Domains Don’t Net as Many Buyers
How much is a name worth?
On the Internet, at least, the answer is: A lot less than it used to be.
Witness Procter & Gamble Co., which last week announced it sold the Internet domain www.flu.com for an undisclosed sum. The sale made headlines, but lesser known is the fact that the domain, along with 99 other names the Cincinnati-based consumer products giant put up for sale, has been on the market since June--with no takers until last week.
The “dot-bomb” phenomenon is rippling through the once white-hot market for domains.
“These days, saying you’re a ‘dot-com’ basically makes people run screaming in the other direction,” said Mark Radcliffe, head of the intellectual property law practice at Gray Cary Ware & Freidenrich in Palo Alto.
P&G; said the price paid for www.flu.com more than recouped the roughly $350,000 expense of maintaining the company’s 2,000-plus domains for the past five years, but executives acknowledge that they may have arrived at the dot-com party just when the punch bowl was running dry.
“A number of Internet companies have since dissolved, and those that are left have less free cash to spend now than they would have before,” said P&G; Finance Manager Erik Roberts.
For P&G;, this represents one of the biggest missed opportunities of the Internet gold rush, which is ironic because the company’s timing was impeccable when it came to snapping up domains in the first place.
In 1995, recognizing the name grab ahead, a fast-typing P&G; employee registered more than 2,000 names related to P&G; products. Those included product names such as www.crest.com, www.pampers.com, www.tide.com and www.pringles.com. The employee, whom P&G; says it cannot locate, also registered generic domains such as www.diarrhea.com, www.headache.com, www.pimples.com.
Today, www.headache.com brings you to P&G;’s “little corner of cyberspace,” a page with a list of P&G; products--oddly, none having to do with headache remedies. Typing in www.pimples.com summons a Web page for Clearasil, P&G;’s acne-fighting creams.
By acting early, P&G; managed to dodge the domain disputes that emerged from a free-for-all that ensued in the late 1990s, when cyber squatters (or cyber entrepreneurs, depending on one’s point of view) were able to charge high prices for popular names that they were able to register first. The melee peaked last December when www.business.com was sold by a Texas businessman for $7.5 million, a record that holds today.
Did the buyer, a start-up funded by Santa Monica incubator ECompanies, get its money’s worth? “Give me a break!” guffawed Radcliffe.
But executives at Business.com probably would beg to differ. The company landed $61 million in financing in September from a who’s who list that includes the Financial Times of London, Cahners and Mort Zuckerman, owner of U.S. News & World Report magazine. Still, the site--an online business directory--has yet to pop up on the radar screen of Media Metrix, which logs the traffic of Web sites with more than 200,000 unique visitors a month.
P&G; avoided having to fork over a king’s ransom for its domains by registering everything it could think of in 1995, long before most cyber-squatters made their claims. The company pays about $70,000 a year to maintain about 2,000 names it has registered with Network Solutions Inc., the company that keeps the master list of domains. For P&G;, which pulls in close to $40 billion in revenue a year, this is small change. But that didn’t stop the sharp minds in P&G;’s global licensing group from reevaluating their strategy on Internet names.
“In 1995, we went out and registered everything we thought would be potentially useful to us as a company,” Roberts said. “We have a large beauty-care business, so we purchased beautiful.com. Since then, our strategy has been to use specific brand names for online marketing, like Covergirl.com. Things that are more generic, like beautiful.com, we’ve chosen not to use. But clearly, a domain like beautiful.com is valuable, and we have chosen to extract that value through this program.”
The program involved putting 100 generic domains on the market, including www.flu.com, which was advertised for $1.4 million before it was sold last week to a pharmaceutical company whose name P&G; did not disclose. If all P&G; domains sell for the asking price, the company will ring up about $10.8 million, according to Roberts.
That doesn’t mean P&G; will actually be able to fetch those prices, however. Many of P&G;’s names--sensual.com, romantic.com and scent.com--are more suited to e-tailers or business-to-consumer (B2C) companies that are currently dying in droves.
“There’s not as much crazy money floating around,” Radcliffe said. “They missed the window. They should have been selling in 1999, when B2Cs were hot. Today, B2C plays are utterly unfinanceable.”
Had P&G; put the names on the market a year ago, it could have sold them much faster and fetched 35% more, according to Stewart Reynolds, chief executive of EchoArts, an independent appraiser of domains based in Toronto.
Like P&G;, lots of companies are shifting away from generic domains to brand names.
“People are beginning to understand that generic domains are not valuable,” Radcliffe said. “You can’t build up brand value in them. . . . They want something they can trademark and protect.”
P&G; also is fighting the uncertainty being created by the imminent introduction of four new “top-level” domains--or Internet address suffixes--including .pro, .info, .biz and .name.
Although market conditions don’t appear favorable for P&G;’s name sale, there are a few factors working in its favor. Many predict that the dot-com designation will retain a premium over other Internet suffixes, such as .org or .net.
“It’s always going to have a bit of glitter, the dot-com,” said Russell Travis, professor of sociology and social psychology at Cal State Bakersfield. Travis, who has registered more than 1,200 names, said the secondary market for domains ultimately will increase in value because most recognizable domains have been snapped up. “Domain names are only getting scarcer,” Travis said.
In the first nine months of this year, more than 16.1 million names were registered with Network Solutions. That’s nearly twice the total number of registered names by the end of 1999.
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Dot.Name.Game
As the “dot bomb” ripples through the start-up world, domains haven’t been fetching nearly as much as these recent highfliers.
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Up for Grabs
Since June, Procter & Gamble Co. has been attempting to unload 100 domains. For now they lead to its Web site, at right. Last week, it sold its first--www.flu.com-- for an undisclosed sum. Here is a sampling of what’s still available:
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Domain Asking price www.beautiful.com $3 million www.romantic.com 1.6 million www.sensual.com 1.5 million www.sensitive.com 1 million www.thirst.com 850,000 www.dry.com 250,000 www.complexion.com 225,000 www.scent.com 150,000 www.toiletpaper.com 135,000 www.dreamcareer.com 85,000
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Sources: Procter & Gamble, NetworkSolutions, GreatDomains Los Angeles Times
