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.”
Once a domain investor has purchased a domain then there is a great reluctance to drop it as the domain may represent a significant windfall someday in the future. Essentially the registries and registrars are selling hope. By the way, I actually don’t have any problem with this as long as investors go in with their eyes wide open.
Once invested, many domain owners then turn to the registries for help in offloading their assets at significantly higher prices. You quite often hear at conferences statements like, “If I was running that new gTLD then I would……” Well, you don’t run the registry so stop wishing you did and work on the problems that you can actually work on. This is a bit of tough love but stop complaining and don't expect someone else to bail you out.
All of us would agree that .CLUB is a reasonably successful registry with an awesome team. Let’s imagine for a second they spent $20m or near enough to 100% of their revenue on marketing. CLUB (back of envelop calculations here) to help existing domain owners. Despite .CLUB being regarded as fantastic marketers they will be the first to admit that $20m is about 2% of what they really need to do a proper ongoing global marketing campaign.
What I'm saying is the best the industry has doesn't have the fire power to move the needle in educating the entire world about the value of domains. What they can do and actually do is target their efforts to maximise registrations and renewals.....this doesn't involve educating corporations.
So here’s the bottom line with registries and registrars. They love you registering and renewing your domains. They aren’t going to spend a huge amount so cash (even if they did have it) trying increase the price of your domains. In the case of .com if you drop a domain it’s likely to be picked up in a second. ccTLDs aren’t typically profit motivated and have other objectives while the new gTLDs don’t have the cash.
This leaves you to market and promote your own domains. It also means you need to focus your efforts and really think about how you’re going to educate your target market rather than sell. You’re fighting largely against ignorance…..so once you get over that hurdle what’s the next one?
We live in a market that has a MASSIVE supply issue. The new gTLDs are inevitably eroding the power associated with incumbent TLDs and in the process, have devalued the entire market (top end .com excepted). If I’m a new business, why would I pay thousands of dollars for a domain when I don’t know whether I’ll exist in 6 months’ time? I’ll just grab a new gTLD, it’s not like there is a shortage of them.
If I’m an existing business, then why would I spend a bucket of cash on a domain name when I can just use something I paid $10 for. I could save the money on the domain and put it towards marketing the product or service I’m trying to sell.
Yes, we know the importance of a good domain name because we are in the industry. Your task is to imperically prove it. You can’t just tell someone to spend $100K because they should….you have to give them hard cold evidence.
Here’s your next problem. The whole point of a domain name is that it’s unique….one of a kind and the reason the buyer needs it. The first thing most people do is bring out comparables…..which undermine the whole value proposition of uniqueness. I’ve always believed this strategy is flawed.....so I'd try to think through this a little more.
So why don’t companies spend money on domains? It’s sad to say but it’s largely ignorance combined the domain owner’s lack of skill to make a compelling case. If there is no business case, then there won’t be a sale.
There are some exceptions to this rule where a wealthy individual just “want a particular domain” and will pay anything for it. These are lucky events and should be grabbed with both hands.
The essential point is unless you are prepared to spend the time putting together the business case then don’t expect companies to want to buy your domains. I will go one step further…..you also have to pick up the phone at some point and present the case to the prospective buyer….ideally this is done face to face.
I should also mention the last reason why companies don’t spend money on domains. Because they’re doing other stuff and domains are complicated. Just think about it, should the marketing, IT, or legal department manage the asset once purchased? An internal champion in a large organisation would inevitably throw their hands up in the air and move onto buying another TV spot.
This is definitely a question your business case needs to answer and it had better be the market department or you’ll end up getting a sale worth pennies.
I know that I’ve rambled a little in this article but I hope that it answers the central question posed in the title. Feel free to poke and prod some of my suppositions with any comments.