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I have a good domain I'd like to use for my startup and it would require a .ly. Should I try to avoid having to use a .ly? Any negative implications or connotations come along with using a .ly?

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I wouldn't say there are any strong negative connotations, no. The only association that could be made is the fact that bit.ly is commonly used by spammers in addition to normal users.

One thing to keep in mind, however, is that the .ly top-level domain is controlled by Libya. In the past they have revoked domain registrations for sites containing content which the government opposed. If that might be a concern, you should probably consider an alternative, such. For example, if your domain was to be "friend.ly", you would probably want to consider "friendly.com" (or some equivalent) instead.

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