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Well, I beg to differ. Keywords in a domain name DO make a difference, or at least that's what I think. Here is my argument why keywords in a domain name are important:
Let is imagine that search engines give zero weight to the keywords in a domain name. As we all well know, any search engine now gives (ever since Google pionered that technique) gives great importance to links from other sites that link back to your site. The number of those links, their quality, the type of sites they come from and the text used in those links play a vital role in ranking your site and in your position in SERPs.
So, the words used to link back to you are important. We'll not differ on that. Let us imagien your site name is www.california-blue-widgets.com. Most link backs to you will use the text "California Blue Widgets" to link back to you. So, even if Google or any other search engine gave zero attention to the keywords in your domain name, those very keywords will indirectly have a very strong effect on your place in SERPs because in many cases people will use thoe very words in the domain as the text for links they put back to you. (Sure there exceptions exist where the link text does not match words in the domain name, but I'm talking about the general case.)
So, next time someone tells you the domain names don't matter, just smile and tell him "Sure they don't."
Branding in the domain name has a different reason for existence. It's good to use both branding in one domain and keywords in one or more other domains to drive traffic.
Yes, Google and Yahoo are nonsensical names that are more popular in Search than CNET's own Search.com but if you don't have the gargantuan budget to market your great branded domain, keywords definitely help.
After all, we're here in WebMaster World, not WebmasterWorldo.com.
It was flawless, in my opinion, except for the comment that branding is what it's all about.
There have been other "flaws" in there from time to time. And that's the real point.
SE algo's change. They fluctuate - Google are forever twiddling dials. The day that they turn down the "keyword in domain" dial, or "anchor text" dial, the sites that were on the ball with branding will be less affected.
The less you have to rely on a constantly changing SE algo, the better.
There was a time when kw in domain mattered from the perspective of weighting in the G algo. That has now been totally, or almost totally, discounted. Think about why. The answer is twofold: 1) Giving weight to domains with kw embedded encourages spam, and 2) Giving weight to domains with kw embedded essentially downgrades domains that do not contain kw in domain. Do you think that G wants to downgrade CNN or the thousands of other information based sites that don't have kw in domain. Of course not.
But for some reason, people often miss the distinction between algo weighting and backlink anchor text evolution. Apples and oranges.
The arguments posed by the OP, while relevant to the wider discussion of kw marketing, are a red herring WRT to how the algo's work, and THAT is what people have been discussing. KW-in-domain not only no longer matters from an algo perspective, but can be taken by some SE's as a potential red flag. Who needs that?
And as for whether kw in domain can help a site's link building efforts (or more to the point, a site's backlink anchor text development), the point is still easily debated.
If my domain is someword.com, but the name of my site is "Someword Widget Shoppe", do you think I'm gonna get the sort of IBL anchor text I want? If I have even the slightest amount of skill in link dev, then the answer is: Yes. ;-)
Brett's comment on branding is wise and long term oriented, and reflects an understanding of the difference between algorythmic importance and online marketing.
If branding wasn't an issue, then go for the keywords. However for the industry I work in (very competitive) the SERPs for the top keyphrase has 6 'branded' URLs, and 4 'keyword' URLs.
Now, I could feasably click on any (or all) of those sites, but which one am I going to come back to because I remembered their domain name? online-widget-selling.com, or brand.com?
Of course, the way to get round it, is to have keywordbrand.com - good keywords and a memorable brand!
If supplemental pages are a problem just think about the ramifications of supplemental algo routines, yikes.
Google s/b and probably is kw neutral as to urls including all portions of the domain name. That would be the only proper way to remove it as a factor.