Why Defensive Domain Name Registrations Aren’t a Good Deal for Small Businesses (Forbes Cross-Post)

By Eric Goldman

[Introductory note: every article has a backstory, but some backstories are more complicated than others. Earlier this year, I was commissioned by a well-known publication to participate in a point/counterpoint regarding registering domain names in new TLDs. The publication wanted me to argue against small businesses registering domain names in new TLDs, and my piece was to be companioned with a counterpoint piece arguing in favor of registering in new TLDs. After several drafts by me, the publication felt my article (presented below) wasn’t extreme enough; they wanted me to argue that small businesses NEVER should register in a new TLD under any circumstance. Because I couldn’t argue that in good conscience, the publication paid me a nominal “kill fee” and cut me loose. I’ll be interested to see if you think my position wasn’t extreme enough–or perhaps too extreme already! (Feel free to comment at the Forbes cross-post). In any case, I wished the publication good luck finding a credible non-shill who would espouse such a hard line and put this draft into the blog queue for the requisite embargo period. That’s now over, so I’m delighted to share with you what they paid me to write:]

Conventional wisdom says businesses should preemptively buy domain names to keep them out of the hands of competitors, griping customers, pornographers or other malefactors. This process is sometimes called “defensive” domain name registration.

In theory, defensive registrations save money. For a relatively low upfront cost (a single .com domain name costs about $10 a year), a business avoids spending thousands or even hundreds of thousands of dollars trying to get the name back from a malefactor—if it’s possible to get the name back at all.

This conventional wisdom plays on the worst fears of small businesses: If you don’t buy lots of domain names right now, you will forever lose control of your brand, and then you will lose your customers. Your business will be destroyed because you were too cheap to spend a few extra bucks buying just one more low-cost domain name.

Don’t fall for these scare tactics. They are part of a cynical sales pitch from domain name vendors hoping to get your hard-earned money by manufacturing new opportunities for mischievous domain name registrations—and then making you pay to prevent that possibility.

It’s easy for businesses, especially small businesses, to overspend on domain names. [For an example, see the story of Nuts.com.] A small business’ domain name portfolio should consist of one, or at most a handful, of domain names for each brand it uses. A well-chosen domain name, tied to each brand you have, will reinforce your customers’ brand perceptions of you and make it easy for your customers to find you. If you have that, you’ve got what you need. For most small businesses, other domain names are a waste of money.

Think about how your customers will find you. Most customers will find you via search engines or through social media. Some will type in your domain name into their browsers; of those, some folks will mistype your domain name, but often their browser will prompt them to correct the error. No one guesses domain names any more.

So if you control a domain name where your customers can find you, congratulations…and mission accomplished! Does it really matter what other people do at other domain names? These domain name registrations out of your control might be frustrating, but they are typically inconsequential to your goal of maximizing your profits. You’ll only really want to respond when domain names use your trademarks to confuse your customers, and only then when enforcing your trademarks is cost-benefit justified.

Indeed, no matter what you do, malefactors will be able to register variations of your brand as domain names if they want. There are simply too many domain name registration possibilities for you to preempt them all. There are hundreds of top-level domains; plus obvious variations of the brand name (i.e., “brandsucks.TLD” or variations with dashes or hyphens); plus typographical errors of the brand. All of that adds up to hundreds or thousands of possible domain name purchases for each brand you have. And as new top-level domain names keep rolling out, each time you’ll be cajoled to buy more.

Most businesses, especially small businesses, do not get good value from a big portfolio of stockpiled domain names being held “just in case.” You’re spending money to procure and maintain assets that you aren’t using and may never use. For most small businesses, these unused assets produce a poor return-on-investment (ROI).

So what should small businesses do as top-level domains keep expanding? You should treat domain name purchases as another marketing expense and, as usual, invest your marketing dollars to yield the highest ROI.

You’ll usually get better investment returns from ensuring existing and new customers can find you than in investing in unused domain name assets. Take the dollars you might spend on domain names and invest in improving your website’s search engine rankings (i.e., search engine optimization), buying search engine advertising to reach new customers (i.e., search engine marketing) and running social media promotions. After all, search engines and social media are where most of your customers will find you.

You should also invest your marketing dollars into improving your goods or services. In the end, the single best way to compete is to deliver more value to your customers than your competitors deliver. In the Internet age, if you have something unique to offer, your customers will evangelize you. Give them more reasons to sing your praises.

With the launch of each new top-level domain, the marketers will tempt—or scare—small businesses into wasting their money on new domains. Resist that urge. Instead, develop a sound plan for spending your marketing dollars, stick with it, and have no regrets.