Categorized | Domaining Tips

Domains – The Best Investment You Could Possibly Make as a Business Owner

Posted on 16 November 2011 by Andrei

After I explained why turning domains into businesses with actual products is not a scalable approach (it can work for a few domains but not for large portfolios), Mark Jeftovic left an interesting comment but one I disagree with. Through this post, I will explain why.

First of all, please click HERE and read the post I’m referring to if you haven’t by now.

Then, click HERE and read Mark’s comment. I’m going to quote one of his statements but I’d recommend reading all of it.

Domain Names – Anything But Unimportant

Here is one of Mark’s initial statements and the message he was communicating through his comment (again, I encourage you to read all of it because he raises some very interesting points) was that in his opinion, domains are not as important as domainers consider them:

“Even worse, if you successfully build the business, then the domain name you build it on is less important (dare I say, unimportant).”

Let’s leave the fact that I’m a domain investor aside for a moment.

As a business owner and a marketer, I disagree with this statement.

Why?

Simply because no matter how successful a project is, a domain will still represent a permanent asset.

If you buy a domain now, it’s yours forever as long as you renew it.

Unlike the average advertising expense (PPC, media buys, whatever), a domain is an investment which will always pay dividends:

Whenever you pay for traffic and have to display a domain, having a great one will significantly boost your CTR. This is not just an opinion, there is lots of data which makes it clear that when it comes to text ads as well as banners, a good domain represents a credibility boost which has a higher CTR as a result.

Why Should You Care

Because the higher your CTR is, the less you’ll end up paying.

This principle is valid when it comes to AdWords, Facebook Ads and pretty much any other platform.

Why?

Because these platforms display ads based on which generates the most money for them.

If you pay $1 per click but have a CTR of 0.1%, they will receive $1 for every 1,000 impressions.

If you only pay $0.2 per click but have a CTR of 1%, they will make $2 for every 1,000 impressions.

Which Ad Will They Display?

The $0.2/click one because even though the person in question is paying 5 times less per click, the ad network is making 2 times more by displaying that person’s ad ($2 per 1k impressions instead of $1 per 1k impressions).

Now crunch the numbers yourself.

Let’s assume you spend $10k/month on advertising, how much money will a good domain help you save monthly?

What about during the lifetime of your project?

’nuff said :)

The message I’m trying to get across is simple:

A Domain Name Will ALWAYS Help You Save Money When Buying Traffic

How much will you save? Well, that depends on your campaign but this much is certain: if two ads are identical and only the domain differs, the one with the better domain will always outperform the other ad.

But that’s not all.

What If You Decide to Sell Your Site?

If that is the case, then a domain will (yet again) pay for itself multiple times over. I helped several people sell their website and the domain makes a huge difference because again, it’s all about credibility.

A lot of time, people will buy your site because they believe in its long-term potential and it should come as no surprise that you’ll score considerably higher in the potential department if your website is called “BestShoes.com” as opposed to “The-Best-Shoes-Online.com” :)

What About SEO?

Once again, a domain will always help you develop an edge.

ALWAYS.

No matter how often search engines will change their algo, domains will still represent an edge directly AND indirectly.

How much will owning the exact match domain help SERP-wise and how will things change over time? Hard to say but this much is certain: it will always give you a boost. Search engine algos are constantly tweaked; sometimes a domain ends up counting more than with the previous algo, sometimes less but I have never EVER heard anyone say that domains shouldn’t count at all. Need I say more?

Also, let’s not forget about the credibility factor associated with SEO. Let’s say that you contact a website owner to ask for a link, don’t you agree that the likelihood of you being taken seriously increases significantly if you own a good domain?

Let’s Not Forget About Type-In Traffic

Some domains have lots of type-in traffic, some don’t but this much is certain: word of mouth advertising is important, it always was and it always will be. In other words, it’s in your best interest to make it easy for people to remember your website.

“The – Best – Dash – Shoes – Dash – Online – Dot – Com” or “BestShoes – Dot – Com”… which one do you think the average Joe will end up forgetting?

What About Partnerships?

Once again, a domain gives you the credibility you need to establish solid foundations.

Ask the Castello Brothers if the fact that they own the category killer geodomain made it easier for them to attract advertisers and I guarantee that they will confirm.

Maybe you’ll end up needing an investor, an advertiser and so on… credibility will play a HUGE role and owning a great domain is the edge you need to stand out.

A Short Recap

By owning a great domain, you will have a permanent edge when it comes to:

  • paying for traffic
  • selling your website
  • word of mouth advertising
  • SEO
  • partnerships

… and the list could go on and on.

While Mark’s comment is interesting and while the reasons why he thinks that domains are not as important as domainers think they are deserve to be analyzed and taken into consideration , my opinion is completely different.

In my opinion, a great domain represents the best investment you can possibly make. Competitors can copy your business model, they can find out where your traffic comes from, they can even steal your landing pages but the domain you have chosen is yours forever and they can never take it away from you :)

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14 Comments For This Post

  1. Mark Jeftovic Says:

    Good article Andrei. Not a lot of issue with it. I’ve always cautioned against “irrational exuberance” in domain valuations, I still appreciate a good domain name as much as the next guy (I did spend low xx,xxx on buying wealth.net a few years back and still think I did well).

    My main points:

    The domain name will not (IMHO) be the difference between success or failure. It will merely accelerate you or hinder you but other factors will decide if you are actually successful.

    Some domainers seem to believe that you cannot spend “too much” on a category killer domain name, I think they’re wrong.

