When you are in the process of developing your digital identity, you will likely look for a domain name that faithfully represents your brand. On the other hand, while searching for the ideal top-level domain, you might wonder, “Why are some domains so expensive?” When you read stories in the past of domain names selling for six or seven figures, you might have wondered to yourself, “Who would pay for something like that?” at that time. Why would people pay for something like that?

Welcome to the world of Premium Domains!

This article solely focuses on answering the burning question: Why are premium domains so highly priced, and what purpose does this serve? Please read further if you are still curious and want your question answered. 

What is a premium domain? 

A premium domain is a domain that is already owned by someone but is being resold to a possible end user at a higher price than the original owner paid for it. (Alternatively, with the introduction of new top-level domains, a domain that the registry has set aside as Premium stock and, as a result, costs more than the standard price.) These domains are typically short, contain many keywords, and (in most instances) come with a premium price tag. They are, nonetheless, considered among the most valuable domain names available on the market, even though they are more expensive. 

A domain name that is of high quality and has worth in and of itself. Memorability, brand alignment, and the potential to attract web traffic are all characteristics of premium domain names. 

Domains are subjected to market forces

The short answer is demand and supply to answer the question about high prices for Premium domains. Short, easy-to-remember, and catchy domains are sought after, and businesses and brands are ready to pay a premium. In all honesty, there is a lot more to the pricing of Premium domains than just demand and supply. Here are a bunch of factors that affect the domains and their pricing. 

a) Registrar’s role and their costs in wholesale

Registries frequently sell domain names in bulk to Registrars. On the other hand, Registries trade hundreds, if not thousands, of domains, whereas Registrars only sell one or a few domains to individuals.

Domain names are owned by registries responsible for determining wholesale and basic prices. Instead of creating a markup on their own, they offer names to Registrars at wholesale prices. After that, registrars add a markup to these prices before selling them to customers, allowing them to profit. In addition, Registries will occasionally provide Registrars with discounts that enable them to purchase domains at reduced prices compared to the usual retail price. This privilege is especially advantageous when dealing with large quantities of domains.

b) Registrars’ pricing strategy

Registrars facilitate purchasing a domain name by making it easier instantly. They don’t buy names from Registries in bulk to resell later. Instead, registrars buy a domain name directly from the Registry when a registrant or end user chooses to buy it. As a result, Registrars can design pricing models directly applied to clients at the point of sale, guaranteeing a quick and easy transaction procedure.

To make lumpsum profits, Registrars need to:

  • Pay back the amount they spent on a particular domain name.
  • Cover overhead and other associated expenditures.
  • Fulfill client requirements about domain pricing.

c) The effect of renewals and sales

Of course, a Registrar’s pricing strategy is influenced by their commercial performance:

  • Registrars may raise prices to cover the costs when a registry raises wholesale costs.
  • Registrars may use promotional pricing to draw in new business.
  • Registrars may choose to remain with a pricing strategy that yields predictable results when business is flourishing.

Initial sales and domain name renewals are significant transactions for domain registrars. Therefore, a Registrar’s price will depend on its capacity to handle both.

So, how is the price justified? 

Many will tell you that all costly domain names are premium, but that’s false. This leads us to the question: Why are some domains premium?

On the other hand, a high price and good quality can justify a higher price. 

Quality is the factor that distinguishes a domain name from a premium domain name. Because of their benefits to a website, premium domain names are associated with a higher price tag than other domain names. There are governing factors such as these: 

  • A robust domain history, which includes a positive reputation, rich link juice, and the presence of solid traffic statistics. Because of this positive history, a premium domain name gets a higher page position in search engines, generating more organic visitors to your website.
  • Keywords that match the name of a product, service, industry, or geographic area. A premium domain name establishes an instant internet brand, saving time and money on marketing.
  • Words, phrases, and keywords that are frequently searched for, meaning that users type them in while they are searching. It is easier to recall names or short acronyms.
  • A name for a domain that includes a word or phrase that pay-per-click (PPC) advertisers are also competing for. The result will be an increase in traffic.
  • Words that can be used as names for brands. Words or phrases that are currently popular can fetch enormous amounts, but they may only be popular for a limited time.

These factors make the case for a domain priced at a premium, but more is needed. These factors positively reflect the market, especially regarding online presence and identity. Let us look at its benefits below.

Benefits of going for a premium domain

The difference between a premium domain name and an ordinary domain name could be the deciding element in determining whether or not one will achieve complete success or content with an average brand name. Acquiring a premium domain name presents investors with a fantastic opportunity to construct superior portfolios and reap considerable profits from their investments. The following is a list of the primary advantages of transferring a premium domain:

Short and sweet:

Shorter domain names are easier to remember. A concise, memorable, and easy-to-remember top-level domain name is highly respected for its enormous value regarding an online presence.

Marketability:

A premium name tends to give users the impression of being more trustworthy, encouraging them to visit your website. When a particular domain name is updated rapidly, it immediately attracts instant trust.

Brand association and identity:

Using a perfect name from the list of premium domain names may establish a strong association between your brand, the products and services you offer, and the people who visit your website. Avoid uninteresting conversations, business jargon, and terrible recommendations made by streaming services.

Search (SEO) friendly:

SEO stands for search engine optimization. A doubtful domain name is likely to have a lower click-through rate. When selecting a domain registrar, consider how your brand name appears online and whether it can attract more clients. This is because a domain plays a vital role in the SEO. 

Conclusion

When you buy a premium domain name, you invest in multiple aspects such as the brand, domain, marketing ability, digital presence, friendliness, etc. So, when buying a premium domain name, avoid considering only price as a factor. This does not mean you buy the premium domain blindly. Also, consult your premium domain provider to understand the best price. Go forth with your premium domain search on their website. 

We hope you have understood this bit about premium domains. Please feel free to reach out to us in case you have any doubts or queries.Â