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This Article Appeared in PC Computing Magazine, April 2000. Introduction
| Squat and Gobble | The Price is
Right The
Name Game |
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Spending millions on a domain name? Are these people crazy? Here's what they know that you don't. The numbers are mind-boggling: Business.com sold for $7.5 million, AltaVista.com reportedly sold for $3.3 million. Neither of these million-dollar transactions will net the buyers a top-notch company, a staff of superefficient employees, or even a fleet of trucks. Instead, the buyers are acquiring something far more precious in today's dot-com economy: a name. Domain names, the simple combination of a word with an extension like .com or .net, serve as both the address and the identity of a Web company. It's location, location, location, and killer brand rolled into one. That's why a good domain name can be all your business needs to make it big in cyberspace. And that's why the market for domain names has exploded, with companies regularly spending millions to acquire the right name. And the competition is only going to get more intense. There are more than 13 million registered domain names, with more than 270,500 added each week, according to the Internet Corporation for Assigned Names and Numbers, or ICANN, the nonprofit organization that oversees the Web address system. The domain name market will be worth more than $2 billion by 2003, according to the San Francisco investment bank Chase Hambrecht & Quist. And in the business-to-business electronic commerce arena, the growth potential is more like $2 trillion, say analysts at Goldman Sachs. With this kind of money on the table, it's no surprise that a whole new class of Web entrepreneur has sprung up around the buying, reselling, auctioning—and sometimes ransoming—of Web addresses. If you're a fledgling Web business, it's possible to get and keep the perfect domain name, but you need to know the rules of the name game. Here's what it takes to come out on top. |
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How quick thinking can turn $35 into millions. A popular way to profit from Web domains is by cybersquatting: the practice of registering dozens, even hundreds, of popular, sometimes trademarked, names with the goal of selling them for big money. Some cybersquatters register popular company names not to sell them, but to garner guaranteed traffic for their own sites. Whitehouse.com, for example, is a bawdy repository of adult material that deceptively lures hordes of surfers looking for information about 1600 Pennsylvania Ave (www.whitehouse.gov). Cybersquatters can then use these huge traffic numbers to command high advertising rates. As shady as this practice may seem, it's one of the easiest rackets to enter. A cybersquatter need only visit an Internet registrar site like Network Solutions (www.networksolutions.com) or Register.com and pick a name that's not already taken. The return on a $35 investment can range from hundreds to thousands—and sometimes even millions—of dollars, depending on the buyer. A trio of cybersquatters made headlines last year when they tried to sell barrydiller.com for $10 million. (Rather than pay, USA Networks CEO Barry Diller took them to court and won.) The recent passage of the U.S. Anti cybersquatting Consumer Protection Act, which makes it easier for businesses to sue pirates holding domain names for ransom, should be somewhat of a deterrent. The publishers of Teen magazine, for example, filed a lawsuit against pornographers who were using Teenmagazine.com as a lewd site filled with titillating photos. And the New York Yankees baseball team is filing a law suit against a fan who registered newyorkyankees.com in 1997. But neither of these cases had made it to court by press time, and another high-profile case involving Quokka.com and americascup.com was settled out of court. So the effectiveness of the new law remains an open question. And many critics are claiming that the law's wording is too broad, and it will be struck down as unconstitutional. Even if the law is upheld, small companies or individuals who don't have the money to wage a lengthy court battle would have a harder time proving they have rights to their name. Owning a Web address isn't the same as owning a trademark, which serves as legal evidence of ownership and gives you the right to invoke the jurisdiction of federal courts when necessary. The best way to protect yourself is to do a name patent search at the same time you try to register a domain name. If the name is available, file an application to register it as a mark. Trademarking a name costs about $325, and you can conduct trademark searches either through the U.S. Patent & Trademark Office database (www.uspto.gov) or through a company like MicroPatent (www.micropat.com). Meanwhile, if you think someone has illegally registered your company's name and you want to file a cybersquatting claim, a good place to start is ICANN's Uniform Domain Name Dispute Resolution Policy page (www.icann.org/udrp/udrp.htm). |
