Mr. Padawer operates DomainAppraiser.com, a site dedicated to advising domain name speculators on how to find names that should fetch the highest price in the market. So who better to advise companies on what they can do to avoid a ghastly error of omission on the path to developing e-commerce revenue?
"The thing companies have to do on the Web is protect their trademark," says Padawer, who has been buying and selling names since the early 1990s.
"Buying names used to be a game. Now companies had better take it seriously," he warns. The cost of delay can be huge. Just challenging someone who owns a domain name to which you feel entitled could run up a $100,000 legal tab.
For example, say you have a company called "Coins, coins, coins." It's a fairly small business, with few customers and a low profile in the community. But when you go to set up the obvious website that will enable you to sell your coins to collectors across the world, you find that someone already owns CoinsCoinsCoins.com.
"You're going to have a very hard time proving that the website is diluting your product, even if you own a trademark on CoinsCoinsCoins," says Padawer, an attorney currently working on his M.B.A. at Vanderbilt's Owen School. To get the courts to acknowledge your right to the domain name, you must prove that the other guy's ownership of it is diluting your product.
Well-known brands like Pepsi are afforded the most protection under current domain name laws. These regulations are attempts to stop "cybersquatting," or the act of registering someone else's "unique and arbitrary" trademark with the intent to sell it back to them. The Pepsi name is unique and arbitrary, just the two conditions needed to protect your name. But if Pepsi had been asleep at the switch and not reserved that domain name (of course, Pepsi does own pepsi.com), they still might have to waste money on litigation fees when they could have reserved the name for next to nothing.
Actually, for as little as $19.95 per year on RegisterFree.com, the cheapest domain name registration site Mr. Padawer can name.
Even if your brand name is safe, there are probably generic names that when entered into a search engine or typed in on a whim could drive thousands of people to your web page. "That's the beauty of generic domain names," he says. "They pull in hits with no marketing expense." So having a good idea for a useful generic domain name (such as Food.com or Tax.com) but delaying to register it can be remarkably costly.
Late last year, the name "business.com" was sold for $7.5 million to a venture capital firm. Its purchase just two years earlier for $150,000 had itself been a benchmark in domain name speculation. Other recent multi-million dollar generic sales have been "wine.com" and "express.com."
Mr. Padawer doesn't see anything to stop the escalation of prices. "I'm very bullish on domain name speculation. 'Dot com' will remain the standard and these names will pay off big. As long as when you turn on the TV everything you see ends with 'dot com,' then it's safe to say these names will do nothing but grow in value."
He has reserved many names, most of which he'd like to sell later, like "commandment.com" and "cyberculture.com." In addition to DomainAppraiser.com, he operates a humor site Schmuck.com. But to demonstrate why these generic names have such value, he points to the favorite domain name he owns, Act.com. He won't say how much he paid for it, but 1,500 to 2,000 web serfers every day show up there -- and there isn’t any content on the page. Nearly all of the visitors to Act.com are looking for information on acting or entertainment.
"Right now, that's 500,000 to 700,000 pairs of eyeballs coming every year who don't come back," Mr. Padawer says, adding that more than 1,500 companies have the word "act" in their name or as their acronym.
His plan for "Act.com": Turn it into an entertainment portal.
His price for "Act.com": "Mid seven figures, plus equity in the business."
"Businesses are really beginning to understand the possibilities of generic terms in a medium that will affect millions and millions of people," Mr. Padawer explains. "So the second you realize a domain name that's useful to you is available, reserve the name and protect your business.