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I can't believe I'm still seeing webmasters ask that thing in 2012. It would have been a relevant question in 2003, but the internet had moved on and so did the search engines. Of course domain names matter, but they are not the only thing that does. Search engine algorithms are a complex set of instructions taking many facts into an account.
If your domain name has an active site on it and somebody searches for that precise phrase, it will most certainly make an impact. For example, if someone were to search for "Red Tube" and there is an active site that gets social media references with that precise phrase as a domain name, it will have a profound impact on the search engine rankings. But that's only one of many, many aspects taken into an account. Goddamn newbs!
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