Imagine the scenario where you have discovered the perfect domain name for your business. Lo and behold, the domain name is a “premium domain” and the seller is looking for a significant asking price.
This may come as a surprise to you, but rest assured, domain names regularly sell on the aftermarket for well above their registration price.
Take a quick look at what three-letter domains sell for!
The question you might consider asking yourself is, “Is the domain worth it for my business?”. To help you answer that question, we’ll outline the features of a premium domain and list the benefits they offer. Once that’s clear, you will be able to assess if the domain is a quality object and apply our simple valuation technique.
What is a premium domain?
The first assessment when valuing a domain is classifying it as a premium or non-premium domain. Premium domains have intrinsic value and have specific characteristics. Non-premium domains, have little to no value. Features of premium domains include:
- Dot com – Dot com is the most popular extension in the world. Due to its popularity, it’s the most widely recognized domain extension. Most premium domains have the dot extension.
- Memorable – Easy to remember is one of the most important characteristics of a premium domain. A domain like “dribaxa.co” is easily forgettable, but you will be hard pressed to forget a domain like “cars.com“.
- Short – Everyone loves short brand names and domains. The shorter the domain, the more brandable and valuable it is. Think of Nike, Uber, Mars, Citi, and Temu just to mention a few exceptional brands.
- Easy spelling – Now that nearly everyone in the world is connected to a mobile device, it’s important that your domain is easy to type. If your domain is hard to type customers may end up misspelling your web address and, in the worst case, you may even send your hard-earned customers to a competitor’s site.
- Pronounceable – It’s just as important as being easy to type. A domain that is hard to pronounce is hard to share. Word-of-mouth marketing is essential for a brand’s success. Don’t forget that a good domain is pronounceable in English and foreign languages as well.
- Descriptive – Words that describe your business can make a domain even more attractive. Think of the brands “Taco Bell” and “Pizza Hut“. It makes sense that “Pizza Hut” serves pizzas, and “Taco Bell” serves tacos. Words that describe a business can help brand association.
Business Benefits of Premium Domains
Now that we have a good understanding of what defines a premium domain, let’s take a quick look at the concrete business advantages that short and memorable domains offer.
- Brand value – Every great brand is complemented by its matching .com domain. The .com is an intrinsic part of every brand, without it, a crucial piece of the puzzle is missing.
- Marketing advantage – Memorable and catchy domains are easier to advertise and promote. In addition, descriptive domains that contain keywords have an SEO advantage over their counterparts.
- Trust – A great domain sends trust signals to consumers. It shows that the business is serious about its intentions. The extra credibility can sometimes make the difference between winning and losing a customer.
Valuing a Premium Domain
Okay, so now that we have introduced you to the features and benefits of premium domains, we would like to present our 6-step process for valuing premium domains.
Because every domain is unique, and value is subjective, we propose you ask the question: “Is investing in this domain worthwhile for my business?“. Here are 6 points to consider.
1. Brand protection
Let’s consider that your desired .com domain is purchased by another company and it’s off the market forever. Would that potentially jeopardize the long-term prospects of your brand? It would be hard to imagine companies like “Uber“, “PayPal“, “Adidas“, “Shell“, and “Coca-Cola” not owning their .com.
2. New markets
Let’s envision for a moment that a company is doing business with a local ccTLD domain extension. For example, let’s assume it’s .de. .de works well for a company selling in Germany but doesn’t work if the company needs to sell outside of Germany. Therefore, the company will either have to acquire the ccTLD for every country it wishes to sell in or rebrand to .com.
3. Company growth
For the next example, let’s assume a company is selling blue widgets with the domain “bluewidgets.com“. What happens when the company starts selling red widgets? Your domain mustn’t limit your company’s future growth. For instance, “widgets.com” would accommodate the sale of all color widgets without having to fragment the brand. Did you know that Tesla rebranded from TeslaMotors.com to Tesla.com?
4. Advertising spend
The harder it is to spell, pronounce, and remember your domain the more expensive every customer becomes. Catchy domains improve the effectiveness of advertising campaigns, while domains that are hard to remember tend to perform poorly. If ad campaigns are 20% more effective with a catchy domain, how much will that save you in 1 year, 3 years, and 5 years?
5. Trust
Consumers tend to view websites with exceptional .com domains as authority websites. On the other hand, companies utilizing second-class domains may be perceived as untrustworthy. Poor brand perception may seriously affect a business’s credibility.
6. Lost company valuation
Brand equity and company valuation are correlated. A memorable brand with a matching .com creates goodwill and the long-term creation of financial value. Would doing business with a second-class affect the valuation of your business?
Related: How to Choose a Perfect Domain Name for your Website?
Conclusion
It’s important to understand that subtle differences can make all the difference when valuing a domain. Value is always subjective, and every domain is unique. Therefore, it’s prudent to ask yourself if an investment is worthwhile for your use case. Company valuation, brand perception, ad budgeting, company growth, new markets, and brand protection are all factors that one should consider when valuing a premium domain.
