Should a Startup Buy a Great Domain Name Worth $500,000?

$500,000 is a big amount of money, and it could be one-half your available capital.  The fact that you have this question in mind implies a certain amount of inexperience, and failure is reasonably possible if your main concern is on where to spend money.

An experience with two domain transactions which were both distressing but reasonable emphasized that 6-figure domain transactions are generally worth it. On the low-end, there is a possibility of pulling off an alternate method of customer acquisition for a practical cost, if extinguished over a couple of years. On the other hand, this has to be compared against other customer acquisition strategies, and the amount needed for hiring people who has the potential of adding other value to the startup.

While individual cases warrant further consideration, in many instances paying anything above $5,000 to $50,000 in cash or $25,000 to $250,000 in deferred equity presumably wastes a great deal of time and money.

Some evaluation criteria to be considered for this question:

1) What is the realistic assessment of type-in domain traffic for the domain in question? That pertains to how many people would naturally type in the keywords associated to your domain. Secondly, what is the differential cost for a short and memorable domain versus one that clearly isn’t.

2) What would be the equivalent amount of users/traffic cost in paid marketing if you aren’t able to get it for “free,” how often will users return to your site by remembering the name versus not, and what is that retention worth?

3) How much capital do you have on hand? What does it mean for the remaining capital if you splurge it on this one specific source? Also, are you buying the domain in cash or equity, and whether it is immediate or deferred?

4) What period of time is the domain transaction being amortized over? How much incremental traffic / users would you possibly get by owning the domain versus buying users versus working on other features / campaigns to accomplish the same things?

Allotting your startup capital wisely can help you reap the benefits in no time. Planning where to spend your money right – such as investing on a great domain name is absolutely not a waster.

For more information regarding the Online Alliance Click Here


About The Author

the Online Alliance

the Online Alliance is here to inspire growth and challenge the status quo by creating member resources, tools and training that is meaningful, evergreen, affordable and effective, that is designed to support Independent business owners to achieve their higher goals.

1 Comment

    Leave A Response