Anika Begay
When AI companion startup Friend revealed it spent $1.8 million to purchase the domain name www.friend.com last week, it sparked a debate about exactly how much branding is worth and how startups should spend the money. Founders from other companies like Loom and Public have come forward to share stories of their own domain-busting missions, but the questions just kept coming: Did Friend spend too much on its domain? Will it really make a difference?
Avi Schiffmann, founder and CEO of Friend, told TechCrunch in an email that the purchase has already paid for itself. And there may be a pattern to the madness, since buying up millions of dollars in domain names isn’t particularly new: Tesla paid about $10 million over a decade for “tesla.com,” and mortgage startup Better.com paid $1.8 million for its domain in 2015, the year it was founded. And according to some reports, OpenAI apparently paid $11 million for “ai.com.”
Alex Harris, co-founder of startup marketing firm Fiat Growth and founder of GP at early-stage venture capital firm Fiat Ventures, told TechCrunch that choosing the right name, domain, and branding can have a dramatic impact on a company’s growth.
The right name or domain can help startups be not only easy to find, but also easy to remember, Harris said. He added that “.com” domains are king (sorry, “.ai” companies) and shorter is always better when it comes to names or domains.
“In many cases, the name is fundamental when there is word of mouth [promotion]”, Harris said. “The name is easy to spell, easy to say. These are some of the things we talk about that are really very simple, 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 often you want customers to interact with your business. If it’s a consumer product that people will turn to often or software that companies will use every day, coming up with something unique and memorable, like Google or Twitter, might be a smart move.
And if a company’s product is something that users turn to less often, or only when they need it, it’s best to choose a name that’s generic enough to pop up easily in search engines.
“If you [are] a product or service that [people] “They won’t necessarily use you very frequently or maybe when they need you, they’ll Google you,” Toubia said, pointing to how someone might look for a locksmith if they were locked out of their apartment.
And for startups that customers don’t interact with on a daily basis (think healthcare companies), most of the larger ones, like Spring Health and Cityblock Health, all have “health” in their names to clarify what they do, and probably for SEO reasons, too.
Harris believes that choosing the right name and domain also adds a touch of legitimacy to a business. A professional-sounding name and domain help people trust a business if they’ve never heard of it before, whether they’re customers, potential hires, or even investors.
“We all receive emails from [companies] with a super long domain or a weird domain extension, and it delegitimizes it,” Harris said. “If you have a domain that’s desirable, [people] Be careful.”
Harris also believes that spending $1.8 million on a domain, as Friend did, isn’t as crazy as it might seem at first glance. He said that if buying that domain helps the company’s business, which he expects it will, that purchase will pay for itself over time. And a good domain like that can double as solid IP that can be sold if needed.
Attention.com
Larger companies can probably afford to spend millions on branding, but does it make sense for startups that are still developing a product and bringing it to market?
Harris and Toubia both cautioned that there are things to keep in mind here, of course. In Friend’s case, both said that the amount of money spent on buying the domain name will only be worth it if it doesn’t prevent the startup from actually building a product.
“The name is important, but you have to sell and develop a product,” Toubia said. “If you’ve already burned 70% of your money and you don’t have a product, investors might not be very happy about it. That could hurt your ability to raise [more money] in the future.”
There are clear benefits to locking down your trademark early, but companies also need to make sure they don’t paint themselves into a corner with a name or brand that could make it difficult for them to change direction later, Toubia said. If a company completely changes its business later, or chooses a name that’s subject to legal action, that initial trademark could prove costly.
It can also be risky to choose a name that is too similar to another company’s. If the companies are in very different industries and wouldn’t confuse a potential customer, it probably won’t matter. But the stakes change dramatically if a company with a similar name commits fraud or another act that could lead to a less-than-ideal association.
Even in less drastic terms, if a name is too similar, it could simply cause general confusion, Harris said, as was the case at former New York City Mayor Rudy Giuliani’s press conference at Four Seasons Total Landscaping a few years ago.
Regardless of how Friend’s decision to buy their expensive domain turns out, both Harris and Toubia said the fact that we’re talking about their decision at all shows their strategy may already be working.
“It’s kind of like naming a baby,” Harris said. “You get to the point where you say, I don’t care anymore; these five names are fine, just pick one. In that moment of frustration, be patient and keep going. That’s very important. Don’t settle for something because it’s easy, because it’s cheap. Think about the resources available and who you’re competing against.”
