Seven hundred thousand dollars is a heck a lot of money. For that kind of money you can build quite a business on an $8 domain name. The buyers of the domain Cat5 were buying more than a domain name. They were buying a company. A company that is built on Google giving more juice to keyword domain names and in my opinion, even at those rates, a fair buy.
Runningshoes.com is on page one, 5th result, for the term running shoes. A huge, ever increasing search term. They appear with the big boys in the shoe/running market Roadrunner sports, running warehouse, and runners world. All companies doing tens of millions of dollars worth of business. For a mere $700,000 Cat5 has become a top 5 player on the internet for running shoes. A market that is growing at 4% a year despite its massive size. According to the Running Industry.
SGMA (2) reported $3.35 billion in running footwear sales, up 6% in 2009. While total athletic footwear sales dropped -0.8% across the board, running shoes topped the list and reported the highest percent gain for 2009. The only other athletic footwear category to report an increase was outdoor/adventure shoes at 4% for the year, while all others reported a decrease. Running shoes are projected to increase to $3.49 billion (4%) for 2010.
The days of typing in domains are slowly coming to an end with most people starting their search with Google. The result is that the ranking of the domains in Google is as just as determinate of price as the domain itself. If the domain is also a generic keyword then it just multiplies the value. The amount a company is willing to pay to for existing ranked generic keyword named businesses is growing each day. Advertising on a national level is not cheap. The cost of a 30 second ad on prime time television is over $100,000 not counting production cost. Paying $700,000 for a site that comes up first page for the 137,000 monthly searches this keyword receives each month is not preposterous . According to Chikita research runningshoes.com should get 5% of the traffic at the 5 position (see chart below) . That would mean they would average 6800 clicks a month from their rankings.
At a CPC of $2.12 for running shoes they are essentially getting $12K a month in free advertising and that is just for the term running shoes. I imagine there are many other terms they rank well. An $8 domain will not rank on the top page here no matter how much money you spend as long as Google keeps up it’s current algorithm. In order to gain customers you will have to buy adwords. At $2 dollars plus per lead you have a much tougher road ahead.
So before you dismiss the big price paid for the domain you have to look at the relative cost it takes to start making money in the running shoes sales market. For someone that wants to have a chance to make money right away, it doesn’t get much better than this. Most people who say the cost was too much either don’t have enough money to understand or simply don’t realize the costs of instant access to a billion dollar market. I think it was a fair price and will actually be considered a great buy in 10 years.
From where I m google seach shows me ranked on top position 1.
So I assume buying worth it’s price. The only thing is that their website doesn’t looks professional, even logo is like my son design it! I thought that it’s a website like we see thousands with drop shipping or affiliate products. My advice if they read this re-design everything and pur a real Shoe store manager/marketing person behind it.
I agree with you Shane. Another example is sex.com the biggest domain sale ever. Sex.com is already ranking no. 2 position in google india for the term ‘sex’. The no.1 is wikipedia, which i think sex.com will easily beat and secure the no.1 ranking for the term in upcoming months……….
Would you risk putting $700,000 into a $8 domain? I would not.
If it did not work out all you would have to your name is a measly $8 domain, but if it does not work out with RunningShoes.com you still have a great asset and one good enough to sell the dream of development to the next guy or gal.
Great investment in a domain. If it were me I’d care little about page one of Google…….Google giveth and Google taketh away. 🙂
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Obama,
That is very true. They will always have the domain name
first of all the entire premise of this article is wrong any 8 dollar domain can rank on google..if you understand the algorithm…you have to use numerous seo tactics…and for 700k you can get a lot of programing accomplished and you can keep it up with blogs,pictures,social elements.
in addition google is only one one channel for national ads..you still have fb,twitter you can use pictures,bing,mobile…wide open, foresquare when you start writing fictious info be ready to back it up.
domainguy,
You seo people are all the same. You think you can SEO yourself to the top every time. The fact of the matter is they bought a fantastic name and a business. With a little effort they will most likely stay on the front page of Google because of their name if the present algorithm stays the same. I don’t have to back up anything. I am right. Runningshoes.com filled with running shoes for sale and info on those shoes has a HUGE advantage that no amount of foresquare is going to overcome. I am not saying that it is the best buy ever nor the fact that the guys at runningshoes.net can’t even do better. Merely stating that I thought the buy was a fair buy. And I’m officially taking you off my Christmas card list for being an ass.
Guys… there is only one RunningShoes.com
This was an excellent purchase. They have not only locked down the best domain name in the running shoe industry they have also taken away the opportunity away from their top competitors.
I’m sure they have purchased how many running shoes they will have to sell to pay this purchase back and the increase in business will pay them back forever.
Great move and I’m sure when people read this thread decades from now the price of 700,000 will be seen as a bargain.
A follow-up podcast/interview with Cat5 at PracticalEcommerce reiterates what you say that, “were buying more than a domain name” — they state that the SE rankings added significant value to the domain name (was #1 at the time they began discussions), and that the prior owner had a site live since the early 2000’s and had built up links and traffic.
Interview link:
http://www.practicalecommerce.com/podcasts/episode/1564-How-to-Spend-700-000-on-a-Domain-Name
end users always have a more definitive and purposeful plan on using a domian name than a domainer looking to buy and resell at a profit. Names like wintercoats.com suddenly look like 6-7 fig names. Again it is the value to the end users and they almost always pay more….