A few weeks ago a client asked me if purchasing an aftermarket/secondary market domain name would be valuable.  In almost every case the answer is, yes - and informed buyers will pay less and enjoy better results.

Secondary market domains are domains that have already been registered, but may be available for sale by the current owner. There is also a niche within the secondary market that focuses on premium “category domains” or domains that represent a specific product or service category (i.e. flowers.com). 

In recent years, the aftermarket domain space has taken off exponentially, but don’t expect to pay $10 for an aftermarket domain. Bookmarks.com was bought for $300,000, according to DomainAppraisal.org, which is minimal compared to the high cost of Business.com, which was sold for $8 million ten years ago. Costs of aftermarket domains are based on specific brand terms, age of a domain’s registration, and the incorporation of high search volume keywords.

While each case is unique, a secondary market domain may provide some of the following benefits:

• Brand Control – Secure domains that include the name of your company and/or are shorter or easier to remember than your current domain.  You may also choose to defensively secure longer variations and/or variants so that they cannot be acquired by another party.

• Category Control – Securing a domain that represents the category of the product/service has proven to be a successful marketing technique. For example, HowStuffWorks.com is a go-to website for those seeking to understand complex terminology and mechanisms in easy-to-understand language. The intuitiveness of the domain name created a loyal audience and aided in strong search engine visibility on “how to” searches. HowStuffWorks was acquired by Discovery Communication in 2007 for $250 million.

• Search Engine Ranking – Whether the focus is on brand, category, customer segment, or geo-targeting, a good domain name will monetize itself here. Search engines place algorithmic value on the keywords in a domain name as well as the domain age or “maturity.” A domain that is valued highly by the major search engines and has high-volume keywords will aid in ranking well for a specific search category.  Both the latest incarnations of Google and Bing seem to place increased value on the domain name when returning results for industry or brand specific search terms.

• Asset Value – A category domain and/or collection of branded domains are considered important acquisition asset’s for many small and mid-size businesses if they ever pursue an acquisition.

If you’re exploring an opportunity to purchase a brand or category domain, here are a few tips that should help guide the way:

• Research – Use services like, www.domaintools.com and www.compete.com (also two great examples of category domains) to understand domain history and domain use or even to monitor domains you may be interested in acquiring.  For category domains, use a tool like Google Adwords Keyword Tool to gauge search volume for a particular term.

• Consider a Domain Appraisal/Acquisition Service – You may look to a group like www.sedo.com for their domain appraisal and acquisition services.  For a reasonable fee, reputable groups like Sedo will conduct the complete negotiation on your behalf and even serve as a financial intermediary between buyer and seller. 

• Prepare to Pay More – Domains that are uniquely valuable to you will be more expensive.  For instance, Verndale paid a premium over the standard appraisal value to secure the domain www.verndale.com from its previous owner.  If we hadn’t, you would still be looking for us at www.verndalecorp.com

• Know When to Hold 'em, Know When to Fold 'em – Like all informed business decisions, you can’t let emotion take control.  Protracted negotiations and unreasonable sellers cloud the space and may keep good domains out of reach for anyone.  So, when all else fails, go out and buy a previously nonsensical term like ‘Google’ or ‘Yahoo’ or’ Amazon’ and go build yourself a multi-billion dollar brand the hard way.