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by Stephen Logan on 3rd October 2011
Everybody wants a domain name that is easy to remember, and you can’t get much simpler than a one or two letter domain. But how much would you spend to secure such lucrative online real-estate? £100? £1,000? Maybe even £10,000?
Well, in a recent auction, a number of major businesses and investors put up some serious money; purchasing these minimalist domains at an average cost of £39,000. It should be noted that this was a charity auction, which may have inspired some liberal bidding; however, the fact remains that the likes of O.co.uk, fb.com and g.co.uk didn’t come cheap. So why are they worth so much?
In actual fact, tens of thousands of pounds for a domain actually isn’t THAT much. Obviously most of us would baulk at any such figure, but companies have paid millions to secure the perfect name in the past. Last year in fact the now infamous sex.com was sold for a reputed $13million. This might be an exception to the rule, but it shows the value that some place on the power of a name and its potential for traffic.
With a one or two letter domain, you are likely to get a fair amount of direct traffic. Now whether those visits are relevant to what your site is offering or not remains to be seen, but it’s the kind of easy visibility that many companies crave.
Amongst the obvious purchases, including clothes store H&M buying hm.co.uk and Facebook snapping up fb.co.uk, a number of private investors grabbed dozens and, in at least one case, over 100 such domains. So if a domain has no implicit value, unless it is your brand name or related key term, why would you spend thousands on getting one?
For instance, Google apparently missed out on g.co.uk. So if you don’t have a UK-based business called ‘G’ or plan on creating one, why would you want to buy it? Whilst it is only speculation, most investors are probably not looking to do anything with their domain purchases – certainly not immediately. They may redirect them to sites that they own, but more likely they’ll sit on them, renew when the time comes and wait for a business to show some interest.
If in the case of g.co.uk, if Google were to renew their enquiries further down the line, the domain own could feasibly charge as much as they want. Equally, interest may come from elsewhere. This is a little like the cyber-squatting of old; largely based on assumptions and good fortune – certainly where the investors are concerned. With domains in short supply already, certainly generic ones such as these, imagine what the situation is likely to be like in the years to come? When demand outstrips demand, suddenly you have a situation where you can profit hugely as a domain owner.
£39,000 is a lot of money. Whether or not anybody will see a return remains to be seen. For the likes of H&M, Facebook and Google, this kind of money isn’t going to break the bank and it is a logical way of protecting their brand. This opportunity doesn’t come around all the time, so it was important to take advantage of this one-off sale.
For small businesses, this is unattainable. You can’t hope to secure a single letter domain. This is why branding is so important these days. You’re not just competing with local companies anymore. If you want to succeed online and offline without paying thousands for a domain, you need a name that is unique and memorable. Get it right and you can add your own value to a domain, get it wrong and you’ll pay over the odds for something that provides little or no added benefit.