Why Did a Company Spend $1.5 million on a Domain?
Most domain names are cheap. Namecheap sells .com domains for about ten bucks a year. Even more expensive domain endings, such as .io, are under fifty bucks.
So why did online marketing company Sumo pay $1.5 million to change its domain name from SumoMe.com to Sumo.com in February?
Below we’ll take a look at the rationale and what we can learn from high-dollar domain sales like this one.
Why did Sumo Want the Domain?
Sumo co-founder Noah Kagan gave several reasons for making this huge investment. In conversations with the press and in his podcast (warning: adult language), he gave three main reasons:
- There were a bunch of companies adding the word “sumo” to their names. He was concerned about confusion.
- People couldn’t pronounce the name SumoMe correctly. (In other words, it failed the radio test.)
- It takes the same amount of effort to do something big as it does to do something small.
How Did Kagan End Up Getting the Domain?
Kagan and his team spent seven years trying to negotiate with a company in India that owned the domain name. He sent over 200 emails during that time.
At first he was rejected. But Kagan says “there’s a price for everything,” so he kept asking. Finally he found a price that both he and the owner could agree on: $1.5 million.
The company paid $500,000 up front and is paying the remaining $1 million over five years. That comes out to about $17,000 per month.
That sounds like a lot, but he points out that it’s a lot less than the $50,000 the company spends each month on servers.
What Does This Purchase Tell us?
A lot of people don’t look at domain names as a marketing expense or an investment. However, Kagan looked at it differently.
He was an early employee at Facebook and at Mint. He watched how Facebook paid to upgrade its domain name from TheFacebook.com to Facebook.com. Mint paid about $8 million to move from MyMint.com to Mint.com.
Now, at the helm of his own company, he understands why Facebook and Mint spent the money and effort to upgrade their domain names.
Kagan said he got cold feet before closing the deal. But he asked himself “How would I feel if someone else got this domain name instead of me?” That, and his excitement, drove him to close the deal.
Do you have a great idea for a business? Register your domain at Namecheap today before someone else snaps it up!
Andrew Allemann is editor of Domain Name Wire, the longest-running blog covering the business of domain names. Domain Name Wire has covered the business of domain name investing for over ten years.