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The name of an architecture studio is, let's say "Peña Arquitectura". When you replace the ñ for an n, you get "Pena Arquitectura", which means pity* architecure in spanish (the language of the country where the studio is).

How should I deal with the domain? The options we are analyzing are using "penia" which is misspelled or "pena" with it negative connotation. Is any of this options considered bad?

* It has many different meanings, but that's the one that will probably be associated with. Of course it will be understood that it comes from from the last name Peña, but it feels weird for the domain.

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Simple answer: use an Internationalized Domain Name (IDN). This way, you can just register peñaarquitectura.com.

However, it's a good idea to register misspellings as well. In your particular case, both pena and penia versions should be registered. Many people, despite their language, will use one of this forms, because they think these characters are not allowed in domains (which was true until not so many years ago, it started in May 2010)

As an example, I run the site Uxpañol. So I registered uxpañol.com and uxpanol.com. Even though 95% of traffic comes from Spanish speaking countries, uxpanol.com is way more popular than uxpañol.com . This is also influenced by the fact that Google seems to prefer the non-internationalized version. And despite the fact I have sent sitemaps for both versions, Google picks the non-internationalized version. Furthermore, type-ins analysis shows that those visitors that type the domain, use uxpanol.com

Another reason to consider this: to avoid cybersquatting and/or typosquatting. This is quite common, and it only takes a few dollars a year to avoid the problem, so make sure you register all variants, considering IDN, regular domains (misspelled) and maybe even TLDs (if you are in Spain, you might want to register .es version, and maybe .net and .org)

Im short: use an IDN, but don't forget about variations in non-internationalized versions

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