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Direct visits lead to spectacular domain prices in China

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.

YearDirect VisitReferralSearch EngineDirectorySocial Media
201641.95% 29.38%25.66%2.00%1.01%

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.

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  1. Jonathan says

    Direct was the same in North America back in the day. China today is looking in the rear view mirror with few new start up unless backed by the the chosen few given state indulgences, with respect Kassey Lee knows little compared to the mature market watchers.

      • Jonathan says

        I personally often have/do. When/if the state indulgences end and VC money takes over from the JD Alibaba Tencent state indulgences competition will become more intense Baibu ad revenues will be the state cash cow
        Google 2016 29.43b – 2019 anticipated $45.69. Google is your rear view mirror [not that it will always be]
        The Chinese state has considered taking a 1% investment stake in chosen startups / commerce IoT D-Wave systems will bring about IoT international Cyber Anquan agreements China leads this field although I think you questioned if people use the word/ term Cyber in the west/east CyberSuo – CryptoSuo – CyberAnquan http://en.people.cn/n3/2017/1228/c90000-9309428.html

  2. Rob says

    Online Retailer’s should not solely rely on expensive Paid Search and Paid Advertising services from Third Party Companies like Google, Facebook, Twitter to drive traffic to their online storefronts.

    Instead, Established Online Retailers and Startups can choose to acquire a Short, Memorable and Relevant Domain Name to receive Free Direct Navigation Traffic, Free Perceived Consumer Trust and Free Word Of Mouth Advertising.

  3. Drewbert says

    Meanwhile, back in the English speaking world, people set google to their homepage and search google for google. Sigh.

    Jing Dong also own 京东.com yet it doesn’t resolve. Weird.

      • Drewbert says

        True, but a few of them still get SOME traffic (enough to pay for renewal fees) and they’re just confusing people by no having anything at that domain name.

        • Kassey Lee says

          I like IDN.IDN better than mixed script for semantic reason. Something like 京东.商城 (not resolves) makes more sense to me. The fact is, even IDN.IDN has not seen widespread adoption in China yet.

      • Jonathan says

        “Mixed script has not managed to take off in China.” True but and as proud as I am of my language I find myself using Americanisms all the time Most of the WeChat generation know and use English alphabet / pinyin they know Taylor Swift, Lorde, Beyone, Justin Bieber, Film & Fashion Stars, Slang terms, Cars Autos, Baby, Games and so on. Was this not the whole purpose of the wonderful Pinyin translations ? There is already mixed script in use the website titles are in pinyin the character script is often purely descriptive ?
        BTCsuo [bitcoincash] / is no different to JDsuo or am I missing something fundamental ? Cyber & Crypto are not new terms but in context to security / anquan they are and /will eventually be globally understood. Do you understand what D-Wave is Do linguists have an alternative term for D-Wave systems in the B2B community ? Please have the courtesy to comment and enlighten me.

  4. Baklava says

    The Future of direct navigation in the u,s imo will rise because you can only throw so much money into the wind before realizing competitors are acquiring domains that would give them a competitive advantage direct nav being one of the biggest advantages. imo

    • Kassey Lee says

      The reason is very simple: you don’t want to depend on the kindness of strangers — or search engines for that matter.

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