.com.  I’ve enjoyed learning a ton about internet marketing while working with a star in the business (Mike).

Domain names to avoid

While keywords in your domain name can help your chances of getting ranked, there are also several things to avoid when choosing a domain name:

  • Long domains. Longer domain names are harder for users to remember and will penalize you in search engine rankings. TheBestMostAwesomeBlueWidgetsYouCanBuyStore.com might have a lot of keywords you are trying to rank for (blue widgets, best blue widgets, blue widget store, etc), but it is a terrible choice of a domain name.
  • Hyphens. One isn’t the end of the world. Beyond that, forget it. Like a super long, keyword stuffed domain name, they look spammy and are hard to direct users to.
  • Any extension other than .com. The .com extension lends instant credibility, and more importantly is what users expect. Sure, there are some successful businesses that don’t have .com names, but they are the exceptions and not the rule.
  • Trademarks.  SweetNikeShoes.com or iPadAppHub.com are very poor domain choices; as soon as you start achieving any traffic or success you are likely to have a nasty battle with Nike or Apple that will result in you losing your domain.

Category Killers

A category killer is a keyword domain name that is an EMD for a short, highly competitive keyword.

Toys.com for example is a category-killing domain that was involved in a high-profile $5MM sale to Toys ‘R Us. Category killers are highly valuable domain names because they rank more easily, provide instant credibility to the owner or business, and even receive a fair amount of type-in traffic from users who randomly go to “toys.com.”

toys-dot-com

Drawbacks of Keyword Domains

Keyword domain names are not without their limitations. Most obviously, they aren’t particularly creative. Ira.com and OnlineDegree.com are category crushing domains that are going to take less work to rank well in Google with and pull in some serious affiliate traffic, but do you really want to start an investing business named ‘IRA’ or an education business named ‘OnlineDegree’?  Probably not.

Tony Hsieh makes a great point about keyword domain names in Delivering Happiness: they can box you in and place limitations on your business plan. Before Tony became involved with Zappos, the company’s name was ShoeSite.com. Tony had the foresight to realize that if the business hit a home run, they would want to sell more than just shoes. They started playing around with the word ‘zapatos’ and settled on Zappos: a fun, catchy, brandable domain that a decade later sells a variety of non-footwear products.

Brandable Domains

In 1997, Larry Paige and Sergey Brin decided they needed a new name for their search engine project dubbed BackRub.  A graduate student friend of theirs suggested the word “googolplex” since their project related to an immense amount of data, and a misspelling during their domain registration led them to decide on the name Google.com, the classic example of a brandable domain.

google-logo

Brandable names are not unique to web businesses. For a brief time earlier this year, Apple (started well before the Internet’s existence) was the world’s largest publicly traded company. Of course, their business has nothing to do with selling apples.  The advantage of brandable names is that they are catchy, fun, and prone to viral marketing. The downside is that they probably don’t tell your users much about what your business actually does.

Another problem with brandable domain names is that they can be hard to spell or pronounce. This can be a real issue in your business’ infancy and can make brick-and-mortar advertising campaigns difficult. How many D’s and T’s are in Reddit? Or is it Reditt? Redditt? You get the picture. There are plenty far worse examples; nginx, a very solid server company, for example just raised a serious amount of venture capital funding. Nwhat?  It’s supposed to be pronounced “engine-x.”

If you browse around any of the most popular domain name marketplaces, you might be surprised at how expensive brandable domain names. You’re going to have to shell out some serious dough for a short and catchy domain. Some public brandable domains that have sold this year include:

  • HX.com ($125,000)
  • Kari.com ($63,000)
  • Zillion.com ($14,800)
  • Loket.com ($3,000)
  • Tirco.com ($2,413)

A few weeks ago, I came across a new start-up called Stylate.com. Stylate has a solid portfolio of fresh, brandable .com domains paired with logos that are all for sale for $250. They’ve had some serious steals, and if you compare their names with equivalent ones priced on Sedo, you’ll fall out of your chair.

stylate-domains

I have no affiliation with them whatsoever, but I’ve bought a few domains from them and have been very happy with their product and service. For $250 you’ll be hard-pressed to do better.  Be very careful using domain name brokers, even the big players in the market.  It’s a seedy industry and there are horror stories and ripoffs all over the Internet.

If you’re going to go the brandable route, keep it short and as pronounceable as possible. I’ve got a few brandable domain names; dartr.com, pirly.com, yilr.com, but only a small amount of very short ones I picked up cheaply.

Keyword-Brandable Hybrid Domains

One of the most cost-effective ways to choose a domain is to incorporate the strengths of both keyword and brandable domains.

BobsBlueWidgets.com is catchy, easy to spell, not excessively long, and contains your most important keyword. Sure, it won’t rank in search results as “BlueWidgets.com,” but it’s more personal and fun. It’s not as short or cool as “Bobbo.com” but it contains your keyword and tells your users what your business is about.

