There may be a couple exceptions which prove the rule, but new TLDs are generally an awful investment for everyone except the registry operator.
Here is the short version...
Imagine registering a domain for $10, building a business on it, and then learning the renewal fee will increase to hundreds of $ a year.— Elliot Silver (@DInvesting) March 7, 2017
And the long version...
Diminishing Returns
About a half-decade ago I wrote about how Google devalued domain names from an SEO perspective & there have been a number of leading "category killer" domains which have repeatedly been recycled from startup to acquisition to shut down to PPC park page to buy now for this once in a lifetime opportunityin an endless water cycle.
The central web platforms are becoming ad heavy, which in turn decreases the reach of anything which is not an advertisement. For the most valuable concepts / markets / keywords ads eat up the entire interface for the first screen full of results. Key markets like hotels might get a second round of vertical ads to further displace the concept of organic results.
It isn't just gTLD's that are stalled. ALL extensions are stalling. The demand by END USERS in 2017 is not what it was years ago. #Domains
The tech monopolies can only make so much money by stuffing ads onto their own platform. To keep increasing their take they need to increase the types, varieties & formats of media they host and control & keep the attention on their platform.
Both Google & Facebook are promoting scams where they feed on desperate publishers & suck a copy of the publisher's content into being hosted by the tech monopoly platform de jour & sprinkle a share of the revenues back to the content sources.
They may even pay a bit upfront for new content formats, but then after the market is primed the deal shifts to where (once again) almost nobody other than the tech monopoly platform wins.
The attempt to "own" the web & never let users go is so extreme both companies will make up bogus statistics to promote their proprietary / fake open / actually closed standards.
But the flip side of those fake metrics is actual revenues do not flow.
My own experience with amp is greatly reduced ad revenue. @Topheratl admits that weather dot com may be an anomaly in having higher ad $.— Marie Haynes (@Marie_Haynes) February 22, 2017
Facebook has the same sort of issues, with frequently needing to restate various metrics while partners fly blind.
Have you tried Angry Birds lately? It’s a swamp of dark patterns. All extractive logic meant to trick you into another in-app payment. It’s the perfect example of what happens when product managers have to squeeze ever-more-growth out of ever-less-fertile lands to hit their targets year after year. ... back to the incentives. It’s not just those infused by venture capital timelines and return requirements, but also the likes of tax incentives favoring capital gains over income. ... that’s the truly insidious part of the tech lords solution to everything. This fantasy that they will be greeted as liberators. When the new boss is really a lot like the old boss, except the big stick is replaced with the big algorithm. Depersonalizing all punishment but doling it out just the same. ... this new world order is being driven by a tiny cabal of monopolies. So commercial dissent is near impossible. ... competition is for the little people. Pitting one individual contractor against another in a race to the bottom. Hoarding all the bargaining power at the top. Disparaging any attempts against those at the bottom to organize with unions or otherwise.
To be a success on the attention platforms you have to push toward the edges. But as you become successful you become a target.
And the dehumanized "algorithm" is not above politics & public relations.
Pewdiepie is the biggest success story on the YouTube platform. When he made a video showing some of the absurd aspects of Fiverr it led to a WSJ investigation which "uncovered" a pattern of anti-semitism. And yet one of the reporters who worked on that story wrote far more offensive and anti-semetic tweets. The hypocrisy of the hit job didn't matter. They still were able to go after Pewdiepie's ad relationships to cut him off from Disney's Maker Studios & the premium tier of YouTube ads.
The fact that he is an individual with broad reach means he'll still be fine economically, but many other publishers would quickly end up in a death spiral from the above sequence.
If it can happen to a leading player in a closed ecosystem then the risk to smaller players is even greater.
In some emerging markets Facebook effectively *is* the Internet.
The Decline of Exact Match Domains
Domains have been so devalued (from an SEO perspective) that some names like PaydayLoans.net sell for about $3,000 at auction.
$3,000 can sound like a lot to someone with no money, but names like that were going for 6 figures at their peak.
Professional domain sellers participate in the domain auctions on sites like NameJet & SnapNames. Big keywords like [payday loans] in core trusted extensions are not missed. So if the 98% decline in price were an anomaly, at least one of them would have bid more in that auction.
Why did exact match domains fall so hard? In part because Google shifted from scoring the web based on links to considering things like brand awareness in rankings. And it is very hard to run a large brand-oriented ad campaign promoting a generically descriptive domain name. Sure there are a few exceptions like Cars.com & Hotels.com, but if you watch much TV you'll see a lot more ads associated with businesses that are not built on generically descriptive domain names.
Not all domains have fallen quite that hard in price, but the more into the tail you go the less the domain acts as a memorable differentiator. If the barrier to entry increases, then the justification for spending a lot on a domain name as part of a go to market strategy makes less sense.
Brandable Names Also Lost Value
Arguably EMDs have lost more value than brandable domain names, but even brandable names have sharply slid.
If you go back a decade or two tech startups would secure their name (say Snap.com or Monster.com or such) & then try to build a business on it.
But in the current marketplace with there being many paths to market, some startups don't even have a domain name at launch, but begin as iPhone or Android apps.
Now people try to create success on a good enough, but cheap domain name & then as success comes they buy a better domain name.
As long as domain redirects work, there's no reason to spend heavily on a domain name for a highly speculative new project.
Rather than spending 6 figures on a domain name & then seeing if there is market fit, it is far more common to launch a site on something like getapp.com, joinapp.com, app.io, app.co, businessnameapp.com, etc.
This in turn means that rather than 10,000s of startups all chasing their core .com domain name off the start, people test whatever is good enough & priced close to $10. Then only after they are successful do they try to upgrade to better, more memorable & far more expensive domain names.
Money isn't spent on the domain names until the project has already shown market fit.
One in a thousand startups spending $1 million is less than one in three startups spending $100,000.
New TLDs Undifferentiated, Risky & Overpriced
No Actual Marketing Being Done
Some of the companies which are registries for new TLDs talk up investing in marketing & differentiation for the new TLDs, but very few of them are doing much on the marketing front.
You may see their banner ads on domainer blogs & they may even pay for placement with some of the registries, but there isn't much going on in terms of cultivating a stable ecosystem.
