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06|12|2008 01:17 pm EDT

The Rise of ‘Brandable Generics’

by M. Fiol in Categories: Editorial, Featured

The Bigger the Pool, the Bigger the Payday

Let’s talk domains. Or on second thought, let’s not.

In the evolving discourse on the value of domain names, I think it’s time to expand our terminology and move beyond the vast generalizations that continue to muddy and lubricate the valuation slope. We simply can’t afford to just ‘talk domains’ anymore.

Accomplishing this means a reversal – taking a ‘micro’ view of a ‘macro’ industry that has, in part, relied upon its vast, ambiguous scale to befuddle and grow.

Domainers have all underpaid and overpaid – in varying degrees. Such is the consequence of a lack of recognized standards, categorization and terminology.

To its credit, the domain industry is self-segmenting, the first instance being the separation of ‘sin domains’ like adult and gambling long ago to today where categories/groups including geo-domains, premium domains, ccTLDs, TMs, category killers and typos are cited with regularity.

One such term is ‘premium generic’ – a title given to domains also known as ‘keyword-rich domains.’ These names are generally one to two word industry/product/service specific which do well in PPC because of their inherent type-in traffic and the specificity of visitor motives.

In fact, much fanfare and expense (see past live auctions) has been paid to the segment, the final burden being overpricing on the sellers part and apathy from buyers. These names are not currently undervalued; on the contrary, they represent little opportunity to anyone outside an end-user – a byproduct of ‘generalization’ in valuation.

In reality, a necessary component of any premium generic appraisal is a study of the industry it is linked to – a domain such as leatherboots.com requires closer examination of the ‘leather boots’ market and industry. What is the state of the industry? Who are the players/advertisers? What is the current cycle? Is the market saturated? What is the seasonality of the marketplace?

A ‘golf’ domain’s value peaks when consumer interest and advertising spending in the sport hits its zenith, they are linked – the figure dependent upon the state of ‘supply and demand’ in any given marketplace.

The point here is that the very nature of keyword-rich domains provides valuation metrics, yes, but it also means the name is subject to important value limitations set by its related industry. And by clumping these names together as a whole, investors mis-valuated and over-spent.

The second important limitation is the size of the potential buyer’s pool and, as all domainers know, a domain is maximized by the rare emergence of a true end-user with deep pockets.

For most domains in this category, these limitations apply ‘caps’ to the real market price at any given moment. Industries go through ups and downs – the trick in valuating, selling these names is recognizing and identifying the current market cycle. Is it a K2 peak or a Death Valley? Timing is all.

Ultimately, the appeal of premium generics lied in their ability to produce their own valuation methodology – making it far easier for buyers/sellers to quantify premium name transactions, thus their popularity as ‘ROI-based’ investments.

At the same time, a disproportionate spotlight on any segment opens possibilities in other auxiliary categories. In this case, undervaluation permeates in the premium generic’s ’closest relative, a segment dubbed ‘brandable generics.’

By mere definition, ‘brandable generic’ valuation is far more subjective and risky but potentially more lucrative on a global scale. Their appraisal is more experience and expertise combined with a ‘gut-sense’ of what a ‘brandable’ future looks like and may need.

Yet, despite this lack of objective methodology and recognition as a class, brandable generics have enough unique characteristics and value to warrant their own term, segment and valuation formula.

Segment eligibility, and distinction, is determined using these six factors – set up as guidelines to help identify/categorize these valuable domains.

1. Must be .com
Can apply to ccTLDs as well but .com is the global brand and the value of this segment is in their ability to appeal across a worldwide stage. CcTLDs can effectively be applied locally and regionally but any appellate firm wanting to expand beyond their ccTLD bounds must eventually migrate to the .com.

2. Single-word (rarely two-word)
From .com, .net and .org to other extensions, buying patterns have shifted towards ‘single-word’ domains. Not only do they retain excellent ‘resale value’, they have increasing importance as SEO tools. As close to ‘liquid’ as anything in the sphere has achieved to date.

3. Brandable in multiple industries
Domain name must be brandable across several, if not all, industries. A name such as planet.com (but not planets.com, see #5) could be developed and branded by just about any company, in any market.

