When AI companion startup Friend revealed last week that it had spent $1.8 million to buy the www.friend.com domain name, it sparked a debate about exactly how much branding is worth and how startups should spend the money. Founders of other companies, like Loom and Public, also came forward to talk about their own efforts to secure the domain, but the questions kept coming: Did Friend spend too much on the domain? Is it really working?
Avi Schiffmann, founder and CEO of Friend, told TechCrunch in an email that the acquisition has already paid for itself. There may be a reason for the insanity, given that buying domain names for millions of dollars is nothing new: Tesla paid an estimated $10 million for “tesla.com” over a decade, mortgage startup Better.com paid $1.8 million for the domain in 2015 when it was founded, and OpenAI paid $11 million for “ai.com” according to some reports.
Alex Harris, co-founder of startup marketing firm Fiat Growth and founding GP at early-stage VC firm Fiat Ventures, told TechCrunch that getting the name, domain and branding right can have a huge impact on a company's growth.
The right name and domain can help your startup not only be found, but also remembered, said Harris, who added that .com domains are king (sorry .ai companies), and that shorter is always better when it comes to names and domains.
“A lot of times, a name is key to going viral. [promotion]“Names are easy to spell and easy to pronounce, it’s a very simple thing we’re talking about but a lot of people ignore. [them].”
Olivier Toubia, a marketing professor at Columbia Business School, said one nuance to consider when thinking of a name is how frequently you want customers to interact with your business. If it's a consumer product that users use frequently, or software that businesses use every day, coming up with a unique, easy-to-remember name like Google or Twitter might be a wise choice.
Also, if your company’s product is one that users will not use often or only when necessary, it’s a good idea to choose a generic name that will show up easily in search engines.
“If you [are] Product or Service [people] “They're not necessarily going to use you often, and when they do need you, they're going to Google you or look for you,” Toubia said, giving the example of someone who's locked out of their apartment searching for a locksmith.
Also, for startups that customers don’t interact with on a daily basis (such as healthcare companies), most of the larger companies like Spring Health and Cityblock Health have the word “health” in their name to make it clear what they do and probably for SEO.
Harris feels that the right choice of name and domain adds legitimacy to a business. A professional-sounding name and domain helps instill trust in customers, potential recruits, investors, and others who may not have heard of the company before.
“We're getting emails from everyone. [companies] “A very long domain or a domain with a strange domain extension makes it less legitimate,” Harris said. “If you have a desirable domain, [people] Please be careful.”
Harris, like Friend, also doesn't think spending $1.8 million on a domain is as crazy as it might seem. He said the purchase would pay for itself over time if it helps the company's business, which he expects it will. Also, a great domain like that would act as solid intellectual property that could be sold if necessary.
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Larger companies can afford to spend millions on branding, but does that make sense for a startup that is still developing its product and bringing it to market?
Of course, Harris and Toubia cautioned that there's a caveat here: In Friend's case, the money spent on purchasing the domain name is only worth it if it doesn't prevent the startup from actually building a product, they said.
“A name is important, but you need to sell and develop a product,” Toubia says. “If you've already burned through 70% of your cash and don't have a product, investors might not be very happy. That could hurt your ability to raise capital. [more money] future.”
While there are clear benefits to locking in a brand early, Toubia said companies need to be careful not to paint themselves into a corner with a name or brand that will make it difficult to change course later on. That early branding could prove costly if a company decides to completely change its business down the line or picks a name that makes it the subject of a lawsuit.
Picking a name that's too similar to another company can also be risky. If your company is in an entirely different field and won't confuse potential customers, it probably won't be a problem. But the risks change dramatically if a company with a similar name commits fraud or other acts that lead to less-than-ideal associations.
Even if it were less extreme, Harris said, names that were too similar could still cause public confusion, like former New York City Mayor Rudy Giuliani's press conference at the Four Seasons Total Landscaping a few years ago.
Regardless of the outcome of Friend's decision to purchase pricey domains, both Harris and Toubia said the fact that we're even discussing it indicates their strategy may already be working.
“It's like naming a child,” Harris says. “You get to a point where you're like, I don't care anymore, these five names are fine, I'm just going to pick one and be done with it. In that moment of frustration, be patient and follow through. This is so important. Don't settle for something because it's easy or cheap. Think about the assets you have available and who you're competing with.”