When Google or Facebook try to enter & dominate a new vertical, the end destination may be extractive rent seeking by a monopoly BUT off the start they are at least willing to shoulder some of the risk & cost upfront to try to build awareness.
Where are the domain registries who have built successful new businesses on some of their new TLDs? Where are the subsidies offered to key talent to help drive awareness & promote the new strings?
As far as I know, none of that stuff exists.
In fact, what is prevalent is the exact opposite.
Greed-Based Anti-Marketing
So many of them are short sighted greed-based plays that they do the exact opposite of building an ecosystem ... they hold back any domain which potentially might not be complete garbage so they can juice it for a premium ask price in the 10s of thousands of dollars.
While searching on GoDaddy Auctions for a client project I have seen new TLDs like .link listed for sale for MORE THAN the asking price of similar .org names.
If those prices had any sort of legitimate foundation then the person asking $30,000 for a .link would have bulk bought all the equivalent .net and .org names which are listed for cheaper prices.
But the prices are based on fantasy & almost nobody is dumb enough to pay those sorts of prices.
Anyone dumb enough to pay that would be better off buying their own registry rather than a single name.
The holding back of names is the exact opposite of savvy marketing investment. It means there's no reason to use the new TLD if you either have to pay through the nose or use a really crappy name nobody will remember.
I didn’t buy more than 15 of Uniregistry’s domains because all names were reserved in the first place and I didn’t feel like buying 2nd tier domains ... Domainers were angry when the first 2 Uniregistry’s New gTLDs (.sexy and .tattoo) came out and all remotely good names were reserved despite Frank saying that Uniregistry would not reserve any domains.
Who defeats the race to the bottom aspects of the web by starting off from a "we only sell shit" standpoint?
Nobody.
And that's why these new TLDs are a zero.
Defaults Have Value
Many online verticals are driven by winner take most monopoly economics. There's a clear dominant leader in each of these core markets: social, search, short-form video, long-form video, e-commerce, auctions, real estate, job search, classifieds, etc. Some other core markets have consolidated down to 3 or 4 core players who among them own about 50 different brands that attack different parts of the market.
Almost all the category leading businesses which dominate aggregate usage are on .com domains.
Contrast the lack of marketing for new TLDs with all the marketing one sees for the .com domain name.
Local country code domain names & .com are not going anywhere. And both .org and .net are widely used & unlikely to face extreme price increases.
Hosing The Masses...
A decade ago domainers were frustrated Verisign increased the price of .com domains in ~ 5% increments:
Every mom, every pop, every company that holds a domain name had no say in the matter. ICANN basically said to Verisign: "We agree to let you hose the masses if you stop suing us".
I don't necessarily mind paying more for domains so much as I mind the money going to a monopolistic regulator which has historically had little regard for the registrants/registrars it should be serving
Those 5% or 10% shifts were considered "hosing the masses."
Imagine what sort of blowback PIR would get from influential charities if they tried to increase the price of .org domains 30-fold overnight. It would be such a public relations disaster it would never be considered.
Domain registries are not particularly expensive to run. A person who has a number of them can run each of them for less than the cost of a full time employee - say $25,000 to $50,00 per year.
And yet, the very people who complained about Verisign's benign price increases, monopolistic abuses & rent extraction are now pushing massive price hikes:
.Hosting and .juegos are going up from about $10-$20 retail to about $300. Other domains will also see price increases.
...
Here's the thing with new TLD pricing: registry operators can increase prices as much as they want with just six months' notice.
...
in its applications, Uniregistry said it planned to enter into a contractual agreement to not increase its prices for five years.
Why would anyone want to build a commercial enterprise (or anything they care about) on such a shoddy foundation?
If a person promises...
no hold backs of premium domains, then reserves 10s of thousands of domains
no price hikes for 5 years, then hikes prices
the eventual price hikes being inline with inflation, then hikes prices 3,000%
That's 3 strikes and the batter is out.
Doing the Math
The claim the new TLDs need more revenues to exist are untrue. Running an extension costs maybe $50,000 per year. If a registry operator wanted to build a vibrant & stable ecosystem the first step would be dumping the concept of premium domains to encourage wide usage & adoption.
There are hundreds of these new TLD extensions and almost none of them can be trusted to be a wise investment when compared against similar names in established extensions like .com, .net, .org & CCTLDs like .co.uk or .fr.
There's no renewal price protection & there's no need, especially as secondary market prices on the core TLDs have sharply come down.
Domain Pricing Trends
Aggregate stats are somewhat hard to come by as many deals are not reported publicly & many sites which aggregate sales data also list minimum prices.
However domains have lost value for many reasons
declining SEO-related value due to the search results becoming over-run with ads (Google keeps increasing their ad clicks 20% to 30% year over year)
broad market consolidation in key markets like travel, ecommerce, search & social
Google & Facebook are eating OVER 100% of online advertising growth - the rest of industry is shrinking in aggregate
are there any major news sites which haven't struggled to monetize mobile?
there is a reason there are few great indy blogs compared to a decade ago
rising technical costs in implementing independent websites (responsive design, HTTPS, AMP, etc.) "Closed platforms increase the chunk size of competition & increase the cost of market entry, so people who have good ideas, it is a lot more expensive for their productivity to be monetized. They also don't like standardization ... it looks like rent seeking behaviors on top of friction" - Gabe Newell
harder to break into markets with brand-biased relevancy algorithms (increased chunk size of competition)
less value in trying to build a brand on a generic name, which struggles to rank in a landscape of brand-biased algorithms (inability to differentiate while being generically descriptive)
decline in PPC park page ad revenues
for many years Yahoo! hid the deterioration in their core business by relying heavily on partners for ad click volumes, but after they switched to leveraging Bing search, Microsoft was far more interested with click quality vs click quantity
absent the competitive bid from Yahoo!, Google drastically reduced partner payouts
most web browsers have replaced web address bars with dual function search boxes, drastically reducing direct navigation traffic
All the above are the mechanics of "why" prices have been dropping, but it is also worth noting many of the leading portfolios have been sold.
If the domain aftermarket is as vibrant as some people claim, there's no way the Marchex portfolio of 200,000+ domains would have sold for only $28.1 million a couple years ago.
RegistrarStats shows .com registrations have stopped growing & other extensions like .net, .org, .biz & .info are now shrinking.
