£1m 'domain' name bet cheap at half the price

The Internet Business Group (IBG) has spent more than £1m to get hold of three domain names. Ironically, the web sites it has purchased all start with the word "cheap".

Buying a domain name can cost anywhere between £1.99 and millions of pounds.

Sex.com remains the world's most expensive domain name after being sold for a whopping $12m (£6.5m) in January this year, yet domain names do not generally sell for the astronomical prices seen during the technology bubble.

Hence eyebrows were raised when IBG unveiled its £1.1m purchase of cheapholidaydeals.co.uk and cheapaccommodation.com, as well as other "cheap" addresses.

Maziar Darvish dismissed concerns that the deal was anything but cheap. "That perception is understandable but this is a strategic acquisition," said , the chairman and chief executive of IBG. "I agree that in their own right, domain names are worthless," he added.

He said that the current sites already generate hundreds of thousands of pounds worth of advertising revenue and that once IBG replaces the current web sites with its own, it expects usage and revenue to grow rapidly.

Simon Halberstam, the head of e-commerce at Weblaw Group, said that generic domain names are attractive as the sites will frequently be accessed through search engines such as Google.

However, he said that companies like IBG would be naïve to buy a domain name for millions of pounds unless there is a business behind it.

"It would be like buying a building and not the business. People do not throw money at domain names for the sake of it anymore," he said.

Steve Palmer, a senior lawyer with Rawlison Butler, said the £1.1m price sounds expensive but the key will be to ensure that consumers are continually driven to the web site.