Kassey Lee examines direct navigation in China.
China has stunned the world in recent years. It’s the place where you can expect spectacular prices of domains sold, such as Le.com for $10m, JD.com for $5m, and Vivo.com for $2.1m. Why? One reason may come from consumer behavior: people in China like to directly visit a website for online shopping.
Search engine Baidu publishes visitor data of more than 1.5 million websites it monitors every month. I have aggregated the data to give you a yearly view of the visit patterns.
|Year||Direct Visit||Referral||Search Engine||Directory||Social Media|
Visitors to a website can come from one of five sources: direct visit (explicitly specifying a domain in the browser), referral (arriving via a link on another website), search engine (entering a phrase to search), directory (listing of websites by category), or social media (such as WeChat).
By far, direct visits bring the most number of visitors to a website, and the trend is up. This suggests many consumers remember and therefore specify a domain when they want to do online shopping. In view of this consumer behavior, it’s natural that major brands want to use domains that are easy for consumers to remember.
A domain that is easy to remember is a domain which requires the least effort to process in the mind of a consumer. Specifically, this means two characteristics: (1) matching the brand, (2) mainstream extensions (.com and, to a lesser degree, .cn). This is because the consumer already remembers the brand name and most Chinese consumers are familiar with the mainstream extensions.
Some brands in China have discovered this not widely known fact and accordingly have invested heavily in acquiring their brand-matching .com domains. They even try to enhance consumer memory by displaying their domains everywhere.
A good example is Jing Dong (京东), the 3rd largest internet firm in the world by sales. The company used to operate on 360buy.com, a cheap domain which did not match the brand name. In 2012, the company surprised corporate China with the $5 million acquisition of JD.com. It also secured JingDong.com which automatically transfers visitors to JD.com. The result was immediate, reportedly saving the company $20 million a year in search engine advertising.
To maximize the power of the domain JD.com, Jing Dong displays it prominently everywhere: company logo, product packages, store signs, delivery trucks, public walls, bus ads, and many more. Whenever you see the Jing Dong brand, you see the name JD.com which, as a result, has been hard-wired into the brains of millions of Chinese consumers.
Look at the numbers again. The domain JD.com cost $5m, saves the company $20m a year and generated $38 billion dollars in sales last year. Jing Dong spent only 0.013% of its annual sales to acquire this single store in the virtual world of the internet. For this reason, Chinese brands are willing to spend big on brand-matching .com names.
This trend has just begun. The Top 100 Internet Companies or the 2016 Top 300 New Internet Companies in China show many companies are yet to acquire their brand matching .com names. They probably do not realize, as Jing Dong has experienced, the power of direct visit and relevant domains. But, they will. Therefore, the Chinese domain market will continue to amaze the world with spectacular prices in domains sold.
Finally, please note that I use the term “domains” instead of “domain names” in order to align it closer with “stocks” and “bonds” in investment.