Leasing Domains: My Advice on What a Business Needs to Think About When Leasing a Domain

Dec 31 2012

There is no doubt in my mind, as prices rise, there will be more leasing of domains. Leasing makes sense for many businesses,  for others it may not.  There is really no sense in discussing the domain owner’s side of the model because it’s all win.  They get cash flow AND hold on to their asset.  The real discussion here is for the lessee.  I operate on both sides of the model and feel I understand the benefits to both.  The first question I ask myself is.  Why would a business rent a domain and build a market on someone else’s domain? Building type in customers, building links, PageRank, and increasing the value of the other person’s domain when it is only being used for a defined period of time.  The answer is simple.  Because you can build up a business cheaper and faster with a premium name. Leasing will be especially advantageous for two specific types of businesses.  A business that doesn’t have the cash to outright buy the name and two, a company that wants to use it for shorter term marketing.  Whether you should buy or lease, it really comes down to cash, cash flow, and circumstances.  What may be a big expenditure for some could be a drop in the bucket for another.  Fortune 500 companies will throw millions at a small campaign and 10 or 20K is nothing to spend on a domain to coincide with the message.  But what if you’re confident that you have a business model that will work, are cash poor,  but need a premium domain to “tip” the model?  That’s where leasing could be your best approach to building your business.   If you choose lease, here are a few important things, in my opinion, that I think you need to think about.

1.  Get a lawyer.  The most important thing you’ll want to make sure is that your paperwork is in order.  Your lease agreement is the key to your existence.  The time frame, the possible options to buy, “deal breakers” etc.  It needs to be a solid business contract.  Do not rely on the domain owners contract any more than you would a realtor’s.

2.  Do not make your brand name the same as the domain.  If you lease telescopes.com don’t make your brand telescopes.com.  Build a brand that will always be yours.  John’s Telescopes will serve you better in the long run.  If you build a good name and you have to change domains they will follow you to another domain.

3.  Leasing a domain is not the same as leasing a building.   It is not apples to apples.  A brick and mortar comparison would be if you leased a building in the middle of the desert with a few pre existing roads that lead to that building.  The better the domain the more roads.  After leasing that building you built more roads in.  You put out posters all over the world that had a map of these roads that lead to your building in the desert.   Your lease ends and now you are forced to move to a new place in the desert.  With roads not built, no maps put out.  That’s what changing a domain is like.  Perhaps not that drastic, but the same idea. In brick and mortar if you changed leased buildings for you store, it’s as simple as putting a “we have moved” sign in the window or a few ads in the paper.  In both scenarios your customers will find you if they want to as long as you give them something to search for. Like John’s Telescopes.

4.  Spend the last few months of your contract forwarding to your new home.  For the reasons above, make sure you control the move and allow your customers and Google time to find you.

5. Track all your data, leasing gives you a test drive.  Find out the REAL value of that domain.  A good domain can put you head and shoulders above your competition and now you have the data that proves or disproves it.  You will have the opportunity to test to see if the domain you are leasing is everything you hoped it would be.  You get to test drive the car before you buy it.  If there is a chance you are going to buy it, try and have something in the contract that has a set price or range so it is an even negotiation.

6. You are going to have to discuss visitor tracking with the domain owner.  As a business owner I absolutely don’t want any of my visitor information going to a 3rd party that can use it or sell it.  As a domain owner I want to make sure that the lessee is not getting my domain banned from Google and ruining it’s value.  My opinion is you don’t need Google analytics to find out if your domain value is being compromised but that’s something that needs to be discussed and finalized in the contract. But the domain owner needs SOME numbers to be able to give to the next person.

7.  There is huge value in product domain type-ins.  It is true and the domain owner will sell you on this.  A domain that used to have a product or company on it probably already gets traffic. Traffic looking for something.  You may be able to offer those visitors what they are looking for.  A type in is much more valuable if it’s a product domain because they are most certainly looking for that product.  Hopefully a product that you have.  The linked visitor still has value but what they are coming for depends highly on what link brought them to the domain.  Know those numbers before you lease

8. Have the site built BEFORE you lease.  There is no sense paying for a domain while your site is being built.  You can build it anywhere and then transfer it over.

9.  Look at your domain as a marketing tool.  It is used to increase and enhance sales.  You are going to be disappointed if you think that having a category killer domain is all you need to succeed.  A domain is only a tool not a business model.

10. Don’t let them put “leased to” or put that it’s leased anywhere in the public forum.  Leased means temporary to many people.  You are building reputation and the appearance of being the best in the category by having this premium domain.  Don’t ruin that making it public that you’ve leased.  You think the rappers driving the Ferraris want you to know they are leased by the record labels?

 

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Outsmarting the Dumb, Outworking the Smart

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3 comments

  1. Niko Bellic

    Regarding 4th point:

    If a lessee ultimately want to redirect the leased domain to some other domain after some period of time then why at first place he is going for a leased domain. He can acquire that particular domain from the start only.

    He can also acquire his favorite domain in ccTLD of his native country which makes more sense instead of developing website on a domain of someone else. Some can argue that the benefit of developing on a ccTLD will go in favor of the .COM owner but i don’t agree with this at all as there is no proof for this statement.

    There are so many domain extensions present today that will make the concept of leasing domains obsolete and ineffective.

    So the other day a car manufacturing company in my country launched a new car named XUV. So instead of leasing or purchasing the domain XUV.COM they decided to go with XUV.com What a smart move according to me?

    JS

  2. Niko Bellic

    LoL
    Wordpress removed some part of my above comment because of angular brackets i guess.

    So the other day a car manufacturing company in my country launched a new car named XUV. So instead of leasing or purchasing the domain XUV.COM they decided to go with CompanynNameXUVModel.com What a smart move according to me?

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