Hold on, even after taking a deep dive into what drives the price of cars.com, a value of $872 million still seems really high for just a domain name, right?
Well, no, not when you consider just how much automakers spend on advertising each year. Cars sales and particularly car sales advertising is a megamillion-dollar business. With the most premium domain name in the industry, it’s no wonder that the valuation for cars.com sits at well over $800 million.
Take a look at some of the
annual ad spending by the top automakers in 2015:
As you can see from Ford and GM, each company’s total yearly ad spending was more than quadruple the valuation of the domain cars.com, and up over 8 percent from the previous year, signalling a huge amount of potential for Cars.com.
Summary
Given the staggering annual spend on advertising, the frequency of internet searches for “cars” and the indefinite life-span of the domain name, it starts to become clear why cars.com is valued at a mega $872 million.