How A Domain Upgrade Spurred Massive Growth

I recently sat down for a coffee with Tim Hargis, the former VP, Marketing & Business Development for Tuft & Needle, an American direct to-consumer mattress and bedding brand acquired by Serta Simmons Bedding in 2018. We had a great chat about domains and branding, and the impact that the right premium .COM can have on a business. The interview has been reproduced here. — Kate Buckley, CEO, Defining.com

Kate: Tim, tell me about your role at Tuft & Needle. What initiatives were you charged with enacting? 

Tim: As is the case with most startups, when you join very early, you can expect your role to change over time, and that was certainly the case while I was at T&N. When I joined, I didn’t have much of a defined role even though I was the first person on the “marketing” team. Over time, I went from marketing to business development, landed wholesale deals with Lowes, Crate&Barrel, WalMart, etc., and then I eventually shifted over to the real estate side where I helped lead search and lease negotiations for our retail store expansion before transitioning out of the company to pursue new ventures in mid 2018.

Kate: What were some of the issues you were experiencing with your existing domain name, tuftandneedle.com

Tim: For the first few years, the majority of our limited marketing spend had been centered around digital channels—primarily AdWords. So our domain wasn’t much of a concern at that time. As we expanded into OOH channels like billboards, radio, and TV, it became challenging because of how long the domain was. Also, “tuft” is not a common English word. So we were forced to squeeze “tuftandneedle.com” on billboards due to space constraints and it caused serious readability/legibility issues. In addition, on the radio, “tuft” sounds very similar to “tough,” so there was consistent confusion around that. 

We ran some analysis and realized what consumers were actually searching for when trying to find us online, and it was pretty eye-opening. It became obvious how difficult it was to spell and remember our name, let alone pronounce the correct version. We’d get search queries for “tough mattress,” “tough needle,” “needle mattress”… 

Kate: Who had the idea to acquire TN.com and why?

Tim: I’ve always been a domain name nerd and big believer in the value they add, so I brought up the idea casually, and there was a fair amount of immediate support from different people inside the company. We all recognized the challenges the domain presented, but we were a bootstrapped company growing very quickly with limited financial resources. We knew that a super-premium domain was going to be high 6, to likely 7 figures to obtain. 

It was really more a question about the right timing.

We continued to seriously talk about it more, and then brainstormed potential alternative domains. We thought of the most “obvious” options (that would have cost significantly less), but each of them had clear problems.  We knew if we went with “TN.co” most consumers would just go to the .com (and also drive up the price of the .com in the future), “tan.com” wasn’t ideal because it was read as a word and not an acronym, “tuft.com” presented the same spelling challenges we already had, and an entire new brand was off the table.

At that point, we were boxed in and had one option—TN.com. Even though we knew it was going to be the most expensive option, by far, it was clearly the best option for the company. 

Kate: Talk about the acquisition and negotiation process. How difficult was it to secure TN.com?

Tim: I originally reached out to the domain broker who was representing the name in mid 2015. Once we determined who owned it, we knew we weren’t going to be getting a “deal” by any means—and the broker was also a great negotiator, I must add—but we were committed to pursuing it.

I went back and forth on it for about 2-3 months, as their original price and our offer was vastly different. Eventually we negotiated close enough on the price and terms that it made sense to just go for it. So we acquired the domain. After we agreed on the deal structure, it took about a week or so to get the purchase contract drafted and executed. We then finalized the transaction through escrow.com. 

Kate: There are only 676 two-letter .COM names in existence. It couldn’t have been cheap! Are you able to share the acquisition price? If so, how did you determine how much to pay based on the domain’s potential value to the company?

Tim: Ultra-premium domains are interesting in that they seem very “expensive” from the outside looking in, but after owning one, you recognize very quickly how incredibly undervalued they are relative to what they cost. 

Of course, the tricky part is you don’t realize this until you have one (and why it can often be hard to determine if it’s worth the high price tag to begin with). 

To put it in perspective, at T&N we were bringing in 9 figures in revenue (this is publicly stated at close to $200m in 2018), and most DTC e-comm companies are spending 20-25% of net revenue on marketing—some are even much higher than this. So, if for example, a company is spending $40-$50m a year on marketing, while increasing the budget every year as they grow, you can expect $200-$300m in spend over the next 4-5 years. Why would you not allocate a fraction of 1% from that entire spend on the entry point (domain) you’ll be driving all the traffic/eyeballs to…AND it’s also an asset that continues to appreciate? 

At this stage, we were still under the radar and knew that if we waited and became even more well known as a brand, the price would just continue to climb and we’d become a victim of our own success. It just made sense to stretch ourselves a little initially, rather than run the risk of it being sold out from under us in the future. That would have been a huge missed opportunity, and if we had taken that risk, the potential alternative outcome would have been significantly worse. 

