sales Why Are Companies Reluctant to Spend Money on a Good Domain?

[Whizzbang]

The last article on “Underpinning Domain Sales” sparked an interesting discussion on the domain forum, NamePros. One of the respondents asked the question, “Why are companies reluctant to spend money on a good domain?” In this article, I hope to answer that question.

In my opinion, the dominant reason businesses don’t spend money on domain names is because of ignorance. On the whole the domain industry has not been able to mobilise itself and communicate cooperatively to businesses about the importance of domain names. I’d like to unpack this a little further.

The biggest problem has always been the question of whom should put up the PR/Marketing money to generate interest and understanding in domains. Some people point to the registries, others the registrars while others say the current domain owners should all chip in. These discussiona often degenerate into name-calling and a lot of inaction.

What domain investors need to appreciate is that once they have purchased a domain name the registries and the registrars have effectively done their job. There is NO incentive for them to try and market on behalf of existing owners to increase the demand for already registered domains so the price goes up. That’s an almost impossible job.

The job of registries and registrars are to convince existing owners to renew and to get new registrations from wherever they can. On the whole, new gTLD registries have been excellent at selling their product to the domain investor constituency based on scarcity. “If you don’t buy this domain you’ll miss out like you did in the .com rush.”

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[todaygold]

In my opinion, the dominant reason businesses don’t spend money on domain names is because of ignorance.

I don't think it's really because of ignorance that much. It's because most businesses, especially those starting up don't want to spend $x,xxx-$xx,xxx on a domain name...they see that as a ridiculous waste...and for most businesses, it probably is.
If you are running 'John's Pizza Shop' and 'JohnsPizza.com' is already taken, rather than spend thousands of dollars on it, most people will just use 'JohnsPizzaShop.com' or 'JohnsPizzaCA.com'.
Most people don't even type in URL's anymore, they simply do a search, so the business will be found either way.
It's like someone saying 'hey, why is that new business owner renting an old building for their business instead of building a brand new store'? Because for most business owners, the rented old building (hand registered domain) will do just as well as building a brand new store (buying aftermarket).
Domainers always think they have the greatest thing ever and can't understand why business owners don't want to buy...but you have to remember, 98% of the population doesn't really care all that much about domains...they don't see it as the 'must have' domainers see it as.

 

[Kate]

Oh sure... Presumably, they're "ignorant" because they just don't want to pay an extortionate price for a domain?!..

Not everybody has the same definition of 'extortionate'. Even seasoned businessmen don't realize the value and think asking for more than $100 is extortion and they should own the domain because they are the 'logical' end user, just because ! (and even though tens of end users have expressed interest before).

I think domain names are actually the most underpriced assets of our times. Just look at how much money is spent on (ephemeral) advertising vs the power of domain names in terms of brand enhancement, and traffic (= $$$$). Domain names look so cheap in comparison.
A lot of money is wasted promoting bad URLs. A good names promotes your business (lifts you up), but a bad name will have to be promoted by your business (and drag your down). Which way do you want to go ?

Few people understand the value of domain names, even among domainers. In fact, even domainers are reluctant to pay for a good domain. It's kinda funny sometimes, they want to sell domains to end users and for their portfolio website they struggle to find a regfee domain whereas the problem could be solved satisfactorily for $$$.

Of course, they say that you can always find what you are looking for in Google but:

• it doesn't always work well, simply put it's not guaranteed that people are not going to be diverted to your competition, or that you will always rank on top
• and you sure have noticed those ads around the search results, haven't you ?
• Google is not your friend
  
• you can't rely solely on a third party to drive traffic (and clients) to you
• strong brands need to be memorable
• myshittyregfeedomain.com can do fine for SEO but will never become big, advertising this on TV or radio is just a waste of airtime and money

 

[Kate]

I really think you underestimate business owners. Maybe I'm mistaken, but I think the majority of business owners have a basic understanding of domain names. They know they are going on their ads, they know they are going on their refrigerator magnets or whatever...of course they want a decent domain, but they aren't going to spend the same amount of money as a new car for one. So how exactly are 'educating' them?

I'm afraid most end users have a poor grasp on the Internet actually, and they actually rely on the webmaster guy, who is never an expert at branding. If he is actually doing SEO right consider yourself lucky. Web development is plagued by amateurism. That's one reason why so many end users have bad domains.

Anyway, it's ridiculous to spend lots of money on advertising (online/offline) and balk at buying a good name, that is your permanent business card on the Internet. Advertising a bad name heavily is draining money.

If you look at the most successful companies of our times, they usually all have great, short, sharp, memorable names and it's not by chance.

