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Business.com: The $7.5 million domain

Added: (Fri Dec 03 1999)

Pressbox (Press Release) - Jennifer Mack, ZDNet

How much would you pay to own the word 'business'? Is $7.5 million too much?

Not according to Jake Winebaum. His company, eCompanies, just paid $7.5 million for the rights to the domain name business.com.

"We've got a great product that we've been working on here and we think it's the perfect brand for it," explained Winebaum.

eCompanies, co-founded by Winebaum and Sky Dayton, founder of Internet service provider Earthlink Networks Inc. (Nasdaq: ELNK - news), plans to use the business.com site to help create new Internet companies. Business.com will feature a directory service similar to Yahoo! Inc. (Nasdaq: YHOO - news), as well as a number of other undisclosed features designed to "make people's business lives easier," Winebaum said.

"There's a second industrial revolution going on right now because of the Internet," he said. "But there's a huge gap out there because people don't know what's out there and what's relevant to what them."

Double previous record
The $7.5 million transaction is believed to be the most ever paid for a domain name. It more than doubles the previous record established last year when Compaq Computer Corp. (NYSE:CPQ - news) paid $3.3 million for the AltaVista.com search engine domain.

eCompanies purchased the site from Marc Ostrofsky, a Houston-based businessman. Ostrofsky bought the domain three years ago from a European ISP for $150,000. Negotiations over the terms of the deal between eCompanies and Ostrofsky have been going on for the past month, with several other companies also bidding on the right to use the popular domain.

Not everyone thinks Winebaum's aggressive buying tactic is a smart move. Brian O'Shaughnessy of domain registrar Network Solutions Inc. (Nasdaq: NSOL - news) noted that "there were a lot of open mouths around here" when they heard of the selling price. Anya Sacharow, analyst for online research firm Jupiter Communications, called the purchase price "ridiculous."

"There was probably a lot of ways to get around spending that kind of money just by being a tiny bit creative," said Sacharow.

"The value of some of these common words used daily in the English language is starting to boggle my mind," agreed Greg Blatnik, vice president of Zona Research.

Both Blatnik and Sacharow point to companies like eBay Inc. (Nasdaq:EBAY - news) and Yahoo! as examples of brands that took previously unknown terms and developed their own brands without spending millions of dollars acquiring the domain name.

"Just because you've got a popular word doesn't mean you're going to have a popular Web site," warned Blatnik.

But for Winebaum, building a brand in the way companies like eBay or Yahoo! did is no longer an option.

"All those things were launched when no one was doing any television or radio advertising," said Winebaum. "You don't have the time any more and the amount of money you have to spend to really build a new brand is astronomical. We feel our marketing dollars will go much farther because we don't have to explain what it is."

The brand thing
The trend towards shelling out big bucks to create brand recognition on an increasingly muddled Internet marketplace continues to heat up. Just last year, online job site HotJobs.com spent half its annual budget, $2 million, on a 30-second television commercial during the Super Bowl. HotJobs plans to repeat the expenditure this year and several other 'dotcom' companies are following suit.

The practice of 'cybersquatting,' (reserving potentially valuable domain names with the intent to sell them at a profit) received increasing scrutiny earlier this year when the United States Congress passed a law making it more difficult for individuals to register trademarked names. Generic names, like business.com, are generally not affected by the legislation.

The practice of buying and selling potentially valuable names has spawned an entire industry. Sites like Afternic.com and GreatDomains.com appraise potentially valuable domains and also feature domain name auctions. Business.com's record setting sale price may not stand for long. GreatDomains reports America.com is likely to sell for $10 million.

With that kind of money being bandied about, even the skeptics are willing to get into the game.

"I wish I owned all the popular words. I'd be a happy camper," mused Blatnik.

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