Best of all, it’s available to register for under $12. Can’t beat that.

bobsbluewidgets

The Domain Name Market

Millions of shares of Google, Apple, and Microsoft exchange hands every day in the world’s largest financial markets. This liquidity allows market participants to relatively accurately gauge the value of these companies. Domain names on the other hand are turned over infrequently in an illiquid, non-transparent, and sometimes corrupt market.

Many aspects of today’s domain marketplace feel like real estate in 2007; notably, leverage is lacking. “Domainers” today buy domains with no interest in developing them, purely in the hopes of selling them at a greater price down the road.  Many of the most expensive, high-profile domain name sales are simply parking pages waiting to be acquired by another buyer.

There is a huge amount of inefficiency in the domain market and this is pretty much the definition of “greater fool” theory. Last week, one very popular domain blogger posted a list of a few of his domains for sale:

elliots-turdbasket-of-domains

[paragraph removed -- I was unfairly harsh here. Although I found these domains overvalued, Elliot received an offer close to the asking price -- I was wrong.  He has a lot more experience than I do in this industry.]

If you look hard enough, there are always bargains

I hope I’m not coming off as too cynical.  There are bargains to be had in any market.  A major part of our strategy with Terran Marketing is to be very selective with the domains we do purchase, and focus heavily on the price we pay for each property.  Ensuring we have a large margin of safety is critical.

Domain name index

One pretty cool project I’ve come across is IDNX, the attempt to create a market index for domain name prices. They’ve factored in tons of sales and found that a domain index has closely tracked the NASDAQ index over the last decade. This isn’t terribly relevant, and I haven’t inspected the accuracy of their methods or results, but I thought it was neat.

idnx

If you are super paranoid about market risk to your domain portfolio, you could buy some long-dated far-out-of-the-money QQQ puts to hedge.

Closing Remarks

I’ll wrap up this blog post with a little bit of advice that will probably sound contradictory: don’t spend too much time or money on your domain name.

It’s so easy to get bogged down and spend weeks debating over the perfect name for your new business, when in reality you will have many more important tasks to stay on top of.  Be decisive.  Twitter was named by pulling each employee’s favorite name out of a hat. I hope I’ve given you some things to think about when selecting a domain name for your business, but don’t over-spend your time or money: you’ve got much more fun and important things to worry about.

Good luck!

3 Responses to The Importance of a Domain Name

  1. Brian October 15, 2011 at 9:05 pm #

    Good stuff, Cole. Now time to obsess for months over the perfect domain name.

  2. Elliot October 15, 2011 at 9:13 pm #

    Cole,

    The particular name you highlighted in my sales post is one in which I have an offer of a bit under $1,000 from a company in that field. We’ve gone back and forth two or three times but I guess we’ve both sort of dug our heels in and haven’t come to terms. There are 371,000 results in Google for the quoted term “human resources outsourcing,” and although many companies abbreviate it to “hr outsourcing,” you can see there are plenty that do not based on the Google results. It may be a long name, but there are 1,000 exact match searches a month for the term, too. Go figure…

    As always, everyone is entitled to their own opinions, and I do appreciate your checking out my blog. I wouldn’t classify myself as a “very popular” domain blogger though… just a domain investor who works on his own and likes to have an outlet to share the things I am doing and what I see in the business, for better or worse.

    I do agree with some of what you’re saying about EMDs. I am finding it challenging to compete with other sites on two of my city-related websites (Lowell.com and Burbank.com). Despite their EMD qualities, they don’t rank as highly as I would have hoped for a number of terms. However, I believe with one of my other sites, DogWalker.com, having the EMD has helped with SERPs and given authority to the brand, which in turn has helped bring on new clients at a decent rate.

    There are many ways to be successful, with or without EMDs, but I think a EMD helps give authority and a company can also block potential competitors from entering the space by purchasing available domain names. Additionally, building a splash page on a EMD or using it as a forwarder can have some benefits as well.

    Anyway, I just read that you’re at Georgetown… I spent a summer in Darnall Hall… the school is on a beautiful campus. My wife and I just visited DC in August and had a nice time… You should check out Granville Moore’s on H Street if you like mussels and fries and good Belgian beer.

    My email address is on my blog if you want to discuss anything.

    Elliot

  3. Cole
    Cole October 15, 2011 at 10:02 pm #

    Hey Elliot,

    Thanks for the response. I enjoy and have learned a lot from your blog. I found this particular set of domains overpriced, but my writing came off harsher than I intended. The illiquidity of the domain market makes it hard to value them, and clearly your appraisal was more accurate than mine would have been (as you almost reached a deal for close to the asking price).

    You’ve done a great job with developing your city websites. I’ve always been surprised with a lot of the laziness in the domain industry with very high-profile properties sitting parked and undeveloped after extravagant sale prices (say wallstreet.com for example). DogWalker.com has some impressive authority, and that’s an interesting niche. I’m planning on launching a similar-style directory on one of my EMD sites soon and I’m sure I’ll take a thing or two away from your set-up.

    Granville Moore’s is a great spot, and H Street is a real up-and-coming area. Definitely check out Biergarten Haus right down the street for a good Belgian beer next time you’re in town.

    Best,

    Cole

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