Safe Bet: Premium Domain Names Hold Their Value Even In Tough Times

Domain names have been called the “real estate of cyberspace” because they are quite literally the addresses businesses occupy on the Internet.  However, some addresses are better than others.  A premium domain is an equivalent of buying the best store, on the best street, with the busiest foot traffic.  Like real estate, premium domain names are valuable assets that hold their value long after a company goes out of business.

Many companies have invested in premium domains, especially category killers, and successfully built their business around them.  Category killer domains are highly valuable because they automatically put businesses ahead of competitors in online searches and in consumer mindshare.  They convey the instant credibility of being a market leader and customers know exactly what the business does.  These domain name investments can quickly pay for themselves on the front-end in the amount of new business generated simply because the consumers’ perception has changed regarding the business.  An added benefit is that marketing costs also tend to decrease for the business. What many business owners forget is that domain name investments can pay off again on the back-end, in the event a company has to permanently close its doors.

The back-end pay off can come in several ways.  In bankruptcy proceedings, all property and property rights have to be listed on the bankruptcy schedules. This includes intangible assets like premium domain names, which may not only be valuable, are also an exemption for the debtor.  Companies in bankruptcy sometimes reap more from the sale of the intangible asset than what they paid.  For example, the category killer domain sold to big-box retailer Toys ‘R Us for a little over $5 million during a domain name bankruptcy auction in 2009.

Bankruptcies can also spell bargains for buyers looking to pick up premium and category killer domains.  Reputation Changer spent $500,000 for the domain name and later sold it for $300,000 during their Chapter 7 bankruptcy, according to  Similarly, Clover Holdings Ltd purchased from Escom LLC in 2010 after the company declared bankruptcy.

Other cases illustrate that premium domains can be bought for less than their immediate comparables.  This happened during the 2013 bankruptcy auction for the domain.  A company in the web hosting business, XBT Holding Ltd, walked away with the domain for $300,000.  Its comparable, sold for $770,000 back in 2009.

Given the longevity of the asset and the value retained long after a company closes, businesses should invest in the best possible name and spend as much money as the business can afford to acquire it whenever possible.  The instant recognition of a premium domain, especially category killers, among potential customers is well worth it.