Why are companies willing to spend millions of dollars on domain names?

Some of the numbers in high-priced domain name transactions are eye-catching, but historically most high-value domain name transactions have not been made public. This situation is changing. More and more startups are realizing that a top-level domain that matches their company name is not only worth the investment, but also a symbol of company pride. As a result, founders who have purchased top-level domains are beginning to share their stories and highlight their successes.

1. Who spends more than $1 million on a domain name?

This topic started to attract attention with the artificial intelligence companion Friend. The company made headlines for its $1.8 million purchase of Friend.com. In a conversation with Friend founder Avi Schiffman, he said that the top-level domain has already paid for itself, especially since the acquisition attracted widespread attention from the industry media.

Recently, the CEO of investment app Public.com revealed on X that they paid $900,000 for their super premium domain. Public understands that the key to success is to quickly establish customer trust, and a reputable domain name can leave the best first impression.

Similarly, mortgage startup Better.com paid $1.8 million for its single English word domain in 2015. In the mortgage space, domains like this offer an advantage of recognition and trust when competing against a range of traditional competitors.

At Atom, we recently sold Koko.com for $1 million, and Recovery.com was purchased by RehabPath for close to that amount to aggressively drive rebranding. Trust in these high-priced domains is growing, and it should be!

2. Stand out in a competitive industry

Some industries are highly competitive, with a variety of similar products vying for the audience's attention. Other industries, however, are highly commoditized and there is a real need to be an industry leader. In this environment, super-premium domains offer an unparalleled competitive advantage, and category-defining domains offer even more definition.

For example, Chess.com has capitalized on the online gaming boom brought on by the pandemic and streaming to attract 57 million monthly active users by early 2023. Its closest competitor, Lichess, whose domain has two more characters, only has 4 million users.

This is exactly what the RehabPath team was looking for when they purchased the domain from Atom. The company is dedicated to connecting users with mental health and addiction treatment providers, providing advice and guidance on mental health issues and treatment options. With a competitive market, it was critical to have a domain that reflected its values, promising a healthy future for those struggling in the mental health field. As founder and chief product officer Jeremiah Calvino said, "We were looking for a name that encompassed everything we are, so finding Recovery.com was the perfect choice for us."

In my opinion, like many top-level domains, the single word "Recovery.com" conveys more than many 1,000-word "About Us" pages. In the months following the rebrand, the domain has proven to be a success for the company. Calvino said, "It's great to have a name that reflects what we do, and a name that defines the brand category." He reported an increase in positive brand associations with all stakeholders, from employees, healthcare professionals to consumers.

3. Show ambition

The purchase of Friend.com and the media response have proven that the purchase of high-value domains is an important way to enter the market. The $1.8 million that Avi Schiffman paid for Friend.com demonstrates the brand’s belief that it can become the industry’s leading AI companion.

AI companions are emerging technology and there is no market leader yet. While social apps like Snapchat have integrated AI companions, there is still a level playing field. Friend.com’s ambitious acquisition gives it a significant advantage in terms of awareness and visibility.

Similarly, our own branding from Squadhelp to Atom.com also demonstrates our ambition to become a well-known brand in the B2B field, and this strategy has shown immediate results. Within three months of the rebrand, our revenue increased by 240%, CPC marketing spend decreased, and so on.

A top-level domain name allows us to create a compelling brand image: from Atom to Friend to Better. For a brand that aims to define an industry, the choice of domain name is not accidental, but an important part of achieving the goal.

4. The digital asset of the Internet

Finally, although you may be tired of hearing it, the fact remains: domain names are indeed the digital assets of the Internet, and are generally considered to be one of the more secure digital assets. According to some research, the total value of the domain sales market will reach $9.5 billion in 2023, up 6.1% year-over-year.

So at least your domain name will likely bring in some return. If your startup ends up being acquired, the value of your super premium domain will be reflected in the acquisition (and further increased by the added value of your brand). On the other hand, if your startup fails, the domain name is still a valuable asset that can help you recoup some funds and move on to the next great idea.

You can also choose to spread the cost of the super premium domain name. Leif Abraham, CEO of Public.com, explained this mentality at X: "We have three years. If we don't succeed, the domain name doesn't matter." While this approach negates the security of buying the domain name outright, it seems to be an important part of driving success. From a pragmatic perspective, spreading the cost can free up funds to help ensure your success in your startup.

5. How a million dollar domain name can bring returns

One thing Friend, Better, Public, and Recovery.com have in common is that they all have the potential to be industry definers. That's why they need top-level domain names to demonstrate their beliefs and make an immediate impact on customers and peers. These brands understand the brand power of a reputable domain name, but not all tech experts share this view.

As Avi Schiffman of Friend.com puts it, “Many pure tech experts lack respect for marketing/distribution because it’s not super product-oriented and therefore overlook how powerful it can be. If you’re one of those people, it may be time to reconsider.” Avi is confident about Friend’s future, in part because of the conviction the team demonstrated when purchasing the domain, while Jeremiah Calvino of Recovery.com finds that a top-tier, industry-defining domain name “reduces the time it takes to build trust and visibility in the market.”