    From a capital allocation viewpoint, especially from the days when domains were selling for idiotic valuations (and sometimes still do), the money spent on a domain name could have been far better spent elsewhere. Fund.com, comes to mind. IRS.com was another overpriced debacle. Even the Sex.com buyers who paid 14M for it ended up insolvent.

    Believe it or not, is it entirely possible to overpay for a domain name but as I have said in the past: having a good domain name is certainly a lot better than having a crappy one.

    regards.

  2. Xdreamer Says:

    some startup businesses pay millions in advertising from vc even at the beginning

    i agree 100 or 200thousand is not much for them and even the best sale of domains in its history was 13 mill

  3. adomainer Says:

    Still bums me out how nobody minds spending a fortune renting real estate but ask them to pay a premium for your domain and you get the cold shoulder!!

  4. nmwando Says:

    I always knew domains were important even b4 buying some myself and even google and ebay and youtube they’re all memorable even if they don’t mean anything hehehe

  5. DCrap Says:

    The only problem is how for every good domain there’s brainless noobs registering dumb crap thinking they’ll hit it big.Then there’s the excuse they have if you tell them the truth,oh poor things how they weren’t there in 96.Take it from me,even if they were it wouldn’t matter.They’d still register dumb crap even in 96 like many have.

  6. Snoopy Says:

    Great post by Mark, print it out and stick it on your wall.

  7. Andrei Says:

    @Snoopy: do you agree that domains are unimportant? In that case, since most end users will figure out that they are, all of our portfolios will be regfee material. But I’m a nice guy and genuinely want to help you out snoopy, so I will gladly pick the top 10 domains of your remaining portfolio and offer not 2x, not 3x but 100x regfee for each. You know where to find me :)

  8. Snoopy Says:

    Andrei,

    He is not saying domains are unimportant, I would read his comments carefully rather than taking a couple of words in isolation. His point is that the industry greatly overstates the value of the domain name in regards to development, his comments are spot on,

    “But the reality is that building the business is the hard part. Even worse, if you successfully build the business, then the domain name you build it on is less important (dare I say, unimportant).”

    “I’ve always said, having a great domain name helps, and it’s certainly better than having a crappy one.

    But the name WILL NOT make the difference between success and failure.”

    I really feel like quoting the entire post, it is that good….but I won’t. People should read it 10 times in my view.

    What we have here though is the fairly typical back patting industry blog post “Doamins – The Best Investment You Could Possibly Make as a Business Owner”", written by a domainer for domainers to convince domainers of something many in the industry already erroneously think.

  9. Andrei Says:

    @Snoopy: let me start by referring to one of the parts you quoted.

    “But the name WILL NOT make the difference between success and failure.”

    That’s not true in my opinion, domains represent one of the cheapest investments which actually can make the difference between success and failure.

    Sure, anyone would obviously love to have a product that’s 2x better than all of the competing ones and anyone would obviously love to be able to sell a product 2x cheaper than everyone else but in most cases, that’s just not possible in 2011 and beyond.

    Why? Because the Web has matured a lot and the competition is fierce. Thus, the free market does its thing and brings prices close to zero profitability which is great for consumers. What I’m saying is that in most cases (and I’m talking about the average online business owner, a person who isn’t a genius capable of innovating to a degree that makes everything else pale in comparison), there just isn’t enough room for significant/dramatic improvement and that’s why anything that can help you stand out counts.

    That’s exactly what domains do.

    Through his comment, the message Mark wants to get across is that domainers think domains are more important than they actually are and I disagree.

    Through this blog post, I tried to explain that in my opinion, domains represent the best possible investment you can make as a person who owns an ONLINE business, for the reasons I referred to in detail.

  10. manchin Says:

    Domains ARE important, but not THE most important part of your business. If you have excellent converting content, the domain begins to pale in comparison.

  11. Andrei Says:

    @manchin: agreed. As mentioned throughout this blog post, my opinion is this: while a domain is obviously not the most important part of your online business, it is the best investment you can make, in other words the investment which yields an excellent PERMANENT return when it comes to pretty much any area that has to do with your online business (brandability, SEO, paid advertising, partnerships and so on).

  12. Jacky Says:

    I believe as long as the domain is marketable and is catchy you got a chance. The most successful sites on the internet are not exact match domains.

  13. Joeseph Bing Says:

    Surprising strategies. I’m uncertain how much to remember all of this, to be truthful.

  14. Mike Says:

    It’s like saying a great Kenyan runner does not need great running shoes to win a race.

    A great Kenyan runner could win the race running barefoot without his great Nike shoes, but he’d be a hell of a lot better off with those shoes.

    Some here have said that if a site is successful and converts well, than the domain is irrelevant. Well, maybe your conversion rate would have been even higher with a great domain. Many, many studies have shown great domains convert surfers to sales at a greater clip than those with poor to mediocre domains. There is a level of trust inherent in these domains, just like brand names. People trust Apple and Wal-Mart as brands, great generics serve in the same context in that RunningShoes.com will generally convert better to sales than JimsRunningShoes.com. RunningShoes.com will be seen as the authority on shoes since it is such a great domain and people think of it as an “authority site”.

    Can you be successful without a great domain…..absolutely.
    Can a great domain be successful without a great site….absolutely.
    Can a great domain and great development be successful….absolutely.

    #3 is your best option, but this is not a game of either/or. One does not exclude the other, such saying a “great development makes domains worthless”. That’s just stupid!! Sorry, but it is!!

    This is simple math people ; I’m sorry some of you don’t get this.

 
 
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