This website discusses domaining and the prediction of valuable domain names as well as discussing domain development opportunities.

How much is my domain worth?

by Barry on March 29, 2008

This is probably the most common question that new domainers have. They want to know if they have struck gold with their latest brainwave or at least a little more than it cost to register that domain.

The bottom line

Your domain is worth what someone will pay for it. Sounds annoyingly obvious and totally fails to answer the real question. The real question is “what is the objective value of my domain?”. Unfortunately domaining is an area where there are no true agreed upon objective criteria for valuation.

You will see all sorts of numbers touted as differentiating the good from the bad. Which ones are useful and which ones are not?

Domain length

The shorter the domain name, the easier it is to remember and the more valuable it is, we are told. Untrue. Will you remember YBVX.com tomorrow? You may say ok, lets add that the name has to be a proper word to the criteria. Yahoo and Google and many others have gained value through branding so we must add that the domain name should be a generic proper word.

This is still not objective. Gambling.com would likely be worth more to a domainer than top.com. Why? Because gambling is a big industry with demand online. A potential buyer is far more likely to pay top dollar for a gambling domain. The extreme might be true e.g. domaining.com versus multiculturalmystery.com but multi-word phrases can be quite memorable.

LLLL.com

A subset of this “rule” are the short domain names that are not proper words. There are various valuations given depending on the letter used (L stands for letter so LLLL.com is a 4 letter domain). While many companies do use 4 letter acronyms, the vast majority of buyers in this area are resellers looking to offload to another reseller and turn a bit of a profit. There is also a common fallacy that these domains are not subject to trademark. LLLL acronyms can be trademarked and you should be careful to research if you buy in this area.

Traffic

The more visitors the more valuable a domain. Not true. Visitors to different industry domains convert differently and the ads pay differently often varying from pennies to 10s of dollars. Be highly suspicious of traffic statistics as they can be manipulated all too easily. Be especially aware of statistics collected over a short period e.g. 1 or 2 months. If you were to base your domain valuation of Christmas.com on traffic in July or December, you would end up with wildly different valuations.

Traffic on an expired domain may come from previous clients of the website but this will drop off as the clients realise the site is gone. These days with arbitrage out the window, you will not gain much from links to the domain either.

Earnings

At first glance, this seems like a good objective criterion but it too is fatally flawed. Unless it is a stellar parked domain, the earnings number will not be that large and so calculating based on a multiple of yearly earnings will not result in a large number. This however becomes more reasonable if you are looking to value a large portfolio since the usual driver for the buyer are earnings.

Perhaps the biggest flaw in this method is the potential unrealized earnings of a domain. This is the potential for development. The best sales will be to end users ready to develop. These buyers will largely ignore any parked earnings and be starstruck by their dreams for a website. They will often value a domain at a much larger price than a domainer or reseller.

I will review other valuation criteria next time and tell you what you can use as a guideline.

{ 2 trackbacks }

How much is my domain worth? | Nethead Creations
April 12, 2008 at 12:35 pm
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April 26, 2008 at 7:29 pm

{ 3 comments… read them below or add one }

Michael Castello March 30, 2008 at 6:16 am

I enjoyed your article. It is nicely written. Sometimes it is difficult to explain simple things which seem obvious to us but difficult for others. You article articulates the worth of domain names in simple fashion.

admin March 30, 2008 at 11:46 am

Thanks Michael. I think it does everyone in the industry a favor if we demystify domain valuation as much as we can. There is a lot of false information floating about and I think it contributes to the appearance of sleaziness which is how the industry is sometimes viewed. I plan to have this series of posts lead to that issue which I think is still a major stumbling block.

Kelly Lieberman March 30, 2008 at 8:55 pm

Great post. I think that for domain owners, determining values is incredibly subjective and difficult. The optimal situation is to research comparative sales and set a reasonable reserve at a well run auction, and let the market set the price.

However, I believe it is our obligation to educate the market first.

Ideally, you have kept up with the latest news regarding the subject matter of your domains and are somewhat versed in the domain’s possible manifestations.
You should keep track of new developments that enhance the value of your domain and keep notes on companies (and the contact person) that may benefit from owning your domain. Meanwhile, keep tweaking your domain whether it is parked or developed with your new insights in mind.

At some point, you realize that the timing is right to submit your name to auction. This is the time to get all of your notes together and create a strategy. Take advantage of PR Newswire and send out a press release. Contact the businessses that might have an interest in the domain and let them know the details about the auction and why they need to own this domain.

In some cases you may be able to come up with a catchy advertising campaign for them.
Case in point:
I own http://www.HighLimitBaccarat.com
Las Vegas Sands released a press release in Feb. that they are refitting their corporate jets with high limit baccarat tables for transatlantic flights roundtrip Hong Kong to Las Vegas. Players, for the first time will be able to gamble in the air.
I think that all casinos will soon follow suit.

I create this little ditty:

HighLimitBaccarat.com
at 20,000ft
Redefining High Limit

At that point, you get the word out to the casinos offering the service and let them set the value at auction.

I think we need to start doing some educating and creative work, and rely less on metrics that alot of these companies never really understood from the get-go.

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