Both aftermarket domain prices & the pool of registered domains on established gTLDs are dropping.
I know I've dropped hundreds & hundreds of domains over the past year. That might be due to my cynical views of the market, but I did hold many names for a decade or more.
As barrier to entry increases, many of the legacy domains which could have one day been worth developing have lost much of their value.
And the picked over new TLDs are an even worse investment due to the near infinite downside potential of price hikes, registries outright folding, etc.
Most of the registration graphs for new TLDs are far uglier than the one posted above. China will not save the new gTLDs.
Into this face of declining value there is a rush of oversupply WITH irrational above-market pricing. And then the registries which spend next to nothing on marketing can't understand why their great new namespaces went nowhere.
As much as I cringe at .biz & .info, I'd prefer either of them over just about any new TLD.
Any baggage they may carry is less than the risk of going with an unproven new extension without any protections whatsoever.
Uniregistry does not believe that registry fees should rise when the costs of other technology services have uniformly trended downward, simply because a registry operator believes it can extract higher profit from its base of registrants.
How does one justify a 3000% price hike after stating "Our prices are fixed and only indexed to inflation after 5 years."
Are they pricing these names in Zimbabwe Dollars? Or did they just change their minds in a way that hurt anyone who trusted them & invested in their ecosystem?
Frank Schilling warned about the dangers of lifting price controls
The combination of "presumptive renewal" and the "lifting of price controls on registry services" is incredibly dangerous.
Imagine buying a home, taking on a large mortgage, remodeling, moving in, only to be informed 6 months later that your property taxes will go up 10,000% with no better services offered by local government. The government doesn't care if you can't pay your tax/mortgage because they don't really want you to pay your tax… they want you to abandon your home so they can take your property and resell it to a higher payer for more money, pocketing the difference themselves, leaving you with nothing.
This agreement as written leaves the door open to exactly that type of scenario
It would be the mother of all Internet tragedies and a crippling blow to ICANN’s relevance if millions of pioneering registrants were taxed out of their internet homes as a result of the greed of one registry and the benign neglect, apathy or tacit support of its master.
It is a highly nuanced position.
Imagine registering a domain for $10, building a business on it, and then learning the renewal fee will increase to hundreds of $ a year.— Elliot Silver (@DInvesting) March 7, 2017
Update 2: Many new TLDs exist primarily to arbitrage existing brands & monetized defensive trademarks. With that in mind, trademark holders have been more aggressive with trying to push trademark protections on the new TLDs even for nebulous misspellings. The EFF has recommended avoiding new gTLDs.
you'll want to think twice about registering in any of the newer global top-level domains (gTLDs), which provide brand owners access to a privately-run Trademark Clearinghouse that gives them veto powers that go far beyond those they would receive under the trademark law of the United States or those of most other countries.
When markets are new they are unproven, thus they often have limited investment targeting them.
That in turn means it can be easy to win in new markets just by virtue of existing.
It wouldn't be hard to rank well creating a blog today about the evolution of the 3D printing industry, or a how to site focused on Arduino or Raspberry Pi devices.
Couple a bit of passion with significant effort & limited competition and winning is quite easy.
Likewise in a small niche geographic market one can easily win with a generic, because the location acts as a market filter which limits competition.
But as markets age and become more proven, capital rushes in, which pushes out most of the generic unbranded players.
Back in 2011 I wrote about how Google had effectively killed the concept of category killer domains through the combination of ad displacement, vertical search & the algorithmic ranking shift moving away from relevancy toward awareness. 2 months before I wrote that post Walgreen Co. acquired Drugstore.com for about $429 million. At the time Drugstore.com was one of the top 10 biggest ecommerce pure plays.
The company is still trying to fine tune its e-commerce strategy but clearly wants to focus more of its resources on one main site. “They want to make sure they can invest more of the equity in Walgreens.com,” said Brian Owens, a director at the consultancy Kantar Retail. “Drugstore.com and Beauty.com are distractions.”
Big brands can sometimes get coverage of "meh" content by virtue of being associated with a big brand, but when they buy out pure-play secondary e-commerce sites those often fail to gain traction and get shuttered:
Other retailers have picked up pure-play e-commerce sites, only to shut them down shortly thereafter. Target Corp. last year shuttered ChefsCatalog.com and Cooking.com, less than three years after buying them.
The lack of publishing savvy among most large retailers mean there will be a water cycle of opportunity which keeps re-appearing, however as the web gets more saturated many of these opportunities are going to become increasingly niche options riding new market trends.
If you invest in zero-sum markets there needs to be some point of differentiation to drive switching. There might be opportunity for a cooking.com or a drugstore.com targeting emerging and frontier markets where brands are under-represented online (much like launching Drugstore.com in the US back in 1999), but it is unlikely pure-play ecommerce sites will be able to win in established markets if they use generically descriptive domains which make building brand awareness and perceived differentiation next to impossible.
Target not only shut down cooking.com, but they didn't even bother redirecting the domain name to an associated part of their website.
It is now listed for sale.
Many short & generic domain names are guaranteed to remain in a purgatory status.
The price point is typically far too high for a passionate hobbyist to buy them & attempt to turn them into something differentiated.
The names are too generic for a bigger company to do much with them as a secondary option
the search relevancy & social discovery algorithms are moving away from generic toward brand
retailers have to save their best ideas for their main branded site
the rise of cross-device tracking + ad retargeting further incentivize them to focus exclusively on a single bigger site
Dr. Pete shared examples of the marketing funnel, highlighting how we must overcome hurdles (or break through barriers to conversion) in order to make a sale.
Why People Buy Premium Domain Names
The idea of an exact match domain (EMD) is that you are buying a piece of land right next to the highway. You sink in a lot of money upfront, but hope that it backs out over time by lowering your traffic acquisition costs. For many years this model was both logical and profitable.
At the peak of the domain name bubble recently, the domain name Poker.org sold for a million Dollars.
A domain name is an asset just like a stack of cash, a piece of gold, or a CDO is. But rather than having a fixed universal value, it is only a *relative* store of value that can go up or down based on market conditions. (Many of these other "fixed" stores of value also change in value when measured against other value stores over time, but they typically change value somewhat slowly and due to the acts of the entire market. With domain names, Google can use their dominant search position to drive massive changes in value in a short period of time).