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The difference between success and failure is sometimes a single word. The difference between success and failure is sometimes a single word. Keep in mind, though, that there's a big difference between registering a trademarked name in bad faith (as cybersquatters do) and owning a generic name like wine.com or jeans.com. There needs to be a clear distinction between a prospector (someone who snaps up generic domain names) and an extortionist (someone who intentionally registers trademarked names), says Jon Whelan, co-CEO of Afternic, a domain name auction site. And if somebody already owns the domain name that's integral to your Web business, prepare to pay a lot to get it. Consider Compaq, owner of the AltaVista search engine—it paid $3.3 million two years ago to buy Alta Vista.com. Or eCompanies, which paid $7.5 million for Business.com last year. Were these companies insane? Well, was Monster.com nuts to spend more than $3 million for two 30-second commercials in the past two Super Bowls? Think about what it costs in advertising and marketing to build a well-known Web business. Most experts agree that it takes at least $50 million to become a breakthrough brand name on the Web. "A good domain is 75 percent of your branding," says DomainRace.com's Ron Perelman. If you're an up-and-coming Tommy Hilfiger, owning jeans.com can save you millions in advertising. It's simple and easy to remember. With a memorable URL, "you become one of the top players in your business," says Perelman. "The main factor is how much you save on advertising by owning a great name." Afternic's Whelan echoes this thought: "Ten years from now, we'll say Business.com got a great deal." Still, million-dollar names are rare. More typically, it can cost between a few hundred dollars for a name like 24hourtutors.com (available for $500) to tens of thousands of dollars for a catchy name like winecellar.com (asking price of $100,000). And because only a certain number of one-word generic domain names are available, a good alternative is to register clever slogans such as Burger King's haveityourway.com or catchphrases like greatbody.com. |
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Still haven't staked your claim on the Web? If you don't have a domain name yet, you'll have to be creative. Here's how to get started: 1. Search the possibilities: Visit a name registry service. While most dealers offer a way to search the .com, .net, and .org extensions, Register.com lets you sift through 29 different top-level domains, including New Zealand's .nz and the island of Tonga's .to, at no cost. 2. Choose your extension: The de facto standard—.com—isn't the only choice. Use other available extensions to your advantage. For example, if you're a doctor you can use .md (which belongs to Moldova but is also used by medical professionals through an agreement with a U.S. name registry service). Click on the radio button beside an extension and type the name you'd like in the search field. Because .md is a country code domain, you'll be limited to 22 characters, not including the extension. For U.S.-based extensions like .net, you can have as many as 63 characters. 3. Lock it in: Once you've found the name you want, secure it. For a fee, you can do this at Register.com, Network Solutions (www.networksolutions.com), or at one of numerous other registration sites. |
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Don't let a typo cost you valuable customers. Even if you have secured the domain name of your dreams, you need to look for name-changers. These high-tech flimflammers steal your Web customers by registering purposely misspelled variations of your domain name. Often a direct competitor will own these domain names. Fast-surfing Web customers make typos and end up at sites like amazom.com, for instance, which is owned by an independent bookseller and not the online superstore. Register.com's Richard Forman suggests registering the variants yourself if you want to protect your company: "It's a pretty small cost, just $35 a year per name to protect yourself from possibly having to fight to get it back." Perelman advises locking up the two most common variants of your name. "There could be thousands of misspellings; it's too hard to grab every one," he says. In theory, the recent cybersquatting law should make registering variations of a trademarked name illegal. In January, ICANN rescinded as many as 800 registered domain names ending with a hyphen (such as microsoft-.com). But this was done to uphold ICANN's long-standing policy prohibiting any character other than a numeral or letter at the beginning or end of a domain name, not as a means to combat variations. On certain occasions a variation of your domain name isn't a devious ploy, but a legitimate site. Web retailer eToys.com got into a nasty battle when it convinced the courts to temporarily shut down etoy.com, a site run by a European art group that had registered the address in 1994. After the toy store found itself the subject of bad press and an angry customer boycott over its strong-arm tactics, it backed off. Many experts also advise you to register country-specific domain names such as hydroponics.fr (France) or heliotrope.mx (Mexico). That way, you can protect your brand name in other countries, and you'll be ready if you decide to expand your business internationally. There are more than 191 country-code domain names available, each with its own set of regulations (some are restricted to residents). Network Solutions (www.networksolutions.com/catalog/idnames) offers country-code packages starting at $500. |