There is only one thing a domain seller would ever need to educate a potential buyer upon, and that is whether or not, and to what degree, the name gets traffic.

Traffic, whether it be natural "type in", or something else, is a marketing value that all business owners will readily appreciate.
...

That's an interesting thought. Of course traffic can be natural (type-in) or artificial (advertising) but it's going to be easier to drive traffic to names that are memorable. Obviously some names are more memorable than others. Relying on Google is dangerous because competitors could rank higher, not to mention the ads diverting you to competitors.

On the other hand it's true that many end users, especially small businesses, don't really need outstanding domains. But it can't hurt. If they grow bigger, then there can be pressure to rebrand.

 

[joro001]

Can you give us an example (virtual or real)?

What is stopping you to pay $5000+ for a memorable name, easy to spread @ social meetings, radio test passed, your company or product brand name representing perfect "meaning" in the industry or niche where your activity belongs.

Dream is for free. The effort to bring that vision/dream to reality is called Belief. If you lose belief, you lose effort.

Kind regeards

It's not important my examples but i'm telling you on the occasions as an end user i've emailed others if price is too high I move on quick.

It's funny you mention $5k as I did recently spend just that on a domain name for a company project. However, the domain is a category killer in a highly commercial niche with significant type in traffic = free marketing on tap as a bonus. I contacted another person in this niche asking how much and was quoted $50k, I just quietly moved on no point carrying on the discussion.

Domains just aren't that important to most end users, i'm the same, as an end user I don't care most of the time except in cases like the above I mention where paying up is worth it for me. Domainers clearly don't get it and think what they have should have end users mesmerized and drawling over their names. Sorry completely wrong 99.9% of the time. (ultra premium domains are another matter but you will need to put down massive money to buy them anyway) Maybe i'm the wrong type of end user lol.

 

[joro001]

I don't think it's really because of ignorance that much. It's because most businesses, especially those starting up don't want to spend $x,xxx-$xx,xxx on a domain name...they see that as a ridiculous waste...and for most businesses, it probably is.
If you are running 'John's Pizza Shop' and 'JohnsPizza.com' is already taken, rather than spend thousands of dollars on it, most people will just use 'JohnsPizzaShop.com' or 'JohnsPizzaCA.com'.
Most people don't even type in URL's anymore, they simply do a search, so the business will be found either way.
It's like someone saying 'hey, why is that new business owner renting an old building for their business instead of building a brand new store'? Because for most business owners, the rented old building (hand registered domain) will do just as well as building a brand new store (buying aftermarket).
Domainers always think they have the greatest thing ever and can't understand why business owners don't want to buy...but you have to remember, 98% of the population doesn't really care all that much about domains...they don't see it as the 'must have' domainers see it as.

This is how I see it.

I am also an end user and can tell you that's how I approach it for most projects I simply couldn't care less about domains, if the .com is taken i'll look at reg fee alternatives. Only occasionally will I be interested enough to spend big on a domain for a project and there would have to be very good reasons for doing so e.g. I want to really stand out with a great exact match domain for advertising reasons, domain gets type in traffic in a commercial niche and so on.

I am part time domainer and even I couldn't care less most of the time. Sorry to all domainers who love hyping domaining but if i'm quoted too high i'll often go elsewhere and get an alternative. The aftermarket right now is stupid, domainers are often paying more than end users ever will. Good luck with that.

 

[Kate]

Indeed, companies don't want to fix what ain't broken, mess with SEO etc. It's only natural. They might consider upgrading their domain name but the move must be as painless as possible.
Domainers should offer assistance with the migration where needed, set up 301 redirects, alias mailboxes etc, or at least present a short strategy plan.
I have met many small businesses that rely on some web design guy, and the 'guy' is normally never an expert at branding, and never an expert at domain names. And he is not your friend.

 

[poweredbyme]

I have 4 answers to your question:

1- Some businesses, especially small local types, don't need a website to sell their products. Domain is just a waste of money for them, not an opportunity.

2- Domains are closed for improvement. If a business has a website, changing its domain is usually very bad idea. Once a domain is selected and used, doors are closed for replacement. Domains are bought for only 1 time for the same business.

3- Domains needs to be purchased in the startup phase of new businesses along with other big expenses like renting/buying office and equipments. In that phase there is no revenue for the business. Budget for a domain is at its record minimum.

