Is a generic, category-defining domain name worth millions of dollars? To some, it has been. The world was put on notice of that in 1999 when Business.com was bought for a then-record-breaking $7.5m.

Since that time, there have been plenty of seven-figure domain name sales. One of them came last month when Candy.com changed hands for $3m. The seller: Rick Schwartz, one of the best-known domainers. The buyer: G&J Holdings, run by confectionary executives (and cousins) Joe Melville and Greg Balestrieri.

Less than two months later, Candy.com is live and as you may have guessed, it’s being used to sell candy. So I decided to take a look at Candy.com and see how a $3m domain name investment gets turned into a functional online retail business.

The Good

  • Candy.com has a lot of the functionality consumers have come to expect from online retailers. There’s the typical shopping cart, order tracking, a wish list, gift registry, email a friend, customer reviews, related items, etc. Since Candy.com is powered by a third-party ecommerce platform, it didn’t have to reinvent the wheel.
  • The Candy.com browsing experience is fairly smooth. Candies can be viewed based on type, brand, color, flavor and occasion through the site’s navigation and DHTML drop-down menus make it easy to drill down into those areas.
  • Live customer service is available online via chat during business hours and the site’s contact page lists a toll-free phone number.
  • Candy.com is taking advantage of a variety of sales tools that many new online retailers overlook or don’t take advantage of, namely a rewards program, affiliate program and gift cards.
  • The footer of Candy.com features logos of the accepted payment methods, its shipping provider (UPS), the VeriSign SSL cert and a McAfee Secure seal. While some question whether these are useful, my personal experience is that they do help reassure some consumers.

The Bad

  • The logo. It’s ‘cute‘ but a little bit too over-the-top in my opinion.
  • The interface is a little rough around the edges and in my opinion, is slightly amateurish. While I might be nitpicky, I couldn’t help but notice inconsistencies with spacing, padding, etc. and think more attention to detail could have been paid. Case in point: when the site first launched, one of the graphics read “Shipping Statment“.
  • There’s definitely room for some SEO. Example: the page for pastel candy simply uses “Pastel Candy” for the page title and meta description.

The Question

Overall, I think Candy.com is a really decent effort, especially when compared to some of its competitors. The $3m question, however, is: is the Candy.com domain worth $3m?

There are a few easy ways to evaluate this:

  • Traffic-wise, Compete.com tracked less than 15,000 unique US visitors per month to Candy.com before its sale was announced in June. Traffic shot up to just under 30,000 unique visitors in June; it will be interesting to see if the increase holds and is built upon. Looking at one of Candy.com’s biggest competitors shows that the upstart has a hill to climb: Compete.com tracked 135,000 unique US visitors to CandyWarehouse.com in June; it has received as many as 279,000 unique visitors in month this year.
  • The idea that generic domain names, because of their natural type-in traffic, largely eliminate the need to spend on marketing is often flawed. Here, a search for ‘candy‘ on Google US shows that Candy.com is competing heavily on AdWords; it currently occupies the second position. So add marketing costs on to the $3m price tag. What effect the ‘Candy.com’ domain has on AdWords performance is unknown.
  • Candy.com appears to be on the fourth page of Google’s organic search results for the keyword ‘candy’. It doesn’t appear to be in the first five pages for high-volume keywords like ‘bulk candy‘, ‘candy basket‘ and ‘gift candy‘. While it’s still very early in the game for Candy.com, its less-generic competitors have a big head start in the SERPs.

But there’s so much more to an analysis than just the numbers. Candy.com’s success will most likely boil down to one thing: execution. Zappos, which Amazon just acquired for close to a billion dollars, may not have been shoes.com but with a solid business model, the right products, a top-notch supply chain infrastructure and rabid customer service, the name didn’t matter at all.

Photo credit: terren in Virginia via Flickr.