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Make a bid for the domain name of your dreams. Until last spring, the only place to register a Web address ending in the familiar .com, .org, .edu, .net, or .gov was Network Solutions. Last year's deregulation of the registration process, however, gave rise to a different kind of domain name entrepreneur, the URL broker. Already, the market is crowded with some 70 URL brokers like Domains.com, DomainRace.com, and Great Domains.com. At these sites people can auction off the tantalizing URLs they own to the highest bidder. In return, the URL broker collects a commission that can be as much as 15 percent of the sale price. URL brokers also let you register unclaimed domain names through them. You'll pay more than you would by registering a domain directly at Network Solutions, but often the broker will also host the Web site for you. A trading post for names—DomainRace.com, for example—lets people scan and make offers on thousands of names like airline.com (name your price) or designerclothes.com (bidding is now at $500,000). For the best protection though, an ICANN spokeswoman suggests buying a domain name from an accredited registrar so you have a contract and the protections that go with it. "If you purchase a name through a third party, there aren't the same legal protections," she says. That's why Afternic is trying to bring security and legitimacy to the URL broker market. Besides providing a domain name auction site, Afternic considers itself a community for Web address owners. Unlike eBay, where there's no context to know whether names up for auction are worth the price (and where hoax bids abound, like the $10 million offer for Year2000.com), Afternic allows bidders to discuss whether a name is worth the price. Visitors can comment on the value of domain names on the site's Appraisal Boards, and there's a wealth of news, research, trends, and analysis available on the industry. "People don't know what the value of a domain name is," says Whelan. "When someone is going to auction a name, they want to have a range of what it may be worth." |
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How much is too much? That
depends on whom you ask. While many of the hottest name purchases are
kept quiet, here are some of the most notable. Business.com—$7.5
million Internet incubator eCompanies' purchase for its business-to-business
site upped the ante for domain brokering. AltaVista.com—$3.3
million Compaq already owned this search engine, but it had to pay dearly
for the rights to the name. Express.com—$2
million DVD Express is banking heavily on this domain to lure browsers
to its online entertainment store. WallStreet.com—$1
million Now a high-profile provider of stock market data, this online
business got a huge jump start with this name. Forsalebyowner.com—$835,000
Online classifieds are a booming business. Drugs.com—$823,456 This seems like a lot to pay for a site that only offers links to online pharmacies. Question.com—$175,000
This e-business startup is being coy about what's to come. Fruits.com—$160,000 Del Monte reminds consumers of its primary business with this simple moniker. Phonecalls.com—$120,000 A bargain for a generic domain in the ever-booming telecom market. HappyBirthday.com—$55,000 Niche names draw lower bids. This startup promises to provide a one-stop shop. |
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Soon dot-com may not be the only dot in town. Instead of taking out a second mortgage on your business so you can buy pokemondealer.com from a URL broker, you might want to hold out for pokemondealer.biz or perhaps pokemondealer.store. ICANN is in the process of deciding whether to roll out six to 10 new global top-level domains for profit and nonprofit businesses over the next few years. As it is, nearly every common name found in the English dictionary is already taken. If it's not already being actively used or parked, it's being sold for a premium. A new batch of domain extensions would open the field for businesses and consumers who have been shut out of the .com Web land grab. Based on negotiations among ICANN members, there ultimately could be many more extensions. No final decisions have been made—ICANN is expected to debate the issue at its next international conference in Cairo, Egypt—but new extensions under consideration include .biz, .firm, .shop, and .airlines. No matter how many extensions are added, experts say .com will remain the gold standard for Web business. People have spent billions promoting .com as the de facto Web address, and it's the default choice in most browsers. Still, new extensions would be a welcome relief for latecomers. It would probably be at least a year before the next extensions take effect, but be ready to register or reregister your name and protect your online turf. "It won't devalue the .com, but it will create niche opportunities that will have gigantic value in their own right," says Register.com's Forman. So prepare to spend a lot for the hottest new names. And expect the same opportunists, from cybersquatters to URL brokers, to get in on the action. The name game is only beginning. Jane Weaver is a reporter at MSNBC. Robert Strohmeyer contributed to this report. |