Paying millions for a domain name? Crazy? Not so fast…

By: ispeculatornew
Date posted: 09.04.2009 (5:00 am) | Write a Comment  (6 Comments)

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toys_r_us_sg-500x375I always enjoy reading those mainstream media articles that discuss domain name auctions. To many, someone paying $5.1 million for a domain name such as Toys.com is insane and a bad business decision. I really think that most of these articles do not take the time to analyze the investment. Imagine you have a toy business and make a decent product. There are of course almost unlimited ways to get traffic to your website, most ways will end up costing money. If the actual method is free, chances are good that you will be spending money on labour force. Some methods are better bargains of course but in reality, few companies are able to generate the massive buzz that a viral campaign can offer.

Going back to our example, let’s take a company that has $1 million in annual sales and spends about $200,000 in promotion for its website. That is highly plausible, much of that money could be spend on search engines, in branding campaigns and so on. Maybe that website would even be doing some limited tv advertising. Fact is, many toy companies spend much more than $200,000 in marketing annually.

I think I would be able to convince you that an ad with the name Toys.com could be twice as effective as a campaign for MyBestToyStore.com. There are so many ways. First of all, any viewer that saw or heard the name will probably have at least 2 or 3 times more chances of actually remembering the name. That means that when he will think of buying toys online, chances are that he will go directly to Toys.com. That is worth a lot of money and strangely, it seems to be underestimated by the mainstream media. If a toy store owner is to be twice as effective on his advertising over the life of his company, which could be decades, wouldn’t that be worth a million or two? I would certainly think that it would.

What are your thoughts? Would you invest an major amount of money in a domain name?

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6 Comments

  1. Comment by Catarina — September 4, 2009 @ 7:03 am

    You have writing a post and I wanna check on the web for the wedding dance.

    I went into this website instead:
    http://www.jkwedding.com

    it should be:
    http://www.jkweddingdance.com

    it was quite funny that I was not the only one that had made that mistake hehehe (check the first link!) See how a domain name can be important 🙂

  2. […] Speculator would pay millions for a domains (I hope he would do it for http://www.thefinancialblogger.com […]

  3. Pingback by 158th Edition of the Festival of Stocks — September 14, 2009 @ 8:19 am

    […] Paying millions for a domain name? Crazy? Not so fast… posted at Intelligent Speculator. To many, someone paying $5.1 million for a domain name such as Toys.com is insane and a bad business decision. […]

  4. Comment by IS — September 15, 2009 @ 7:57 pm

    Great find, very true:)

  5. Comment by GDI — May 19, 2010 @ 6:47 pm

    Where can I get a cheap domain that includes hosting?

  6. Comment by IS — May 20, 2010 @ 4:13 am

    You can always try GoDaddy.com!

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