Search Engines Influence the Value of Domain Names
Search is the primary mode of online navigation. For years search has been replacing almost all other forms of online navigation as the new default. There are about 7 billion people in the world with about half of them online. Google likely gets about a search per person every day!
Search engines can decide what variables they want to count & how much. In a world where subjective marketing aspects (like branding) are replacing signals of relevancy the value of keyword domain names is greatly diminished.
If your model works out to where it takes 3 or 4 years to break even & recoup the initial investment, then that model may look quite different if Google manages to redirect 50% or 60% of that traffic stream at some point in time ... at some point the price of the domain has to adjust to the new market conditions.
An Example of the New Normal in Search
With the above in mind, I thought it would be worth highlighting how the domain bubble grew & ultimately popped.
First, lets start with a current search result. The below example is for "pool tables."
Note that brands get a number of options to play here: AdWords ads, AdWords product ads, Google Product Search, branded navigation, big brands in the organic search results, niche vertical brands, and any local results for nationwide chain brands with a local outlet. Go back a couple years and this search result would have mostly been dominated by smaller online retailers & niche hobbyist websites.
The below image is from 2008. Notice how small the AdWords ads are & how 7 of the 10 organic listings on page 1 have "pool tables" in the domain name.
Today most of those results are off onto page 2 or 3 or beyond, where few searchers dare to go. Now even the exact match domain is forced to buy AdWords to compete for it's own name. Without the AdWords ad, the exact match domain would require a searcher to skip over 45 other links before finding it somewhere below the fold.
Other keywords (like engagement rings) which once left room for review & comparison sites have been completely dominated by brands. Outside of end consumer reviews (and who but an expert publicly reviews more than 1 engagement ring? and who is not biased in their review of said rings with emotional attachments?) there is no way to get a comparative view of quality. There is no room for such an idea in Google's brand-only search results.
Update: Checking back in a few years later ... as of August of 2013 this post has only grown more true over time. In the following image, notice how the ads keep on scrolling, the size of the local result insert increased & now even the .com EMD "category killer" isn't even on page 1 of the search results any longer.
The algorithm is only going to keep adding more signals that boost brands. PoolTables.com might have better editorial content than a mega-retailer like Amazon.com, but it is hard for them to collect as many reviews as Amazon can.
Cutts confirmed what Google said when the +1 button launched: Google will use +1 activity to influence its search results.
“It’s definitely a signal we’re paying a lot of attention to,” Cutts said. “It has tons of potential. It looks very promising.”
Big brands can do giveaways to their core customer base to expand into new markets, allowing customers to pay for the discounts with a vote, stuffing the ballot box on these new "relevancy" signals.
For commercially viable keywords these have the net effect of pushing the organic search results further down the page. A recent study by Optify highlighted that while low CPC & tail keywords send most clicks (~89%) to the organic search results, for high CPC & head keywords AdWords ads consume most search clicks (~ 60%).
Google Comparison Ads
In certain high money verticals Google offers Google Comparison / Google Advisor ads, which allow them to place a 4th ad slot above the organic search results.
Notice how much larger some of these ads are than typical ad units. When Google targets your keyword with one of these ads they significantly change the dynamics of the market.
Product Ads
Google has offered graphical product ads automatically matched to the search results. Generally for bigger brands Google offers these on a risk-free cost per acquisition pricing, whereas smaller advertisers need to pay by the click to use this ad format.
Googler announced that searchers clicked on this ad format nearly twice as often as regular search ads & in some cases Google has even started testing including these ads in their ad space that appears above the organic search results.
Search clicks are a zero sum game, so the more risk-free clicks the big box brands get from this ad format the lest clicks there is to go around for everyone else.
Product Search Listings
These serve as more eye candy to distract searchers from the organic search results. Once again these typically feature listings from larger brands & Google doesn't mind if these are a bit off because they still push the eye away from the organic results and toward the AdWords ads.
Look how off those "necklaces" are. Evidently if you are not a sport's fan you have no business wearing necklaces ;)
Localization
Localization is a boon for small local businesses which can now gain a slice of the local traffic stream that they were priced out of the market on. However, as a domain buyer, the value of AutoInsurance.com drops significantly after the large metro areas have localized results which do not allow the cost of an expensive domain to be amortized by the potential to rank everywhere. What is worse, is that the largest cities are the ones with the most vibrant economic activities (more businesses, more residents, larger loan sizes, and so on). Through localization any generic unbranded nationwide player simply misses out on the most valuable traffic.
Verticalization & Double Dipping Ads
Much like how localization locks generic players out of local markets, Google's increased verticalization (and allowing certain brands to double or triple dip on ad serving) now means that some results have over 80% of the screen's real estate dominated by a single key player.
Search Box > Address Bar
When Google Chrome launched it replaced the address bar with a search box.
That allows Google to...
intercept & redirect type-in traffic demand
re-highlight content you have already seen in the past (likely to be from some larger brands, as they have larger ad budgets & more ways to be found)
recommend popular searched-for keywords (which are often brands, since awareness-based advertising creates search demand
When Internet Explorer 9 was launched Microsoft also adopted these features
Google Instant's search auto-completion directs users away from some keywords and toward others. At first that statement seems like it could be saying that it consolidates search volume to a smaller set of keywords & thus could make domain names more valuable. However, if you have ever looked at a list of the most popular keywords you would know that they are largely filled with branded keywords. The media was aware of this obvious shift & Amit Singhal had to do an interview stating that there was no brand bias to Google Instant.
Awareness-based advertising biases keyword recommendations, which is why Pontiac ran a TV commercial telling you to search Google for their brand. Of course when SEO consultants did similar things they got whacked. ;)
Extra White Space
In the most recent beta Google has tamed this down a bit from the absurdity they were first testing, but Google has shown an interest in using whitespace trickery to drive the organic search results further down the page.
The rise of mobile applications & mobile search devices further pull leverage away from publishers & toward ad networks.
What's worse, is through personalization they have an asymmetrical information advantage over publishers in their ad network. They can tell you that you are getting 68% of the value of an ad click, but how do you know if they don't undervalue the contribution of that click while overvaluing the contribution for clicks where they keep 100% of the income on?