I can’t disclose the exact price, but it’s been stated publicly before (by one of the Co Founders) that it was seven figures—that I can confirm.  I think it was a fair price given other two letter .COM end user sales.

Kate: And it had to substantially impact user experience! How did the domain acquisition impact your marketing strategy? What did you do differently as a result of landing TN.com?

Tim: Initially, we used TN.com exclusively on billboards so we could accurately segment the traffic coming from that channel (to get a directionally-accurate measure of the ROAS) while we continued to use tuftandneedle.com on our digital channels. 

Prior to this, we’d used tuftandneedle.com on billboards—having TN.com made a huge difference in the amount of traffic that channel generated. If you’re going to be doing any meaningful amount of OOH marketing, you must have a great .COM or you’re likely just throwing money away through inefficient ad spend, and blaming the marketing channel instead.

Once we ran this test, we switched all of our OOH channels to TN.com.

Kate: Did you see a measurable difference in traffic or conversion rate —or a reduction in your cost of customer acquisition? What was the biggest difference or impact that TN.com had on your business?

Tim: This gets very complicated to accurately determine, especially when you’re in many different channels, but we definitely noticed an increase in mobile traffic when we started using TN.com in OOH. Assessing whether or not our blended acquisition costs dropped as a result of having TN.com would be much harder to definitively say one way or the other.

But do I believe our marketing was more effective by having it? There’s zero question in my mind about that.  I believe it more than paid for itself in a relatively short period of time, and think most would agree it was one of the best investments the company made.

But putting that specific impact aside, there are many other benefits it brought: credibility and legitimacy (because typically only larger brands have very short .coms), its strong visual “appearance” on packaging/products/creative/ tc, and fewer email issues. For example, we’d run into issues surrounding customers spelling the company name incorrectly when emailing support. The domain [ TN.com] is just far easier to remember.

Interesting story: We had an employee at Tuft & Needle (that had previously worked at a domain registrar) who saw our billboard one day and thought, “How did they get a two-letter .com?!” and applied for a Customer Experience position and got hired!

Kate: Tuft & Needle was acquired by Serta Simmons Bedding in September of 2018 congratulations! That had to have been an exciting ride. Do you think the acquisition and subsequent deployment of TN.com played any role in this acquisition?

Tim: It’s hard to say if the domain itself played much of a factor, but there’s no doubt it was a huge asset in growing the company (which of course helped the business become a desirable M&A target).

Kate: How did this experience impact the way you view premium domains as tools for marketing and business development?

Tim: I’ve always been a believer in the value of premium domains, and it’s good to see more and more companies building on them and leveraging their impact. They’re an asset, not an expense—and if your “marketing agency” doesn’t understand this, they should be fired.

It still boggles my mind when I see companies that are clearly spending a fortune on marketing, attempting to drive traffic to a mediocre (at best) domain that is hard to remember, easily misspelled, and often confused. It’s like spending millions of dollars remodeling a $100,000 hom —it just doesn’t make any sense.

Kate: Do you own any premium domains personally?

Tim: I own a super premium one-syllable, one-word .com with a partner that we had planned on using for a startup (prior to COVID) and have a handful of other average domains. I’m not an investor or broker—I just geek out on (and love) domains. My friends think I’m super weird, and they’re probably right!

Kate: What advice would you give to any company that is considering upgrading to an ultra premium domain name?

Tim: First, I’d suggest trying to make the move sooner rather than later, even if it feels like a little bit of a stretch financially. If you have product-market fit with clear traction, and ambitions to build a company of any meaningful size, it becomes an asset that you can’t afford not to have.

Super-premium .coms continue to get more and more expensive as they becomerarer and rarer—so waiting and hoping that the price comes down over time isn’t a useful strategy for extremely desirable domains.

There are plenty of creative ways to acquire and finance domains, if the cash purchase price is currently out of reach (lease option, seller financing, etc.). These structures at least allow you to secure the domain  and begin leveraging it right away, while providing a payment plan that’s manageable for your company.

Secondly, engage with a great domain broker who understands the premium domain market (strong 6 to 7 figure sales) and knows how to approach these domain owners with a reasonable and compelling offer that gives you a real chance at securing the name. The owner profile can alter the strategy and offer you make, and you need someone who has successfully executed high-value name transactions before that can effectively navigate these negotiations.

In addition, using a domain acquisitions broker gives your company anonymity and ensures the price you pay is fair and in-line with current comparable sales (most of which are never publicly disclosed and likely only known by the top brokers inside the domain community).

Good luck acquiring your premium domain—I can assure you that you won’t regret it after you get the opportunity to begin utilizing it!