Why a Company Paid $500k for a New Domain

As you have probably noticed lately, there are now hundreds of options for top level domain names (a TLD is what is right of the dot in your domain name).
While .com remains the dominant TLD, you can now choose from domain endings like .design, .blog and .guru.
A company just paid a record amount for a domain name ending in one of these new TLDs: VacaRent, LLC paid $500,300 for Vacation.Rentals, just topping the old record of $500,000 paid for Home.Loans.
Why so much money? I recently interviewed VacaRent founder Mike Kugler to get the scoop. He said he believes this new TLD gives him instant credibility and will help with search engine optimization.

Good Domains Add Credibility

Kugler is creating a directory to connect vacation homeowners with renters. This is a business dominated by two very large companies: Airbnb and HomeAway (now part of Expedia).
Taking on these companies is no small feat. Kugler believes that owning the “exact match” term for the vacation rental business will give him instant credibility in the marketplace.
Up until now, most people have argued that a good .com domain names is required to get credibility from a domain name. Kugler won’t argue against VacationRentals.com being the big domain for this business. Indeed, HomeAway bought a business that used VacationRentals.com for $35 million. HomeAway’s CEO said much of that was for the domain name and to keep it out of the hands of competitors.
Does a new TLD like Vacation.rentals also convey credibility? Perhaps, and it should at least carry more credibility than “VacationRentals” ending with some non-.com domain. It certainly lends more credibility than something like DavesVacationRentalsOnline.com!

Search Engine Optimization

Kugler also thinks the domain name will give him a leg up with search engine optimization.
This wades into a hotly debated area. Google has repeatedly said that your choice of domain name will not impact your search rankings. Some people have tried to study if new TLDs can give you a leg up if the domain name matches a search term. Most of the studies have been small or relied on anecdotal evidence.
Here’s a relevant piece of anecdotal evidence: Vacation.rentals has barely launched and it’s already ranked on the first page of Google for the competitive term “vacation rentals”.
There could be a lot of reasons for this. It doesn’t hurt that the site has received lots of press and links thanks to its record-setting domain price.
Is Google perhaps giving some credit to the domain for being an “exact match” of the search term? Google tends to ignore dots in domain names, so it could view this domain as simply being “Vacation Rentals”.
Also, if people link to the site as vacation.rentals, Google might read the anchor text as “vacation rentals”.
Using a non-.com domain certainly doesn’t hurt search engine optimization. The question is if it helps, and that question is still open to debate.
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