Google Small Business Taxes
Some sites get the benefit of the doubt, whereas other sites just get doubt. I highlighted how Google's approach to link buying, AdWords penalties & other issues vary based on who is getting whacked in our recent post about Google small business taxes.
Too Small to Matter
Smaller sites are more likely to come under attack from "the algorithm" as they are easier to knock over & are generally less stable. That gives them a higher risk factor & makes it even harder to build reliable business processes around it. How do you scale employment (or even inventory) when one month you are up 50% and the next month you are arbitrarily off 60%?
Further, Google has consistently screwed up original source attribution, which makes it even harder to justify for a small business to go the extra mile & spend extra money creating premium content, if the result will be Google paying someone to steal that content & wrap it in AdSense ads.
Where Does this Lead Us?
If you buy a "category killer" it is critical that you rank #1, but in many niches the exact match domains that ranked #1 for nearly a decade are now #3 or #4 in the organic results. Add in 3 AdWords ads above the organic results & things like product ads and it isn't hard to end up below the fold. If your relationship to that 1 keyword is your core competitive strategy but you can't even promote the keyword (because you are below the fold) then the strategy is a failed one.
Further, as Google keeps adding more usage signals into the relevancy mix that will keep favoring brands.
This is not to say domain names are dead across the board. there is still plenty of opportunity in some areas, but equally some names require large investment & as an SEO strategy may get thrown under the bus by any of the above (or similar future moves in other market niches).
I Stopped Buying Domain Names
I believe I was one of the first SEOs to publicly highlight the benefits of exact match domain names. Back when Google engineers were dismissive of it some of the smart money was dismissive of what the engineers stated and made plenty of money from it. But I have prettymuch stopped buying domains at this point...as in most cases the valuations generally don't make sense on a risk adjusted basis in the current market (let alone what the market will look like after the introduction of +1 & other brand signals).
Deep Pocketed SEOs Are Selling Their Domain Names
The person who was likely the single SEO most responsible for running up the price of exact match domain names (he over-paid for some of them based on the presumption that the numbers would back out similarly to some of his earlier investments in a market that was dominated by a government-sponsored bubble) has now become a domain seller.
You don't get much more amoral capitalist opportunistic than this person is (see the following before and after for his payday loans effort)
In March Matt Cutts talked down exact match domain names, but the truth is that Google never really needed to discount them, simply by adding more criteria to the relevancy algorithm which boosts brands they already had the same impact.
Search has moved away from relevancy toward promoting brands. As SEOs we don't control Google. We can only focus on promoting that which they reward.
The smart money is now saying that domain names are generally significantly overpriced, especially as an asset class valued based on SEO potential.
Where do you place your wager?
Update: On November 7th, 2016 PaydayLoans.net sold at NameJet for $3,005 & PaydayAdvance.net sold for $189 ... huge drops from the hundred grand to quarter million or so ask on some of the above shared names.
And those are 2 of the biggest terms in the payday industry
Take a look at what Matt Cutts shares in the following video, where he tries to compare brand domain names vs keyword domain names. He highlights brand over and over again, and then when he talks about exact match domains getting a bonus or benefit, he highlights that Google may well dial that down soon.
Now if you are still on the fence, let me just give you a bit of color. that we have looked at the rankings and the weights that we give to keyword domains, & some people have complained that we are giving a little too much weight for keywords in domains. So we have been thinking about at adjusting that mix a bit and sort of turning the knob down within the algorithm, so that given 2 different domains it wouldn't necessarily help you as much to have a domain name with a bunch of keywords in it. - Matt Cutts
It is believed that Google requires participating hotels to provide Google Maps with the lowest publicly available rates, for stays of one to seven nights, double occupancy, with arrival days up to 90 days ahead.
In a world where Google has business volume data, clientele demographics, pricing data, and customer satisfaction data for most offline businesses they don't really need to place too much weight on links or domain names. Businesses can be seen as being great simply by being great.*
(*and encouraging people to stuff the ballot box for them with discounts :D)
Classical SEO signals (on-page optimization, link anchor text, domain names, etc.) have value up until a point, but if Google is going to keep mixing in more and more signals from other data sources then the value of any single signal drops. I haven't bought any great domain names in a while, and with Google's continued brand push and Google coming over the top with more ad units (in markets like credit cards and mortgage) I am seeing more and more reason to think harder about brand. It seems that is where Google is headed. The link graph is rotted out by nepotism & paid links. Domain names are seen as a tool for speculation & a short cut. It is not surprising Google is looking for more signals.
How have you adjusted your strategies of late? What happens to the value of domain names if EMD bonus goes away & Google keeps adding other data sources?
A couple days ago there was a blog post on TheDomains about "how stupid SEOs are" and "the amazing power of domaining" where they highlighted how awesome domaining was because a guy registered a domain name he saw in a comic and it sent a bunch of traffic.
What that article failed to mention was:
That traffic wasn’t from the power of the domain name…that was the power of free advertising & the distribution of the comic strip.
The same domain name likely received ~ 0 traffic until it was featured in the comic strip. If it had an organic traffic stream for years before being highlighted it most likely would have already been purchased.
As that comic strip falls into the archives & into obscurity the organic traffic it was driving will drop back to roughly where it started at: 0.
The flood of new found traffic was hardly a goldmine anyhow. It was entirely irrelevant to his main business, and thus entirely worthless. The only exception there would be unless the person was offering information about comics, installing malware, pushing reverse billing scams, etc.
Being Ignorant Doesn't Create Profit
The laughable (and ignorant) thing about the comments on that post were that some of the people who were commenting were equating SEOs to misdirection & scams that sell traffic off to the highest bidder. Sorry, but that is what PPC domain parking is all about...the ad networks optimize yield & the publishers agnostically push whatever generates the most yield: often scams!
Stating that all SEOs are dumb spammers is precisely the same as stating that all domainers are cybersquatters. Neither are true, and neither serves much purpose, other than aiding the spread of ignorance.