4- Domain pricing depends merely on the buyer need. So sometimes domainer might look like a profiteer from buyer's perspective. Because buyer knows if he could register before the domainer, he would pay only reg fee. So the domainer is trying to make profit just from acting earlier than him. Buyer also knows in his offline business, his profit is equal to sale price minus cost. What's the cost of a domain? Reg fee. Any price above the reg fee is perceived unfair by a buyer unless apparently there are other buyers (competitors of the buyer) who might pay more.

 

[Cdomains]

We live and breath this stuff every day.

The average end user does not look at domains the way we do, and sometimes it is hard for us to see it like they do.

I think 99% of end users are not aware at all of the fact that domains could be worth more than reg fee.

Most don't know about the after market or domain name markets like Sedo, Afternic, etc.

Most have never seen the sales charts at DNjournal, so they have no idea of the values.

I can't tell you how many times I've had a shocked or angry reaction from an end user who inquired about a name and then learned the price was not close to reg fee.

In fact this is the reaction I get more often than not.

The only buyers who really understand the value are tech savvy business people and entrepreneurs.

These are the buyers who are willing to pay a good price for a domain, because they get it.

The rest are clueless.

 

[Joe N]

Ok, but what is it exactly you're wanting to educate them on Joe?..

Apart from the traffic angle, which is something that is easily appreciated by business owners and is somewhat separate to the "education" process I think you're alluding to, isn't the only advice you could give a buyer something along the following lines:

"Well, short domains are usually better, and try to be descriptive in your name if you can... Oh, and if you want to play with brand-able identities then that's ok too"

Isn't this, Joe, all they would ever need to know about domains or do you have something else in mind for them?...

There are a few more things:

Greater credibility, improved visibility, more perceived professionalism, instant trust, improved marketing, brand protection, investment potential, increased authority, memorability, added clarity.........

 

[TRY]

For most online businesses, it's even less important. Having 'BillsSneakers.com' versus 'BillsSneakerShop.com' isn't going to make a big difference. People are going to find your business through a search. And as for marketing...most online businesses will be marketing on Facebook, Google Ads, etc. In which case, customers are simply going to click the ad and be taken to your website...they're not going to hand type your website in from the domain.

BINGO! In my personal experience as well as many case studies online in regards to sem perform a and b testing on 2 different domain names, and guess what was the conclusion,...The right domain name Will Save you money on advertising due to various factors not the least of which is a higher click through rate, ....Not a big deal if your spending less $100 a day on SEM, but if your spending thousands a day then the savings add up,...

 

[Kate]

It's true that most end users don't need truly outstanding domains.

However, some are really making life more difficult than it should be. These are the real ignorant (in my opinion).

I have seen a lot of bad advice handed out by so-called web experts.

For example I had a client who once started a subsidiary in a European country.
So they registered the full company name in .com, but it was confusing because it had a triple S (imagine stuff like euro express score), not only was the name ugly and a bit long, but I suspect it generated a lot of misdirected mail too, because people have to actually type E-mail addresses sometimes ! And of course spelling an E-mail address over the phone is a difficult exercise, and even then the other party will still not get the name right half of the time.
See what I mean when I stress the importance of memorable (and easy to spell) domains.

I mentioned to them that the shorter version in the local ccTLD was available for regfee, and the .com was on sale for 2K. I have never lobbied for an aftermarket acquisition, but wanted them to consider options and do some more brainstorming but it's hard to 'educate' end users.

Bottom line: don't buy a great domain unless you have too. Don't buy a crap domain without exploring other options. It can cost you in the long run. Some companies could really benefit from an upgrade of domain name.

One thing to ponder: a great name is an asset that will probably appreciate over time, it can be sold later on, if the company ceases operations, rebrands itself etc. A crap name will just be dropped.
On the occasion I have met ultra-posh corporations with super-expensive offices in select locations, but poor domains and mediocre websites. Sometimes, I really wonder why end users stop being ambitious when it comes to their online presence. There is often a huge discordance between URLs and how the company projects itself in the real world.

 

[Joe N]

I don't think it's really because of ignorance that much. It's because most businesses, especially those starting up don't want to spend $x,xxx-$xx,xxx on a domain name...they see that as a ridiculous waste...and for most businesses, it probably is.
If you are running 'John's Pizza Shop' and 'JohnsPizza.com' is already taken, rather than spend thousands of dollars on it, most people will just use 'JohnsPizzaShop.com' or 'JohnsPizzaCA.com'.
Most people don't even type in URL's anymore, they simply do a search, so the business will be found either way.
It's like someone saying 'hey, why is that new business owner renting an old building for their business instead of building a brand new store'? Because for most business owners, the rented old building (hand registered domain) will do just as well as building a brand new store (buying aftermarket).
Domainers always think they have the greatest thing ever and can't understand why business owners don't want to buy...but you have to remember, 98% of the population doesn't really care all that much about domains...they don't see it as the 'must have' domainers see it as.

