When AI companion startup Friend disclosed last week that it had spent $1.8 million to acquire the www.friend.com domain name, it sparked a debate over how much branding is worth and how companies should spend money. Founders of other firms, such as Loom and Public, stepped forward to explain their own experiences securing a domain, but the doubts persisted: Did Friend overspend on its domain? Will it actually make a difference?
Avi Schiffmann, founder and CEO of Friend, told TechCrunch via email that the purchase had already paid for itself. And there may be a method to the madness, given that buying domain names for millions of dollars is not a new phenomenon — Tesla paid an estimated $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. According to some sources, OpenAI spent $11 million for the domain "ai.com."
Alex Harris, co-founder of startup marketing firm Fiat Growth and founding general partner at early-stage VC firm Fiat Ventures, told TechCrunch that getting the name, domain, and branding right may have a significant impact on how a business grows.
According to Harris, the right name or domain can make startups easier to find and remember. He also stated that ".com" domains reign supreme (sorry, ".ai" enterprises) and that shorter names or domains are always preferable.
“In many cases, the name is critical when there is any kind of 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 quite simple, but a lot of people ignore [them].”
Alex Harris, co-founder of startup marketing firm Fiat Growth and founding general partner at early-stage VC firm Fiat Ventures, told TechCrunch that getting the name, domain, and branding right may have a significant impact on how a business grows.According to Olivier Toubia, a marketing professor at Columbia Business School, one important factor to consider when choosing a name is how frequently customers will engage with your company. If it's a consumer product that people will frequently use or software that organizations will use on a daily basis, coming up with something unique and memorable, such as Google or Twitter, could be a wise move.
And if a company's product is one that people use infrequently or only when necessary, it's best to use a name that is generic enough to be easily found on search engines.
"If you [are] a product or service that [people] won't necessarily use very frequently, or maybe when they need you, they will Google or search for you," Toubia said, citing the example of someone searching for a locksmith if they were locked out of their apartment.
And in the case of startups that customers do not contact with on a daily basis, such as healthcare firms, the majority of the significant ones, such as Spring Health and Cityblock Health, include "health" in their names to make it obvious what they do and, most likely, for SEO.
Harris believes that choosing the right name and domain provides respectability to a firm. A professional-sounding name and domain help people trust a firm if they've never heard of it before, whether they're consumers, potential employees, or investors.
"We all get emails from [companies] with a super long domain or weird domain extension, and it de-legitimizes it," Harris told me. "If you have a domain that is desirable, [people] pay attention."
Harris also believes that investing $1.8 million on a domain, like Friend did, isn't as wild as it appears at first. He stated that if purchasing that domain benefits the company's operations, as he believes it will, the purchase will pay for itself over time. And a decent domain like that can serve as valuable IP that can be sold if necessary.
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Larger organizations can definitely afford to spend millions on branding, but does it make sense for startups that are still developing a product and preparing to launch?
Harris and Toubia both cautioned that there are certain things to consider in this situation. In Friend's situation, both agreed that the money spent on acquiring the domain name will only be worthwhile if it does not inhibit the firm from really developing a product.
"The name is important, but you have to sell and develop a product," Toubia told me. "If you have already burned 70% of your cash and do not have a product, investors may be dissatisfied." That may limit your potential to raise [more money] in the future.
There are obvious benefits to establishing your branding early on, but businesses must also avoid painting themselves into a corner with a name or branding that will make it difficult to pivot later, according to Toubia. If a corporation later changes its business or picks a name that is subject to legal action, the early branding may prove costly.
It may also be dangerous to select a name that is too similar to another company's. If the organizations are in completely different industries and would not confuse a potential customer, it probably won't matter. However, the stakes rise considerably if a company with a similar name engages in fraud or another behavior that results in a less-than-ideal connotation.
Even in less dramatic terms, Harris believes that if a name is too close, it may generate broad confusion, as was the case with former New York City mayor Rudy Giuliani's press conference at the Four Seasons Total Landscaping a few years ago.
Regardless of how Friend's decision to purchase their costly domain turns out, Harris and Toubia both stated that the fact that we are discussing it indicates that their strategy may already be working.
"It's kind of like naming a kid," Harris added. "You reach the point when you say, 'I almost don't care anymore; these five names are OK; just pick one and be done with it. Be patient and persevere during your displeasure. It is quite significant. Don't choose something simply because it's easy or inexpensive. Consider the assets at your disposal as well as your competitors.