Why Fortune 500 Corporations Decline Premium Domain Names

August 13, 2014  |   How to Buy & Sell Websites   |     |   Comments Off on Why Fortune 500 Corporations Decline Premium Domain Names

Premium domain name owners often over-value and over-price their domains due to the popular logic that a Fortune 500 corporation can easily afford it. This widely-accepted notion is fueled by the occasional million-dollar domain name sales reported in the news. The fact is, these sales are the exception. That’s precisely why they make the news when they do occur.

I’ve interacted with enough decision-makers at large corporations to know that domain names are never on their radar. They have bigger problems to think about than whether to acquire a domain name or not. As domain industry professionals, we often forget that a corporation consists of ordinary people with professional needs and fears. We have to think about the person (not the corporation) who decides for the corporation.

Yes, most large corporations can afford to pay a million dollars or more for a domain name. But the question is “Why should they?” The decision-maker at the corporation has to be able to answer that question and convince his stakeholders. If he can’t, then his inevitable answer to the domain seller is “No, thank you.” Premium domains rarely sell at their expected high valuations for 3 primary reasons:

1. Buying a premium domain name doesn’t further a decision-maker’s career at a big company.

Large corporations are run by employees. Let’s be honest, no matter what any employee says about his dedication and service to a company, his top priority is self-preservation. In other words, he has to take care of himself first before he takes care of the company.

Employees follow company rules, play office politics, and move up the corporate ladder. Buying a domain name does not help an employee move up the ladder. It’s not part of the playbook at a traditional big business. In fact, most employees don’t know or care about domain names.

People care about things that affect their survival. Domain names are a huge industry but still unfamiliar to the average person on the street including the CEO of a publicly-traded company.

So when a domain owner prices his domain name at $1 million or more, these employees are often stunned. They don’t understand how they can justify paying that price for a string of letters and a TLD. Moreover, the domain name produces zero cash-flow.

After a quick assessment, the employee decides that he doesn’t want to embarrass himself in front of his superiors or investors. It’s not worth the risk to his career. He says  “No, thank you.”

This response surprises sellers who believe that the domain is obviously a good investment that can pay dividends for years to come. Usually, this is true. But the person writing the cheque on behalf of the corporation has to believe this. Most decision-makers do not.

2. The company has already spent millions on its current brand name. Why should they spend more money on a new brand name?

Corporations trademark product and company names. They spend millions of dollars advertising these names in order to embed them in the public’s mind. When presented with a domain name, the decision-maker asks himself “Why should we spend money on a new brand name after spending millions on our current names?”

Sometimes, the domain name represents the industry category. To a domain investor, it makes sense that a corporation in the industry should want to own this domain name.

For example, the Russian government should own Russia.com, an oil company should own Oil.com, a mutual fund provider should own MutualFunds.com, or a wireless provider should own Wireless.com.

Well, they don’t. Why? Because these domain names are not important to their business operations and revenues.

An oil company like BP doesn’t need Oil.com to sell oil. If people want information about BP, they do a Google search with keywords BP or British Petroleum and Google delivers BP.com website. Everyone already knows BP. They don’t need the generic name Oil.com to communicate with the public.

On the other hand, acquiring the 2-letter .com BP.com made sense to BP’s decision-makers for branding purposes. It’s easier for consumers to remember BP.com in advertising than BritishPetroleum.com. BP.com is better for type-in traffic. Thus, BP.com domain name is an important part of the corporate strategic plan. Oil.com is not.

Oil.com is owned by online news company WN.com. Oil.com is important to an online media company because it affects its business operations and revenues. In other words, it affects the careers of the WN decision-makers.

The same logic applies to the other domains mentioned above:

– The Russian government and Kremlin have .ru websites to communicate with the public. These websites are prominent in SERPS for keyword searches. The government doesn’t believe it needs Russia.com.

– Mutual fund companies like TD and Fidelity have established brand names that the public knows and searches for. They don’t believe they need the generic MutualFunds.com.

– Wireless providers like O2, Verizon, and Vodafone have recognized brand names. Everyone knows these names. They don’t believe the name Wireless.com will improve their business performance.

Again, in most cases, these domains can improve these businesses. But this has to make sense to the decision-maker.

3. When the premium domain name is not in the strategic plan and budget, Price becomes a problem.

Large corporations live and die by strategic planning and budgeting. If an expense is not in the budget, it’s ignored. If it is in the budget, corporations spend freely.

Generally, domain names are not in the plans and not in the budget. As such, a decision-maker has to make a strong case for why he wants to add a million-dollar expense to the budget. He has to explain it to his superiors (often board members) or investors. It’s difficult to explain domain names to people who are not involved in the domain industry.

The decision-maker may want the domain name. But he doesn’t need it. At a lower price, he could explain and justify it. But when the price is too high, he usually decides he doesn’t want it that badly.

Don’t take it personally when you offer a premium domain name to a large corporation, you feel that they should pounce on it, and they say “No, thank you.” The employee is really saying “I don’t see how this domain name will further my career at this company.”

You have to think about the other person (not the corporation) when you offer and price a domain name. People run corporations. People have professional needs and fears that you must address.

There may be a large company somewhere that will pay your high price. But despite what you read in the news, these are the rare exceptions. Most corporations will decline your offer.

Price your domain name reasonably, try to answer the decision-maker’s needs, reduce his fears, and you will sell your domain name.

Author: 

Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.

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