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June 2009
June 20, 2009
Why do generic domains sell for high prices?
OK, I’ll weigh in with a few thoughts. I’ve studied top tier domain name sales for a long time.
Inevitably, when a high profile top tier domain sells, lots of people post that domains are worthless, and obviously one can brand any business with a meaningless name. It happens all the time. Then they give plenty of examples. Then lots of people post say that the domain was worth millions and it went too cheap.
So I actually decided to study the top 200 historic domain sales and see what I could determine. Here is some of what I found.
92% of all top domain sales are dot coms
88% are domains which exactly match keyword search terms
86% of all top domain sales are single words.
41% are 5 characters or less.
So what about traffic? Do top tiers sell primarily for the type-in traffic? I compared traffic data for several high profile domain sales
http://www.40z.com/2009/04/val.....affic.html
and type-in traffic is apparently NOT the reason most top tier domains sell for high prices.
That still leaves a few reasons on the table.
I found 2 studies, although admittedly did not find many studies on the subject, about response rates to ad compaigns using top tier generic domains vs company brand type domains.
Both studies showed a signficantly higher click through rate for internet ads using category specific generic domains vs other types of domains. So it appears that generic domains can increase advertising efficiency, and perhaps as a result lower the cost of advertising and branding.
It makes intuitive sense.
Besides a startup wanting to sound ‘big’ by owning the dot com for their industry, what about a seasoned end user who wants to keep competition out?
I developed a list of large corporations who own top tier generics for their industries
http://www.40z.com/2009/05/gen.....-them.html
Most certainly some of these companies are not using these domains for ad campaigns, even if some are, however as a defensive strategy they at least prevent competitors from using the domain to drive traffic and capture new customers.
Do top tier generic domains increase search ranking? I don’t have any studies to support that, but I have plenty of personal experience that shows me they do. When a domain exactly matches the keyword being searched for, and there is a site with relevant content for that subject (i.e. not just a parked page) it seems the generic domain branded sites leap frog past others. Of course all my SEO friends will tell you that you can reach the top of page one at the search engines with any domain, on any subject, be it XYZdomainonanything.com. And I’m sure they are right. But my experience shows, generic domains help.
So why do generic domains sell for high prices? Here is what I believe:
1. They give a lesser known competitor in an industry the appearance of an 800 lb. gorilla.
2. They are more efficient in advertising campaigns. Both online and offline. Because they sound authorative on the subject, and they are easy to remember later.
3. End users buy them not only for marketing uses, but to keep competitors out.
4. Some get type-in traffic, delivering new potential customers at zero cost.
5. They assist in search engine ranking
6. They are easy to remember, and to type in, and thus increase return/repeat traffic.
Some of these points, I’ve been able to show with research, and some are just my 2 cents…
I also suspect at exit strategy time, a generic with a viable business might more easily attract a buyer than XYZanydomainaboutanything.com, but I’ll have to do some research on that idea.
