What makes premium domain names strategic assets?

Nowadays, almost everyone has a domain name. Whether it is for your business, blog, an idea you have and never get around to, a simpler email – most of us have been through the process of registering a domain. And one thing you inevitably realize, as soon as you start looking for one, is – a good domain name is hard to find. Why? Long story short, when domains first came about not many people were aware of how important the internet will become for just about everything.

Your domain name is your address on the internet. Similar to real estate, you have perfect locations, decent locations, some that are just compromise locations, the « this will do for now » type, and others you really don’t want to go close by, due to bad reputation they have built over the years. So the perfect locations, the names that are dictionary words, creative, meaningful, brandable, short, memorable, global – logically those got registered first. Many by big corporations, others by small companies who later on became big, some by entrepreneurs that saw an opportunity to invest in them as assets to later develop or sell.  As time went on, more and more of our business and personal lives moved online. Domain registrations grew matching the demand – everyone was looking to have their spot on the internet. Fast forward to today, we have over 334 Million domain names across different TLDs. That’s a lot of domains! No wonder a good one is hard to get. 

Over 91% of Fortune 500 companies for 2024 run their businesses on Exact Brand Match .com domains (EBMs). More than half of the fastest-growing companies share the same. It seems like the bigger and more successful a company gets, the more they are inclined to invest in their brand and subsequently – their address online. If you are testing an idea, launching a hobby site online or just playing around, sure, a domain name is a domain name, pretty much any will do. It just serves you to access your site. But if you are building a brand things change. It’s not just about you anymore. What story do you want to tell the world? How easy do you want to make it for your customers to remember and reach you? How much risk are you willing to take with their trust? When your vision goes beyond testing an idea and runs into building a strong, independent brand that you see in the future, then a domain name is no longer just a bunch of letters you type in. It is a strategic asset to your brand.

"Strategic assets are, the set of difficult to trade and imitate, scarce, appropriable and specialized resources and capabilities that bestow the firm’s competitive advantage."

The value of strategic brand assets like premium domains is directly related to their uniqueness and inimitability. There is only one perfect domain name for your brand, and it has no other strategic equivalent with matching qualities.

Gates and Company, in conjunction with Jahani & Associates, analyzed over 500 M&A deals in the tech sector in the period 2010 – 2016. Here are some of the findings.

• Google acquired Waze for $969 million and allocated $843 Million to goodwill.
• Facebook’s $17.2 billion acquisition of WhatsApp had an astonishing $15.3 billion recorded as goodwill.
• Yahoo! paid $990 million for Tumblr, with $750 million going toward goodwill, including $182 million for customer contracts and relationships.
• Microsoft acquired LinkedIn for $27 billion and allocated $16.7 billion of its purchase price to goodwill; and when it acquired Skype for $8.6 billion, $7.1 billion went to goodwill.

In each of these examples, the target company’s strategic assets (IP, customer relationships, brand) were valued significantly higher than their tangible/physical assets (plants, property, equipment, etc.)

It looks like creating a strong brand is important not only for reaching and retaining your customers, it can also achieve premium valuations.

So, how are premium domain names strategic assets?

200% repeat customer rate, increased direct traffic, lower marketing expenses – just to name a few immediate results entrepreneurs share after securing the best name for their brands.

"Approximately 91% of all traffic to AirBnB came organically through direct or unpaid channels, reflecting the strength of our brand." (AIRBNB IPO PROSPECTUS)

A premium domain is an asset you can liquidate, should the business fail or change direction

Escrow.com made a comparison of returns across asset classes, including stocks, bonds and real estate. They concluded that, unlike other investment instruments such as bitcoin, stocks and bonds, the vast majority of domain name returns over the past 17 years have been positive.

"…unlike other investment instruments such as bitcoin, stocks and bonds, the vast majority of domain name returns over the past 17 years has been positive." (ESCROW.COM DOMAIN INVESTMENT INDEX REPORT)

Premium domains give you unmatched competitive advantage

As per definition, « Brand equity is the value premium that a company generates from a product with a recognizable name when compared to a generic equivalent ». How long does it take a brand to make a name recognizable? How much does it cost over the years? A premium name can significantly accelerate that process and directly increase profit margin per customer, allowing brands to charge more for a product than their competitors for similar products.

There is no doubt that sourcing and securing a premium domain name for your brand is neither a small nor an easy task. It is also a fact that for many entrepreneurs, getting such a name on a startup budget can seem impossible. That said, the upsides of building a strong, independent brand on your name make it well worth the investment in the long run.

The right domain name is an important consideration when it comes to building and protecting your brand. If you’re ready to take the next step and invest in a perfect domain name for your business, contact us to learn more about our available options and how we can help you get started.