A good domain name isn't a brand new building. It's a prime location for your store.

Better location = more visibility, more traffic, and ultimately more visitors.

I don't care what kind of business you run... The easier people can find you, the more money you're going to make. It makes a difference. A lot of business owners don't get that.

Some businesses get it, but don't yet have the capital to invest in a quality name, and to do so could be irresponsible in the startup stages. So we see a lot of them going for short, quality names in their respective cc, or .net, or .io, or .co... But inevitably, if/when they get the funds, they'll come after that premium .com, because they know how crucial it is to reach the next level.

 

[garptrader]

Joe's burger joint in a rural town does not need to spend a lot of money on a domain name and they probably do not need a website.

However a company which promotes its products and services directly to consumers online or which uses its domain in television, radio or billboard advertising can harm their promotional efforts with a poor domain. They may not realize it but ineffective forms of advertising can be far more costly than a good domain name.

 

[jmcc]

1. What a domainer thinks is a good domain is not necessarily what a company considers a good name.

2. A good company name or brand is defensible and can possibly be trademarked but a generic domain may not be so easily protected.

3. The company may have already spent a lot of money on paperwork, advertising and branding and doesn't want to have to redo all that work and spend more on a domain name.

4. Most small businesses consider their web presence like print advertising and only update it once a year. (Most of the web is brochureware and does not change much over the course of a year.)

5. Most small businesses don't do their own web development or handle their domain registrations and hosting. It is outsourced to web developers and SMEs often go on the recommendations of these web developers so contacting the companies directly might be a waste of time.

6. Dot COM is not king outside the US market. The local ccTLD is often far more popular.

7. A company is more interested in developing a brand rather than a domain name.

8. People remember brands.

9. They are doing well with their existing domain name.

Regards...jmcc

 

[Whizzbang]

I really think you underestimate business owners. Maybe I'm mistaken, but I think the majority of business owners have a basic understanding of domain names. They know they are going on their ads, they know they are going on their refrigerator magnets or whatever...of course they want a decent domain, but they aren't going to spend the same amount of money as a new car for one. So how exactly are 'educating' them?

This is the third time I've said that I agree with you LOL! I'm really sorry if I'm not understanding where you perceive we differ in opinion.

To reitereate, business owners are smart and they won't spend money unless they believe they will get a return. Domain owners believe they have the answer to the business owners problems with a great domain.....it's up to the domain owner to educate the business owner on why this is the case. I also believe business owners are aware of domain names but are unaware of the differences and nuances between them. This is the education gap the domain owner needs to fulfill if they are to have any chance of selling their domains.

I've been in business for myself for over 35 years and I wouldn't spend one penny on anything where I didn't fully understand the benefit to my business. Domain owners typically ask a lot for their domains (in the eyes of some business owners) therefore the benefits need to be clearly articulated for each and every asset. I do not believe there is a one size fits all for selling high end domain names.....maybe the subject of a future blog post!

 

[urlurl]

My Points on why or why not a person/business will put up the money to buy a name


1. Size
How big of a company or project will it become. A person starting a blog about his cat vs billion dollar enterprises will see the value in solid domain name totally differently.


2. Confidence/Belief
Do they believe the company will succeed - is it worth the risk putting up thousands of dollars on a good name. If they are confident they are more likely to feel better about spending more.


3. Capital
How much money are they working with and how is it going to be allotted. Big difference in spending for a bootstrap project vs well seeded company make a big difference.


4. Future Potential
How large do they expect the business to grow. Is it going to be a neat little tool, directory, app, etc that is very limited in scale. Or does it have the potential to be the next; FB, twitter, uber, etc


5. Understanding
Do they have the general understanding about domains, SEO, and extensions. Are they aware of the secondary domain name market and how to obtain domain names that are already owned.


6. Alternatives
Sometimes there are just as good alternatives that are still available for regular registration.


7. Attainable
Is the ideal or perfect matched domain name even remotely attainable. A person owns an apple farm - We all know he's not getting APPLE .com, no matter how much he tries or has to spend.


8. Stubbornness/Ignorance
Some still see domain investors as "squatters" and will be dammed if they give any money to them


9. Presence
A business that doesn't or wont depend on internet traffic does need to shell out the big bucks for a great name. That food truck or local dog walking business will do just fine with whatever they reg.


