Tag: Domain Investing

Generic vs Brandable Domains

I recently listened to a podcast on Domain Wire with SparkToro’s Rand Fiskhin (better known as the founder of the SEO analytics company MOZ). He also wrote the book Lost and Founder.

You can listen to the Domain Wire podcast episode here. Below are interesting transcripted bits from the interview.

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A Brief History of Domain Names

Asked about the history of domain names and on the importance of domain names, Fishkin said the following:

“In the early years of SEO and Google, and of search engines being the primary way of how we find everything, there was a good 10-15 year period, at least, where keywords (the words and phrases that people search for and how Google makes associations between those words), using those keywords in domain names could actually have a really positive beneficial impact.

These were sort of the gold mine days of these semi-ridiculous domain names. You want to rank for “best auto dealer Seattle”? Well, you should register best-auto-dealer-seattle.com.

And that ended somewhere between seven or eight years ago. It started getting much less powerful. And about three or four years ago it really dropped again. And today, it is very minimally beneficial. And I would actually argue that you lose out, even just in terms of just SEO.

You really lose out when you compare the value of a domain name like that, compared to something that I would call Consumer Brandable. A domain name and a business name associated with that domain name that people can say, speak, hear, remember, build an association with.

Keyword rich domain names are just not those.”

Is there still value in the one word exact match domain words (like clothing.com)?

Fishkin: “I personally wouldn’t do it. I would be much more inclined today to say… Look, there are people today who would invest in clothing.com. They think it has value. They think they could build a brand around it.

I would absolutely say that a short, pronounceable word that has no meaning but could be a memorable brand, is far better. So I would take Zappos over Shoes.com any day.”

What about actual words that are not the actual keyword that you are targeting?

Fishkin: “It’s plausible, but I think it is actually really challenging. I’ve seen a lot of challenges around this re-branding of a name that means something else. I don’t know if you remember, but Jonathan Sposato here in Seattle where I live, he was the founder of picnik.com. They struggled for years.

Picnik was a photo editing, storage and manipulation website. Sort of in the early days of Instagram and those kind of things. Picnik was a big player. They were bought by Google and probably integrated into Google Photos eventually.

The struggles over the years to get that domain name to mean the right thing to the right people. And to get over the cognitive dissonance between the slightly misspelled version of the word with the K at the end.

Lemonade (the insurance company) is I think a little bit more like Amazon where it can be brandable. It is definitely doable. I personally would not choose it, because I would not want to deal with the baggage and challenge of association. But I think a decent brand builder could use it.

The bank in Portland, Simple. They have been moderately successful I would say, building up a brand around it. It helps that the word is a adjective rather than a noun.

For you to rank you need to outrank the other meanings of the word

Fishkin: “Right. You have to get some serious traction and then outrank a lot of other things. There is almost certainly going to be other brands that also use the term simple. The same thing is true with Lemonade, right? You’ve got to outrank a Beyonce album?! Oh, man.

For that reason alone, I wouldn’t take Lemonade.com. Especially because there would be the natural and perhaps very reasonable accusation that you were trying to [piggyback of the album]. Especially so close to that albums release.

If it were talking 10 or 15 years on, its a different story. If you want to registered Thriller.com today, I don’t think anybody is going to complain that you are stepping on Michael Jackson’s toes. But if you registered Lemonade.com today, I could see a lot of Behive fans being…

The value of anchor text and exact match domain names?

Question: What about the value though, if I do have that exact match domain name – lets say I was selling shoes on Shoes.com – the anchor text that people would use to link to the website is shoes.com. Do you think that still has some value?

Fishkin: “Some, but it is declining every year. And it is much much smaller than it used to be. The really interesting thing today is that Google has got this system that has structure whereby the algorithm builds entity association with keywords and phrases.

I registered SparkToro.com and over the last couple of years, Google has come to associate SparkToro.com with audience intelligence and market research. all the things that the company does. So, the words and phrases that whatever press and reporters cover us with. And every journalist mentions.

I’m on you podcast and you are going to say something about that Rand Fishkin is the founder of SparkToro an audience intelligence software platform. I hope you are going to say that. In the text on theweb page that this podcast lives on.

From that, and hundred of thousands of others, Google is going to build up this entity to keyword association database. They know how to associate, whatever it is, Barack Obama with 46th President. They know to associate Harrison Ford with Indiana Jones. They to associate Andrew Altman with Domain Name Wire Podcast.

From that entity association build-up comes much of the value. In fact, sometimes even greater value then what you saw ten to fifteen years ago with anchor text and exact match keywords. And using shoes.com to link to shoes.com, which told Google that shoes.com was all about shoes and gave them a rankings boost.

It’s not to say that this is completely gone. There is still a fragment of that value left. It is just that you can achieve a lot of the same algorithmic input and value from essentially the entity graph then the anchor text.”

More about Domains and Brandable Names

The Efficient Market Paradox

Two economists are walking down a street, discussing the Efficient Market Hypothesis, when one of them suddenly stops in his tracks. He points to the street and says “look, there’s a $10 bill!”

The other economist looks at him with a mixture of amazement and disgust as he replies in a reprimanding tone: “Obviously, if there was a $10 bill there, someone would have already picked it up.”

What this joke illustrates is the inherent paradox of the Efficient Market Hypothesis. For markets to be efficient, they are active participants. For participants to be active in a market, there needs to be an arbitrage. In a perfectly efficient market, the arbitrage is competent away by the activity of the participants. 

The Markets are Mostly Efficient

No market is perfectly efficient. New information is constantly entering the collective perception of the market. Once information becomes obvious, it will obviously be priced in, when markets are efficient. 

WIth the internet and other technological advancement in data gathering, analytics and distribution, markets have undoubtedly become more efficient. In the early value investing days of Warren Buffett, he would read through Standard and Poor’s manuals, making mental calculations of stock’s intrinsic valuation. Nowadays, this information is readily available and calculated, practically in real time. 

In a podcast interview on the Invest with the Best Podcast, Michael Mauboussin, presented a fascinating statistic:  

“I think that one of my other favorite statistics in the paper is that in 1976, there were less than 1 CFA charter holder, for every public company in the United States, and today there are 27 CFA charter holders for every public company in the United States. So a lot more eyeballs on the companies that are out there. And maybe there is clearly more dispersion in smaller midcap companies. But look, the world is just a super dynamic place. You see these value changes are quite dramatic. You think about 2020 and hardly anybody had any idea what was going to go on. It was really hard.”

Degrees of Market Efficiency

It goes without saying that there are different degrees of efficiency. When you invest in big S&P 500 stocks such as Apple, Amazon or Netflix, you should be aware that there are hundreds of analysts that cover those stocks. You have to ask yourself what kind of an edge you have over those market participants. 

At the same time, there are plenty of markets and asset classes that are less efficient. There are many publicly traded stocks that don’t have a single analyst covering them. Outside of the stock markets there are all sorts of asset classes and markets where an individual can develop expertise and investment edge. Internet domains, for example, is an asset class that has a very vibrant secondary market and dedicated investors. 

There are plenty of $10 bills out there, waiting to be picked up.