By Duane J. Higgins, ceo
xtradot.com

(Post updated 08/09/2013 with recent Yahoo news release)

Yahoo recently spent about a billion dollars for Tumblr.com. CEO Marissa Mayer suggesting that 75% of that cost was for the social blogging site's "cachet" with the young trendy set. In Yahoo's quarterly report filed this week Yahoo revealed that $752 million of Tumblr's value is "goodwill." What does this "goodwill" have to do with? Are we talking about the Tumblr brand? Something that is far removed from the Tumblr tangible assets, contracts, software etc? If that is the case and were talking about a non-quantifiable asset that is valued at $752 million by Marissa Mayer, why not have a discussion about a billion dollar domain name?

Will a domain name ever sell for a billion dollars? Probably not. However, if that ever happens, I can tell you exactly what the domain name will look like- and its not what you think.

It is often said that generic/category defining domain names (of the .com version) are the most valuable. There is a good argument behind that as all of the top domain name sales to date have been generic/category defining terms. For example, see some all time sales below in us dollars:

sex.com 13,000,000
Hotels.com 11,000,000
fund.com 9,999,950
porn.com 9,500,000
fb.com 8,500,000
diamond.com 7,500,000
beer.com 7,000,000
casino.com 5,500,000
slots.com 5,500,000
toys.com 5,100,000


However, the domain name sale that will top them all will likely not be a generic term. It will be a branded term (and probably a made up name). That is because the monetary and inherent value of good brandable domain name is unlimited. This fact is very easy to prove. Let me try a "thought experiment" here to make my point. If Google were to abruptly shut down its search engine today (it could happen) and put (just) the domain name Google.com up for sale, what would the domain name alone be worth ? How much would the name sell for on the open market? It would of course set a new domain name sales record. Would just the domain name sell for a billion dollars? Maybe.

How about the following domain names (remember just the domains-not the company)

YP.com
Bing.com
YouTube.com
Yahoo.com
DrudgeReport.com
Match.com
eHarmony.com
Amazon.com
Twitter.com
Yahoo.com


Most likely all of the preceding domain names (remember just the domains) would set all-time domain name sales records. Not all of the names are category defining or even the market leaders in their category. However, what each company has done is establish a very memorable, recognizable and valued brand and service. Anyone purchasing the domain could open their new company as the "new Yahoo", "new Bing" or "new YP.com", "new Drudge" etc. Of course the key would be to keep the quality of service going. The new company would have to execute at an equal or superior level. But of course that could be done and the domain name would be a virtual gold mine for the new company.

Now of course, none of those scenarios are going to happen. None of those companies are shutting down in the forseeable future (as far as I know). However, the point of that little experiment is to show the value that a simple brandable domain name can have. Yes, a simple domain name can provide the basis for an enormously successful brand.

The value of a great brandable domain name can be unlimited.

Now let me try another test. What is this domain name Capital.com worth on the open market today? Capital.com would certainly a top-level, premium, enormously valuable domain name on todays' open market. In fact, it is considered just that. Last I knew that domain Capital.com was up for sale. Probably could be had for around 1-2 million dollars or maybe more.

Why the difference in price between the "branded names" and the "generic term" names? The reason is because, as I mentioned, the value of the brandable domain name is unlimited. Google built the brand and made it incredibly valuable. Just as the domain name MichaelJordan.com has phenominal value. Much more than probably basketball.com or hoops.com. Building a valued brand is not an easy thing to do. However, once you do it, the brand (and domain name) can become incredibly valuable. Much more than stand alone generic term domain names.

There have been several articles in the news lately regarding the naming of Internet start-up companies and the need (and shortage of) great brandable (.com) domain names. Since my company specializes in sourcing out, acquiring and reselling brandable domain names, I'll put in my two cents worth here regarding what would constitute a potentially great brandable domain name"
  • Of the .com extension (you at least want to own this, no matter what extension you use)
  • As short as possible
  • Pronouncable
  • Memorable
  • Unique (Ideally unused by anyone else, ever.)
  • Professional
  • Protectable (as in intellectual property)
  • Able to elicit the desired feelings or association with the newly formed company
  • Match to style and logo
There are a few additonal potential scenarios that I should mention that could be in the running for producing the first billion dollar domain name. They would result from "made up names" as well. For example, lets say that there does become a new truly global reserve currency (that replaces the us dollar) as has been predicted for several decades now? That (.com) domain name would be worth alot of money. How about a new clean/green universal fuel source that could take on the gas/oil/ng cartels? A cancer treatment that came out of nowhere and was not proprietary? (owned by a big drug company?) Just a few examples among many possibilities.
So back to my original question. Will a domain name ever sell for a billion dollars? Probably not. However, if one ever does- you now know exactly how it will happen.