A domain name, as Eric Ramage clearly stated in his article “ Joining up the Dots”¹, usually consists of three parts: a generic "top-level" domain such as ".com" or "net” that identifies the type of organization, or “.de” or “.it” that identify the country code; a second level domain such as ecta or cocacola or eric.ramage, which identifies the organization, company or individual; and a third level domain such as "www," which is used to identify a particular host server.

Domain names have various functions and objectives. They can serve as a trademark such as www.porsche.com or as an expression of free speech such as www.poetsagainstthewar.org. A trademark owner can stop another business from using the same mark as a domain name only if that domain name is used in connection with the sale of goods or services and is done in bad faith and/or (depending what proceeding rules can be applied) with no legitimate interest.

Two Groups and Two Sub Groups of Domain Names

Therefore, we have two groups of domain names: a non-commercially oriented domain name and a business or commercial domain name. This article will focus only on the second type of domain name and its commercial value. Within this group, however, it is necessary to make another important distinction: domain names that are strictly connected to providing products or services and domain names that are more like company flags to mark a territory, even a virtual territory, as in the case of domain names. Thus, we have selling champions vs companies’ flags.

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The value of (distinctive) domain names consists, at least for a portion of it, of (a) the trademark value, b) selling capability which equals the attractiveness of the domain name itself (and/or of the relevant web site), measured by the traffic channelled by and through the domain name.

In relation to the selling champions-domain names, we should assess whether and how much business or new business was produced by the domain name(s). There are sectors that are more prone than the others to receive inputs and push by new domain names. Especially domain names coinciding with websites by which and through which services or products are directly offered on the market (e.g. www.amazone.com, but also www.vodafone.com). In order to measure this aspect, it is necessary to have a clear assessment of the situation before the introduction of the domain name–web site and, after its adoption, see the difference between the ante and post situation. In the first case, all turnover is produced thanks to online sales and thus thanks to and through its domain names; in the second case, online sales increase but are still a small part of total turnover. In the Vodafone example the domain name is a mix of the company flag and selling champion kinds of domain.

These two layers in the functions of a domain name represent the direct effect that a domain name can have on sales of branded goods or services or, on the contrary, the attractive effect of the domain name on surfers. In the former case, the domain name value (which comprises the trademark) will be given by the supplemental sales that it may produce directly or indirectly or by avoiding problems of interference from cybersquatters. Therefore, it may consist of a combination of two items: more sales plus the avoidance of cybersquatting costs.

In the case of pure selling-champion domain names, the only value will be given by the traffic channelled through the website which, at the end of the day, will coincide with its trademark. This is easy because the value of the domain name will be more or less the same as the trademark. It will be given by turnover and possibly by price differences.

In the case of a more mixed situation lying between the two extremes of selling champion and company flag domain names there are a lot of domain names that may contribute to the turnover of the branded goods or services but do not coincide with this.

Take, for example, a luxury trademark which is also a domain name. The main turnover is reached through ordinary sales and chains of distributors. However, there is a separate value of a domain name in which, besides selling products, the company reinforces the status symbol of its trademark which has to be maintained in the internet arena as well.