Why Domainers View SEOs Dimly
Many domainers who try to hire SEOs fail badly because they are too cheap & buy from lousy service providers. They feel that since they bought domain x (and sat on it while literally doing nothing for a decade) that they somehow deserve to be the top ranked result. To be fair, it is pretty easy to become lazy and not want to change things when you register domain names & then literally watch them spit money at you. ;)
Against that approach, the smart SEOs (the ones actually worth hiring) realize that it is more profitable to buy their own domain names and keep all the cashflow for your efforts rather than doing 95% of the job for 5% of the revenues. Yes a good domain name is helpful, but with the right attitude you can still do quite well even on a hyphenated nasty looking .info domain name. ;)
Why SEOs View Domainers Dimly
A combination of squandered opportunity & arrogance.
I frequently tell myself that in 3 years or 5 years that the web will be so competitive that it will no longer be as profitable as it is today. And every year I have pushed that mindset back another year while we grew. But who knows how long that will last? Sure as long as there are signals there will be ways to influence them, but if you are not one of the favored parties then at some point it will be challenging to compete.
The Real Challenge: the Search Duopoly vs Publishers
When Google got into the web browser game, one of the big "innovations" was the Omnibox. They integrated search right into the address bar to help drive incremental search volume.
As they were a new browser it was not a big risk or big concern to domainers (as most people who use direct navigation are either people revisiting a website they already visited or people new to the web who are likely to use the most common default web browser - Internet Explorer). Nonetheless, address bar as search box highlighted things to come & a way the web would change.
When Google announced their Chrome OS they decided to do away with the CAPS LOCK BUTTON AND REPLACE IT WITH A SEARCH BUTTON. OOPS SORRY ABOUT THAT. Again, it is not a big deal today, but if that ever became standard the future would grow more challenging.
The big problem with Google doing such innovations is that whatever they do, they also give Microsoft permission to do. Google can't complain about what Microsoft is doing if Microsoft is only following Google's lead.
Hey look, Google will recommend *any* browser so long as it is monetized by promoting Google Search. Internet Explorer (the most popular browser) need not apply.
Just like the Omnibox, Internet Explorer 9 integrates search into the address bar.
As soon as IE9 rolls out, domainers can count on losing traffic month after month. This trend is non reversible in well established markets like the United States & Europe, and in 3rd world markets the ad markets pay crumbs.
If that happens, it won't impact domainers much, but if Microsoft copies it, then look out below on domain prices. You wouldn't be able to get to a domain name without first being intercepted by a search engine toll booth. In that environment, a PPC park page produces ~ $0. And even established sites that are generic might not be a great strategy for creating *sustainable* profits if/when the organic results are below the fold. People who invest in brand have some protection against pricing pressures & irrelevant search results, but those who are generic don't typically have much brand to protect their placement nor profits.
Google despised how Microsoft bundled services & believes all other competitors should win market by market based on the merit of the product. Google does not believe this line of thinking should be applied to TheGoogle though, as you need to be a seriously dominant market player to stay in the lead position while opting out of appearing in the search results of the default search engine.
Even on the regular web staying competitive is growing increasingly challenging due to these moves to lock up and redirect normal user behaviors to shift it through an increasingly ad dominated search channel.
According to Matt Cutts, speaking at a recent PubCon, Google will be looking at why exact domain matches rank so well. For example, if you have a site at blue-widgets.com it may rank a bit too well for the keyword phrase [blue widgets].
Curious.
Don't Google know? ;)
More likely, Matt would not make a concrete statement, one way or the other. "Yes, exact Match domains rank better!", is not something Matt is likely to say.
Secondly, the implication is that exact match domains are a problem.
Why Use Exact Match Domain Names
Exact match domains names, as the name suggests, are domain names that match the search keyword term. i.e. Hotels.com, shoes.net, planetickets.org etc.
Is it a good idea to adopt this strategy for SEO? Ask ten different SEOs and you'll likely get ten different answers.
On the plus side, an exact match may help you target one, specific keyword phrase. Your link text and domain name match up naturally. The domain name will likely be highlighted in Google's search results, thus giving the listing more visibility. There may be ranking advantages, depending on who you ask.
On the negative side, an exact match only "helps" you target one keyword. It may be too generic for wider applications, such as brand building. Exact match domains may be over-hyped, and not worth a premium. There are, after all, many domains ranking #1 that aren't exact match, so it is debatable how much SEO advantage they actually provide, particularly as Google keeps pushing brand.
Is There A Problem With Exact Match Domains?
So why would Matt imply exact match domain names might be a problem?
It is understandable that some in the SEO community - perhaps an SEO working on client sites, or those who don't own any exact match domains and see others ranking above them - would have a vested interest in making a noise about the competition. If webmasters make enough noise about it, then Matt Cutts may feel a need to respond.
The supposed ranking power of exact match is probably a red herring. The problem Google may be hinting at is that exact match may be more likely to be involved with spam, thin affiliate, or other low value content than other types of domains. In other words, it becomes a quality signal.
If that is the case - and I'm not saying it is - then that may be the reason Google would look closer at exact match domains, not the fact that a domain matching a keyword is somehow evil.
Because it isn't.
There is nothing wrong with owning an exact match domain.
It comes down to business fundamentals. If you're trying to build a unique brand, and resulting keyword stream, then an exact match domain name will be a hindrance rather than a help. You'll forever be competing with generic search traffic. Keyword domains names aren't particularly memorable.
The premium that an exact-match domain name commands, when sold on the after-market, may not be worth it. You don't need an exact-match domain name to rank well, so the money may be better spent getting a new $10 domain name to rank. Or, alternatively, you could buy an existing site that already ranks well for your keyword, and others, for similar money as an inflated exact match domain.
Finally, if you're competing with a clear market leader, then generic isn't going to help you much. i.e. owning searchengine.com isn't going to make Google lose any sleep. You may also be over-looking an opportunity to differentiate your offering against the market leader in terms of brand. Think Blekko vs searchengine.com.
Sure across the entire web exact match domains can rank for a wide variety of keywords, but there are a couple things to think about when stating that...
those rankings are spread across many different domains
the bonus any domain gets is only relevant to their 1 exact match phrase
Many domains are seen as exact match, but the keyword is popular precisely because the keyword is a brand (like eBay, Amazon.com, Monster.com, Google, Yahoo!, or Bing).
Many brand owners (especially small & local ones, where there are few signals of quality) are not heavily engaged in SEO. If Google doesn't show the official site on a brand search they look bad (in 2005 there was a brief period of time when Paypal.com wasn't ranking for "Paypal" due to botched aggressive Google link anchor text filters), whereas if they rank an exact match domain where it is relevant it doesn't really significantly detract from the searcher's experience.
