Why would a company pay over $1 million for a domain name?
Chances are you paid about $10 for your website’s domain name. Perhaps you paid a bit more for something other than a .COM domain. But can you imagine paying over $1 million for a domain? A handful of companies have paid this much to land the ideal domain name for their business.
Just this year, deals were finalized (or made public) for Christmas.com at $3.5 million, Hippo.com for $3.3 million, and Marketing.com for $2.5 million.
These are staggering amounts of money for domains that renew for about ten bucks a year. But each of the buyers believes it was worth the added expense. Let’s take a look at why these companies saw value in purchasing a premium domain.
The value of great domains
You’ve probably heard “all the good domain names are taken.” While many people will disagree about the definition of “good,” it’s fair to say that all of the good one-word .COM domain names are registered. So if you want to acquire one of these domains you’re going to need to buy it from someone, and they’re likely going to ask for a lot of money.
One-word domain names bring a lot of benefits.
A big benefit is the instant credibility that a short, valuable, one-word domain name gives to a business. Would you feel more comfortable buying Christmas goods at Christmas.com or JimmysChristmasShopOnline.com?
This is even more important for certain categories of goods and services, such as finance. Hippo is a home insurance company with a funny name. But using a short, one-word domain name gives customers confidence that it’s a serious company. (Especially if they learn how much the company paid for the domain!)
Another benefit is that good domain names are easier to remember. This helps with word-of-mouth referrals. Consumers who hear about a company are more likely to remember the domain later when they are in front of their computer or mobile phone. And many of them will default to typing .COM at the end, so it’s usually a better choice than a less expensive domain ending in a different extension.
Speaking of mobile phones, great domains are usually short and easier to type. As the world goes mobile, shorter domains are better. This might be part of the reason that TransferWise decided to rebrand as Wise and acquire Wise.com for $2 million.
Why now?
These days it seems like people are paying more than ever for good domain names. There are many possible reasons for this.
First, venture capital money is flowing. Companies with a good idea and a strong founding team are raising lots of money fast.
While we don’t know exactly how much Cart.com paid for its domain, we know that it has raised over $100 million in funding. Forge Global raised more than that before acquiring Forge.com. And Class bought Class.com before announcing its $105 million funding round.
Spending 1% or so of a funding round on a great domain name doesn’t seem like too much.
Another thing that might be driving the market is special purpose acquisition companies (SPACs). These entities are helping companies go public easier than a typical IPO, so many more businesses are doing so. More companies becoming public also makes us aware of how much they’re spending on domains because they report outsized purchases in their SEC filings. For example, this year we learned that mortgage company Better.com paid $1.82 million in 2015 for its namesake domain.
Finally, there’s a lot of cash in consumers’ wallets right now. They’re getting rich on cryptocurrency gains, non-fungible tokens (NFTs), and the stock market. People have become millionaires almost overnight (literally, within weeks or months) and are willing to put some of that money into domain names.
Million-dollar domains are here to stay
It’s not clear what will happen with venture capital funding over the next five years. Nor can we predict the price of bitcoin in 2025. But the value of easy-to-remember domain names is unlikely to change anytime soon. So you can expect to read more headlines about eye-popping domain name sales in the future.
If you’re looking to purchase a new domain name (perhaps not in the millions of dollars), you can’t go wrong with Namecheap. Check out our domain marketplace today.
