One of the things that I've "learned" in the past couple of years of building websites is that some niches have a hell of a lot more competition than others. Life Insurance, for example, is just a tough niche to break into. My takeaway from that is that it probably makes more sense to be a big fish in a small pond that a small fish in a big pond.
However, this article makes a couple of interesting points while encouraging people to just into "big niches":
My day job involves developing and promoting my own small stable of online businesses. However, on a daily basis I devote time to domaining -- finding good domain names to buy. One thing that I have banged my head against in the domaining community on a regular basis is (what I believe to be) a substantial misunderstanding of what makes domain names valuable to online businesses. A domain name's true value lies in its value as a force multiplier. Independent of a domain owner applying substantial force to the domain, it has relatively little value at all.
First, I should make a few caveats:
I buy a handful of domain names each month, so I believe domain names are both useful and valuable.
There are a couple of classes of domain names that are valuable independent of their value as force multipliers. For example, misspellings of popular generic domain names aren't really useful to develop a site on, but they may generate substantial and valuable traffic. Alternately, short commercial .com names (Toys.com, Candy.com and various adult-themed names have been in the news this year) attract substantial easy-to-convert type-in traffic. And there are all sorts of stories about domainers building 5-6 figure a month revenue streams on these sorts of domains.
Here's an example of the misunderstanding that I see often: "The domain name itself takes care of something like 50% of the SEO work" (from a comment on ElliotsBlog.com). I've had other conversations with domainers who have argued that "the domain is the biggest piece of the puzzle" when it comes to building sites.
I don't buy it -- and more importantly, I've never seen a result remotely similar to that. Building websites into effective businesses takes a tremendous amount of work, experimentation, time, patience and risk. Good domains are a useful starting point, but it takes a lot of work to grow a site from "registration fee" money (which the vast majority of domains that people buy and sell every day never make), to "car payment" money to "work for yourself" money. In fact, what strikes me most about the domains that I own is how little type-in traffic there is out there relative to the traffic available from search engines.
(As one data point, I own a single-word commercial .com domain that I have been developing for a bit less than 1 year. Type-in traffic represents less than 5% of the site's traffic; search engine traffic > 90%. And true type-in traffic -- navigation to the site from folks that have never heard of it -- will continue to decline as a percentage of total traffic.)
Domains as Force Multipliers
A "force multiplier" in military speak is a factor that makes a group of soldiers dramatically more effective: for example, the ability of precision-guided bombs to dramatically change the outcome of a war. (thanks Wikipedia) I think that's a good analogy for the utility of most premium domain names.
A domain name is useful for several things: 1. You'll get a small amount of type-in traffic -- people that think "Hey, I want to buy some candy -- I bet there's a website at Candy.com that sells candy." 2. Search Engines give a bump to sites that have content related to the generic terms in their domain name. I don’t think they do this because it makes it easier for search engines to categorize the site — I think it’s because end users are more likely to trust the “brand”. 3. If you’re building a site, it’s easier to get on the phone and explain to someone that you own “Laptops.com” than “Best-Laptops-Around.com”. The person on the other end of the line is more likely to believe that you’re serious with the former domain than with the latter, whether you’re trying to get a link, become an affiliate, sell them something, etc. 4. The domain name — along with your title tag and some text the search engine scraped from your site — appears in the search results. End users trust good generic domain names, so all else held constant, they’re more likely to click on your link.
But, with the exception of type-in traffic, none of these benefits help you unless you help yourself. That is, if you do a lot of work, a good domain name can amplify your efforts. But if you don't do the work, don't expect the domain name to do it for you.
How big of a force multiplier is a good domain?
Tough question, and one that I can't do more than speculate on. However, I think there's a good case to be made that the more competitive the niche you're trying to break into the less useful premium domain names are.
1. In competitive areas, where much of your competition has a good domain name (perhaps a branded domain name), don't expect to see much of a bump because of your domain name. (One industry that comes to mind is life insurance.) There's lots of great content out there and people have been consistently building links for a decade. There's a lot of offline advertising and people trust brands that they know more than generic names. In this scenario, the search engines have lots and lots of trusted content for the most profitable queries. My guess is that the multiplier effect is minimal -- low single-digit percentile. Given that domain names in these niches are expensive, you may be better off coming up with a brandable $7 domain name (ie Insurabilious.com)
2. In areas with middling competition, I think a good generic name can be quite useful. I'm guessing that it can give your efforts as much as a 20% bump. Maybe it becomes easier to attract links than it otherwise would have been; Maybe it's easier to find partners, or to negotiate a better payout from those partners because they took you more seriously; Maybe a higher percentage of people clicked on your links in the search results because they assumed that such a great domain name would be coupled with useful content and features.
Other Force Multipliers that You Can Buy
There are, of course, other force multipliers for your business that you could buy instead of a domain name.
Editorially-chose inbound links are probably the single most powerful force multiplier. While I don't buy (or recommend buying) links directly, I certainly invest in techniques and assets that increase my chances of acquiring such links. It's hard to overestimate the degree to which a single good link can multiply the rest of your work.
A technology platform that makes it easier for you to develop content and features that help your end users.
Analytics tools and consulting that help you understand what your users want.
Increased traffic can itself be used as a force multiplier if it helps you better understand how to convert your users.
Names matter, not least for the simple reason that humans seem to be wired to remember them (present company excluded). But before you go out and spend 5 figures for a domain name do some deep thinking about whether that name will pay back your investment within a reasonable time horizon. And whether it will multiply your efforts more than some of the other assets mentioned above.