4. Large buyer pool
True brandable generics appeal on a broad scale to potential end-users. Domains like sky.com or earth.com have prospective buyer pools that could reach into the tens of thousands whereby a leatherboots.com is likely limited to a few dozen at most.

5. Singular, not plural
The plural is, many times, the ‘premium generic’ as with homes.com vs. home.com. Thus, one can take top-shelf names and determine their categorization using this simple metric – score.com vs. scores.com, game.com vs. games.com.

6. Variant traffic
First off, and a given, they must have some traffic or ‘heartbeat’ – if not, it’s likely not a real, known word.

Second, brandable generics are historically difficult to monetize via traditional routes given the vast differences in what visitors to the name are searching for. People visit ‘share.com’ and ‘glamour.com’ everyday for dozens of different reasons, making them a poor fit for optimization algorithms and search-ad revenue programs.

Yet, within the difficulty to park these names, the opportunity emerges – more suited to the speculator than the pure PPC domainer.

By focusing on the premium segment, domainers have allowed brandable domains to slide by, undervalued to the state of ‘inexpensive’ in many cases – largely due to the application of short-term metrics in valuating both generic categories.

Domainers must consider that the value of keyword-rich, premium generic domains is subject to fluctuation and inherently linke) with the state, the cycle of its industry. Brandable generic appraisals rely, in part, upon the ever-decreasing and finite supply of its comparables for assessment.

At the core, these brandables should be measured by the scope and scale of the potential buyer pool – is it Olympic-size or a kiddy pool? Some of these domains can be compared to oceans.

In the end, valuation demands ‘micro’ segmentation to determine which names will appeal in the future marketplace on a ‘macro’ level. In other words, dump the generalities within your own lingo, your own mentality and find that pool. That is, if you can afford to get into the .club first.

Hurry, space is limited, price is going up – the secret just went macro.

– M.Fiol is a long-time domainer and appraiser for DomainConsultant.com

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6 Comments

David J Castello

June 12, 2008 @ 3:35 pm EDT

Excellent article.

Michael Castello

June 12, 2008 @ 5:13 pm EDT

Excellent article from someone that sees the BIG picture. Use his points and be ahead of the game. There is information in this piece that I have used since 1994 but is not easy to communicate to others. M.Fiol articulates it very well.

Susan Prosser

June 13, 2008 @ 1:49 am EDT

Well put. Again, another great resource to reference and use when considering buying or selling property.

Antoinette

June 13, 2008 @ 8:26 am EDT

I got a lot out of this article although I’m still not sure I know the exact difference between a premium generic and a brandable generic domain name. The 6 factors help but some could be applied to premium generic domains as well.

A lot of the domain name industry terms are pretty fuzzy and it’s assumed everyone agrees on a definition when it is actually difficult to pin one down.

And I think it is “lay” not “lies”…but I could be wrong (paging my fourth grade English teacher…).

Stephen Douglas

June 19, 2008 @ 8:30 am EDT

Great article. Very detailed and representative of overall traditional aspects of domain evaluations. However, at a happy hour party with a large group of SEM and domainers in Portland, OR, we debated the determination of which was more valuable in a domain choice, singular or plural. While a lot depends on the domain name itself, overall, many domainers look at the singular first. However, the SEM experts said the plurals were more valuable. I agreed on some points, but is that the way it works in a domain auction? My experience told me that the singular usually was more valuable. I’m reconsidering that position now.

We thought of two domains: Table.com and Tables.com

We quickly chose the plural of this domain as being more valuable (not by a significant $$ amount). The one basic reason we agreed on was that “Tables.com” seemed like a better brand for a build out — or a co-branding marketing asset. However, if you take the domain “baby.com” and compare it to “babies.com”, the singular easily beats the plural. The proof is in the Johnson & Johnson pudding.

There are so many variables to domain name values it’s very hard to really determine how “high” a domain value can go. What you can find out, though, is where its “ground floor value” is. Find out that appraisal amount, and you don’t want to have a buyer dig below your “ground floor value” and “collapse” the minimum value of your domain.

These types of articles you are posting are extremely valuable to domain investors and the business/marketing sector. Keep it up!

Stephen Douglas
Successclick.com

Mark

June 19, 2008 @ 4:39 pm EDT

Very well put. A great read.

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