By Richard Harroch and Andrew Miller
We have recently seen some blockbuster acquisitions of internet real estate, in the form of premium, dotcom domain names. NFTs.com was acquired for a reported $15 million and HubSpot acquired Connect.com for $10 million. Over the last few years, exact match keywords have become important, valuable digital assets, and signify a transformational shift in the way premium internet domain names are valued.
In the BG (Before Google) era, most people navigated the web by typing a keyword or domain name into their browser. Having a world-class domain name and brand was almost like owning a “TV network,” but one that is global and without walls. Initially, the focus was on one-word, generic domain names that represent a massive global category, such as Sweeptakes.com or Home.com.
Recently a new type of internet real estate has become incredibly valuable, and strategically mission critical to brands and emerging companies. These are called “exact match” domain names, single words that imply a powerful brand, such as Extend.com, Gala.com, Universal.com, Iconic.com, First.com, Recuperate.com, and Gravity.com. To illustrate this, here is a link to several exact match domain name acquisitions by market leaders, and case studies from the most successful founders and executives.
Ways companies acquire exact match internet domain names
Earlier stage, venture-backed businesses will often add a word to their domain name, even though their brand is simply one, powerful dictionary word. For example, successful warranty company Extend initially began as HelloExtend.com. This was before its savvy CEO and founder, Woody Levin, quickly realized that one of the most strategic moves he could make was to acquire the company’s exact match domain name, Extend.com, and drop the “Hello.”
Another tactic some companies use is to go with a non-.com domain name, such as .io or .xyz, if the .com domain is not available. A problem with that is customers may still end up going to the .com domain name instead of to the .io or .xyz version, and end up at the wrong site. Another problem is important emails being sent to the wrong address. In the end, a company may need to acquire the .com domain name, but may be in a precarious negotiating position.
Finally, some companies will make out-of-the-gate decisions to acquire an exact match domain name asset. Recent examples of this are Wonder.com and Candy.com, both led by some of the smartest operators and investors of the internet age.
The value of exact match domains
If you are a single-word brand and product, having your exact match domain asset is the single most important investment and decision you can make, and it is both offensively and defensively strategic.
Consider the “Super Bowl” analogy. Some businesses can spend $8 million dollars or more for one 30-second Super Bowl commercial, which is over and measured quickly. If it works, there is a return on investment, and if not, it is a significant hit to that company’s profit and loss statement.
For a similar cost, if they had purchased their exact match or category .com domain name, they would have a balance sheet asset that is an appreciating, amortizable, resalable investment, while adding exponential enterprise value and utility to the business. The same executives and investors who shun a seven-figure domain acquisition are probably spending P&L money to advertise their forgettable, non-matching domain name all over the internet.
Your domain name—a critical business asset
There is an old real estate cliché, “Location, location, location,” about the importance of being located on the best real estate. Your brand and the address to access it online is your company’s internet real estate. It is your address to the globe.
An exact match category domain provides a company with authority, credibility, conversion, and clicks—“hear it once, remember it forever”—all while being an investment with appreciating value and returns.
Remember this very important fact: you have only one exact match .com domain name. It is the scarcest of assets, and therefore, the most valuable. Once it is off the market, it is most likely gone forever, and not having it could critically impact your business in many ways, including all facets of your marketing, branding, raising funds, and an eventual future sale.
RELATED: Key Steps in Obtaining a Great Domain Name
Copyright © by AllBusiness.com. All Rights Reserved
About the Authors
Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a venture capital fund in the San Francisco area. His focus is on Internet, digital media, and software companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on startups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He is the co-author of the recently published 1,500-page book by Bloomberg, Mergers and Acquisitions of Privately Held Companies: Analysis, Forms and Agreements. He was also a corporate and M&A partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 250 startup financings. He can be reached through LinkedIn.
Andrew Miller, Managing Director of Hilco Digital Assets, a Hilco Global company, has been a leading investor and expert in digital assets, including premium domain names, crypto, and NFTs. Andrew founded leading marketing companies CreditCards.com and InsuranceQuotes.com, and is an early investor in the Bored Ape Yacht Club NFT, as well as Thrasio, a leading consumer goods company. He has been principal in over $330 million of domain name transactions, including many of the highest-value transactions. Connect with him on LinkedIn.