10. Because
I wanted to even this out to a 10 point blurb. So my last point is "No Good Reason, Just Because'




These are a few key points (there may be more) I use when i price, sell and decide on buying names for investing.

'Know your Audience'

 

[Joe N]

Maybe I missed something. But who are you to say what businesses 'should' be using 'good domains'? Who put you in charge of other businesses decision making? If they are fine with what they have, that's their business.
And there have been massive ad campaigns for well over a decade...every major company has either their brand name or a 'category killer' .com in their ads...other business owners see that.

I don't know... Who am I to say people shouldn't smoke? Who am I to say people shouldn't go into work every day and do a half-assed job?

People (and business owners) are welcome to make whatever choices they like. That doesn't make them good choices.

Certain businesses set themselves up for failure with the choices they make. Sometimes a choice that contributes to that is cheaping out on their domain name.

 

[Joe N]

Haha, so funny. I think you should take a break from reading DN Journal for a little while...

So you asked the question to mock my answer? That's uncalled for. You're welcome to disagree, but I'd appreciate if you would keep the personal attacks to yourself.

 

[frank-germany]

But that's not what this thread is about. There will always be a lot of crappy domainers and domains. Domainaing is a business, and 8 out of 10 businesses fail in the first 18 months. That's never going to change.

exactly

Business owners need to be educated. I'm talking massive ad campaigns drilling it into their heads for years. I don't know who's going to foot the bill for that, but it's the only way. It's how opinions are changed these days.

no need for us to educated them

the market will educate them
as they will lose business
in regards to their competitors
or spend more money on advertising

 

[tomcarl]

Simple really....

Show me a man who settles for another domain name rather than the perfect domain for his business and is within his financial reach, and I'll show you a man that settles in most other aspects of his life.

 

[frank-germany]

I once adviced a google adwords customer for whom I run his campaigns
to buy his best and most expensive keyword.de

which was for sale at €1700 at the time

so he told me that he will be broke if he would perform those kind of deals

( and he was paying for this keyword several thousand per month at adwords - great keyword for him )
and it would have been the by far better companies name


about a year later the keyword.de sold for €5700 to somebody else

 

[DN Invest Ltd]

Business owners are uneducated, period.

Some company owns Furniture.com (fictional example). So what? That doesn't means they can't benefit by owning CustomWoodenFurniture.com.

No matter how many stores and showrooms they have, there will always be more people that visit them online than offline. OK, Furniture.com is ultra-premium domain. Yes, but CustomWoodenFurniture.com can rank better than Furniture.com (after quality development) for the "custom wooden furniture" search phrase. Didn't check, but lets say 5,400 people search for this keyword phrase each month. Why not taking them? After proper development CustomWoodenFurniture.com will be on the first position on Google (any other domain will need much more effort) and it is expected that it will be receiving about 32% of those 5,400. That means at least 1,728 visits a month (plus those who will be attracted by "accidential keywords"). Lets talk about conversion rate of only 1% and only after we take into account bounce rate of 50% (very conservative). That means 8 sales a month. Lets say that pure profit per sale is only $50 and we are at $400 a month. That means $4,800 a year. Yes, that is nothing for a big company, but if they paid for this domain only $1,000 and if their IT department spent only 40 hours on quality development and SEO that will be all what they needed to do. Their pure profit for the first year will be $3,800 and then $4,800 for each additional year. If they do the same thing with 100 domains (big companies can do that) they will be making pure profit of $380,000 a year more than if they didn't do that, without any additional effort, without any cut in their expenses etc. What if they get domains with higher exact monthly search? Lets say 20,000 a month. Then they will be making way more than $1 million in additional profits, without any additional effort. What if their conversion rate will be 2% and their bounce rate only 30%? Get the point?

OK, and what about some other company which uses another non-premium domain? They should spend all their marketing resources on additional domains (and proper development) instead of paying a fortune to costly AdWords campaigns which will last only while they are paying. Only one domain with decent exact monthly search which can be purchased for $1,000, or less, when someone outbound them, can bring them $3,800 a year (later even more) in additional profits. For a small company this amount is not something they should ignore. Well, they actually ignore this because they are uneducated.

We should all together start working on global campaigns which will educate people of the importance of domain names.

 

[nomen]

Shadyness and general dislike of domain hoarding certainly doesn't help. I think a lot of 'honest and hard-working' small business owners go for reg fee domains simply because they're intuitively being afraid of getting scammed.

 

[Cdomains]

There is NO incentive for them to try and market on behalf of existing owners

That is because domainers are the end-users for the most part.

The vast majority of the business of the registries is business from domain speculators and they know it.

They already have that market covered.