Adam Lewis highlighted how advertisers can get a glimpse into the endless sea of words searchers use & how impractical it is to presume they can know everything in advance:
One of the most impactful new features lies within the keywords tab and is called "see search terms". This option allows advertisers to choose one or more keywords and see the search term users typed in to trigger that keyword. It also shows which ones are being clicked most often and which are not being clicked.
Often the exact keyword it not what users are actually typing in. Guessing all the possible variations that a user might enter to find your product is essentially impossible. "See search terms" gives you the most popular user queries that triggered your ads. Not only does it help people learn about their user, but it can also potentially save money on SEM by exposing highly specific keywords with less competition and better quality scores.
Note the sentence that I bolded...guessing everything that is searched for that is relevant is roughly impossible. In SEO there are a variety of implications associated with that, but one of the most important ones is this: when you pick an exact match domain it is mainly only helping you with that 1 main keyword that you chose.
Yes there are implications in terms of perceived credibility and such, but those impacts can be created through brand building. With an EMD you pay thousands of Dollars (sometimes 10's or 100's of thousands) to target that one keyword. If a person were to buy MyKeywordStore.com (or similar) for $8 & spend that $10,000 on marketing, then in many cases that $10,000 would generally / typically more than make up for any advantage MyKeyword.com gets.
Much like often overstated type-in traffic, when you look beyond brands, there are not many individual keywords that represent a huge market by themselves.
We have built a database of 10 million + keywords & few of them (less than 10,000 of them) have a combined CPC * estimated search volume of $1,000 or more per month (presuming you captured 100% of the search traffic for that keyword & monetized it as well as Google does).
However, those numbers overstate the market ...
many of those valuable keywords *are* brands (seo book wasn't much of a keyword until *after* it was a brand, which is why the domain name was available to me for $8)
brands that are created on keywords can be forced to change due to market conditions (FreeCreditReport.com ---> FreeCreditScore.com, legislation whacked the student loan consolidation market, Google Instant promotes some keywords at the expense of others, the US government has launched names like Cars.gov, StudentLoans.gov, Change.gov, etc. ... who wants to compete directly against the government when they control legislation, can create an EMD on the fly, and can cross-link new sites in their network ... allowing them to outrank you in a couple weeks)
If you are not a brand & rank #1 in the organic search results (with 3 AdWords ads above you) then you might only get about 25% to 40% of the search traffic. Worse yet, in some of the largest markets Google puts a 4th "Google comparison" ad above the organic search results, further driving down the organic search results.
Google's search volume data & suggested bid prices have typically overstated the market (because they want to create bidding wars on core keywords & drive bids upward)
Almost nobody monetizes as well as Google does. In many cases when their number shows $100,000+ per month the actual publisher earnings for that keyword might only be a few thousand Dollars.
There are at most a few hundred exceptionally potent keywords where the single word will build a business for a generalist webmaster. That number would be higher if you combined them with professional training in an area and significant industry knowledge, but if you know your industry well and have access to capital and are investing into a premium domain name then odds are good you are investing heavily elsewhere and doing quality work elsewhere. The idea that there are tons of lucrative exact match domains on the market which anyone can use to build thriving businesses on and are available at a discount is somewhat (perhaps completely?) inaccurate.
Exact match only gives you that bonus on exact match. Not a collection of keywords - just that 1 word. And tying your business to 1 keyword can be risky. Just ask anyone who is on a singular version of a domain name where Google Instant promotes the plural version of that keyword. Some of those folks likely had chunks of cinder block falling out their pants the day that launched.
Whereas brand allows you to keep spreading ... but it can take a lot of work to turn a generic keyword into a brand. And by the time you do, your business model and/or the market may have already moved elsewhere. An exact match domain name can sorta box you in and make your business less flexible. SEO Book is a bit of a weird fit for a private SEO community & training website, and Oakland Pizza will *never* become Dominoes or Pizza Hut.
And (when compared against generic keywords) brands are not only more flexible, but they are more memorable, make it easier for you to differentiate, allow to engage at a deeper emotional level & charge more for your products or services.
I don't regret choosing SeoBook.com in 2003 (it certainly worked out awesome in the short run), however if I had more foresight I would have shifted to a different domain in the 2004 to 2005 timeframe. So often when people join our community they are amazed by the depth and breadth of discussion outside of SEO, but a rebrand at this point would be brutal. ;)
Owning SearchEngine.com doesn't really do much for you when there is a Google or a Bing in your market. Owning Auction.com (or maybe Auctions.com) doesn't do much against eBay. Owning Portal.com (or maybe WebPortal.com) isn't going to compete against Yahoo!. Microblogging.com is no Twitter, SocialNetwork.com is no Facebook, VideoHosting.com is no YouTube.
It is basically a choice of short-term vs long-term goals:
do you want to pick a specific keyword & try to sell something relevant today (with less flexibility going forward)
do you have the assets available to build a brand that will remain flexible under changing market conditions
While exact match domains can box you in, it is a sign of relevancy for that specific keyword: as you have tied your business to it!
Either you got to the market early, or you shelled out thousands of Dollars. OnlineKredit.org just went for $36,400! Whoever bought it is not probably going to be signing guestbooks / comment spamming / auto-generating content /etc. And the guy who paid $1 million for Poker.org wouldn't have paid that unless he planned on building something sustainable there.
The one area of exact match domains where I think Google has been (and will continue to) tighten up is some of the longtail cybersquatting, but...
tightening up can be tricky because the same word can have different meanings in different markets (perhaps continued efforts into localizing results will solve some of these issues)
earlier this year Google did whack some longtail EMDs that had few other signals of quality
more recently, Google has been showing far more results from 1 domain on navigational queries, and has been ranking official sites for related queries even if they didn't have some of the keywords in their content or link anchor text
even for generic search queries (like "cameras") Google sometimes lists suggested related brand navigation in the search results
trademarks protect usage & legislation is moving in the direction of making it easier / cheaper / faster for brand owners to whack cybersquatting
The third reason we really like [eNom] is because the data, right. Almost 10% of the entire web hits our servers. At least 10 million domains. In a world like the web, where everybody is everywhere, trying to figure out what people are doing, particularly in the longtail this is a really exciting source of data.
