Looking Back to the Sale of Toys.com
As we all remember, Toys.com sold for $5,100,000 back in March. Being in the domain industry, I am someone who understands dictionary word domain names can be worth a lot of money, especially very generic ones such as Toys.com. But the more I think about this sale, the more I wonder whether a domain, even as generic as it is, should sell for anywhere over $1,000,000.
My feeling is that a big company can make good use of any quality domain name. Whether that name is Toys.com or that name is PayPal.com for example, both companies have been able to make a name for themselves.
Why does a company need to spend so much money to buy a generic dictionary word domain name when they can buy a brandable name for so much less and most likely do just as well with it.
While PayPal.com is worth a lot more today than the company purchased it for long ago, I can almost guarantee you had PayPal not become what it is today, the domain name would be worth a lot less. PayPal isn’t even a great brandable name in my opinion, but the company has been able to do wonders with it.
I’d love to hear your comments. Call me crazy about my opinion, but just know that many people outside of the domain industry have agreed with me on this and think I’m crazy when I tell them the sales prices of some of these domain names.
“But the more I think about this sale, the more I wonder whether a domain, even as generic as it is, should sell for anywhere over $1,000,000.”
Who cares what anyone thinks some “should” sell for. What it “is” worth is all that matters and the fact is lots of domains are worth over $1 million.
“Why does a company need to spend so much money to buy a generic dictionary word domain name when they can buy a brandable name for so much less and most likely do just as well with it.”
Do you really think a made up brandable name will do just as well for a company as a highly valuable generic such as toys.com?
I get the impression you are pretty new to the industry, it is an argument commonly made by non or new domainers who don’t understand that success with a bad domain is not the same thing thing as the domain being unimportant. Some people build great hotels on less than great land, some people paint amazing pictures on cheap canvas, some people have almost no education and still become millioaires. Cool…but at the end of the day those factors were likely all a hindrance to success.
(btw your form doesn’t work well-seems to delete text when you click on anything)
Candy.com will have close to 100% recall rate after one ad. Their competitor without a great name will have to show their ads to people at least 10-20 times before people may remember their name. For internet-centered company it’s so worth it to spend some percentage of their advertising budget on the best name this amount will buy.
Consider looking from the point of Organic and type in traffic and add the competition to obtain such domains. Many dropped off at 3.1 million on this toys.com auction.
(btw your form doesn’t work well-seems to delete text when you click on anything)
Check before clearing the form. If you are using Javascript then add a if loop to check ob the form is empty.
The irony is that it is the non-Internet usage that can make a great generic dotCom worth millions off the bat. Do you know why businesses pay Madison Avenue millions of dollars? It is simply so the public can remember their client’s name on a billboard, newspaper page, magazine page, radio spot or television commercial. Yep, that’s it in a nutshell. It all comes down to the herd’s memory factor. A domainer blogger wrote that the #1 dilemma facing Madison Avenue is that they’d still rather sell a client a $2,000,000 eight week advertising campaign than buy their client a $2,000,000 mega-domain that will pay dividends forever.
Simple!
I had never heard of National A-1 before the auction.
But I know what Toys are ! And now, everytime I type in Toys.com on my
browser, I end up on ToysRus.
now repeat that with the millions of others who were not aware of the auction but who visit Toys.com
Tough luck for National A-1 , that’s millions of potential customers they would have connected with.
Now, think Toys, Get ToysRus.
(National A-1 is out of the picture! forever..)
you gotta love the power of generic names!
= about the same as a 60 second slot during Superbowl = not much to big business
It might have been a mistake for them if they overpaid for the domain, but the price they paid seems fair, so in addition to using it, it is also an investment. It may not ever be worth more than they paid, but it is not like they threw $5 million out the window like they do when they pay to advertise offline.
Mainly, if they spend $100 million a year on advertising, then spending a small percentage of that on having a very memorable domain is worth it. Plus, it gives them clout and makes them sounds like the biggest company in the industry (which they are). Maybe it would have been a better domain for an up an coming toy company, like what happened with the candy.com sale, so it would instantly catapult a small company into the big leagues. But, it is also a risk for a small company to spend that kind of cash. For KB Toys, it was chump change. They can always sell the domain if they need the cash back.
I think you’re completely underestimating the size of the market toys.com completely dominates. PayPal.com is in a completely different class. IMHO Toy-r-Us STOLE Toys.com for “only” 5 mil.
“Why does a company need to spend so much money to buy a generic dictionary word domain name when they can buy a brandable name for so much less and most likely do just as well with it.”
Hi,
I believe you are missing the point about a domain like Toys.com.
Domains like Toys.com, Candy.com, etc, are not just dictionary words or just generic domain names.
Toys and Candy and such are Category Defining Domains.
Imagine every toy having the imprint Toys.com or every candy bar proclaiming Candy.com.
The prestige, the Instant Credibility, the $ saved on advertising is priceless.
No brandable domain is comparable right from the start as those powerhouse domains are.
I attended the eToys bankruptcy auction in Wilmington, DE back in February and the original bidding for Toys.com ended around $1.25MM. National A-1 was unaware of the auction and petitioned the Bankruptcy Court to re-open bidding, at which time they and Toys R Us went head to head until National A-1 pulled out @ $5MM, and TRU closed the trade @ $5.1MM.
For TRU, the domain is “priceless” as it knocks out a potential competitive threat. They’d have probably paid $10MM if necessary. Had National A-1 won @ $5MM, it would have taken a very long time for them to make it a profitable investment from running an eCommerce toy business, which has proven to be very difficult due to seasonality, pricing competition, the “fad” element of the toy business, and other factors.
Lesson is, if two deep-pocketed, serious buyers exist, you can throw out all market comps — it’s just like a rivalry game in sports….the other factors at play supersede “worth”.
More coverage from the February Toys.com
http://www.benpadnos.com/2009/02/etoys-bankruptcy-auction-february-4-2009/
http://www.benpadnos.com/2009/02/toyscom-sells-for-51mm/