If the domain name data leakage from eNom & BulkRegister is "exciting" for him that means sharing it must be "not exiting" for their customers.
One more from the "competing against yourself" series. ;)
Obama has been known to use domain names to go after emotionally charged empty words that are easy to support (like change), but now the government is going after commercial keywords like cars.
Cars.gov was launched on June 30th and is already ranking #3 in Google for cars!
What does it do to the value of cars.com when cars.gov is a co-opted business deal between the government and select auto companies (which the government may have confiscated some of your money to prop up and is now propping them up again via rebates and direct marketing to compete directly against you once more)?
Who has a link network large enough to compete with the United States government when they are at the core of what Google considers to be the clean & trustworthy parts of the web? In 2007 Matt Cutts stated:
But, certainly, all of the things that have good qualities of a link from a .edu or a .gov site, as well as the fact that we hard-code and say: .edu or .gov links are good - and when there are good links, .edu links tend to be a little better on average; they tend to have a little higher PageRank, and they do have this sort of characteristic that we would trust a little more.
(Update: Google's Matt Cutts stated there was no hard coding of .edu and .gov links & stated the above quote sorta came out of a mis-interpretation or transcription error on a run on sentence.)
Imagine launching a 1 word domain name late into 2009 in a multi-billion dollar field and ranking it above the fold in less than 2 weeks. The government just did that. And they can do it at will. Over and over again. For free :)
Now if you invest in a big keyword rich domain name you not only need to worry about Google and the market, but now you have to worry about how the government might start competing against you.
What might happen to the value of mortgage.com or credit.com or health.com when the government launches the equivalent government portals co-sponsored by whatever relevant multi-billion dollar corporations pitch the idea to a congressman from their district?
If the equivalent .com sites are thin arbitrage sites they will gain value as misdirected visitors stop by. But longterm the trend has to corrode value of domain names. If they are real sites they may lose out by finding themselves below the fold for their own brand if the government pushes hard enough.
Once politicians realize the value of domain names how long will it be before there are .gov domain names for every aspect of life? Diet.gov anyone? Are you ready for love.gov?
Choosing a domain name for a new project can be a little daunting.
All the good names are gone. Once you find something acceptable, you'll have to be sure you can live with it for a long time. And what about the implications for SEO?
So many considerations.
Do You Want A Disposable Domain Name?
Some domains are throw-away, so the domain name doesn't matter so much. buy-viagra-online-cheapest.com might be just fine for someones 100th pharma site. We all know it's going to be blitzed eventually, anyhow ;)
For such domains, brand is never going to be a major consideration. But for most other projects, I'd recommend devoting time to brand considerations and credibility factors.
Why?
Traffic Comes From Everywhere
Obviously, traffic doesn't just originate at search engines. The way things are going, the webmasters who used to frequently link to sites will just Twitter about you instead!
Word of mouth is becoming more and more important on the web. The most popular websites today facilitate personal publishing.
In order to capitalize on this, it is helpful to have a brand name that is easy for people to remember. It should be distinctive. It should be credible. It should be something people feel comfortable passing on.
When people mention you in the context of a social network, are they going to talk about cheap-mp3-online-buy-cheapest.com? Would they feel comfortable recommending it to their friends and networks of contacts? Does it make them look good? Will they remember your domain name five minutes later? Would it be something they'll pass on?
Even those webmasters who do link out tend to be cagey about where they link. The last place they'll link to is the trashy looking domain name.
The credibility of a domain name in such an environment counts for a lot.
Brand Naming Strategy
Brand is a is a collection of experiences and associations connected with a service, a person or any other entity
What does "Google.com" mean to you? An incorrectly spelled mathematical term meaning 1 followed by 100 zeros?
I'm guessing Google means finding things, making money, technology, the future, and various other experiences. That's the power of brand. Made-up, memorable "meaningless" words become incredibly valuable and significant.
That's ok for big companies who spend a lot of money on building these associations, but what about the site owned by the little guy?
One idea is to use soft branding. Leverage off a concept that is already known, and twist it a little.
For example, an xml feed product that acts like a mail client might use the term "mail" in the brand name, because people are already familiar with the concept of mail. "Hotmail" is an example of soft branding. AfterMail is a service that retains copies of emails sent by employees and holds them in a central database. The brand name is partly unique and memorable, and partly describes the function.
Good Domain Names Appreciate
Once you have a good, brand-able domain name, it will very likely appreciate.
As time goes on, good domain names become more scarce. Add to this the associations you're building, and the domain name can become a valuable asset in it's own right. This is seldom, if ever, the case with disposable domain names.
How much is SEOBook.com worth? Would it have been near as valuable now if Aaron had called it learn-seo-online.com? Possibly, but I suspect the latter is always going to have credibility issues, not to mention the dreaded hyphens.
Exact Match
There is a lot of debate about exact match domain names. There is evidence to suggest Google weights this factor highly, but ask different SEOs and you'll likely get different answers.
SEO considerations aside, exact match has a bonus when it comes to PPC. Check out this article by Frank Schilling:
What do you suppose would happen if I advertised my URL under the key-phrase that matches the name? Well, I tried it and I found that because my URL matched the key-phrase people were searching for, I had to bid less for traffic. People were more apt to click on a link when it matched the URL.. and the power of .com just reaffirmed to Jane Public that she had found the market leader.
What has this got to do with brand? If you build a brand to the point where it becomes a searchable phrase i.e "seo book" you'll enjoy the same benefit as the guys who own the exact match names. You'll find it easier, and cheaper, to dominate both organic and PPC listings.
It's harder to do that with a watered-down generic name.
Linking Factors
If people do link to you, it's desirable to have a keyword in url. However, sometimes this conflicts with brand imperatives i.e. being memorable and distinctive.
So what do you do?
Try using a byline.
For example, if your domain name is Acme.com, you could add a byline that describes what you do i.e "Acme.com - SEO Services". People may well link the full description, or use that phrase when talking about you. The by-line becomes an integral part of your brand. This approach is especially important when trying to convince directory owners to link to you with addition keywords.
For a lot more information on domain naming strategies, check out Aaron's domain naming lesson in the members section.
