Continuing my review of criteria for valuing domains. This time I want to cover criteria that do play into the potential valuation of a domain name.
Search frequency
The search frequency of terms in a domain name can play a part in valuation. The more popular the search term, the more visitors are likely to come to your domain through direct type-in. Of course it is not quite as simple as this. Key word order is important in a domain name. Two terms of high search frequency will get many more hits as a domain name if they are in the right order e.g. BritneySpears.com versus SpearsBritney.com. When checking the search statistics for a two word or phrase domains, put the words in quotations marks in Google and compare searches using various combinations of words or use a keyword tool.
Trademarks
If you have a trademark in your domain name, then your domain is likely to be only of value to the naive, the greedy or the trademark owner. Do not expect the trademark owner to pay you anything. They may well rely on lawyers to retrieve the domain for them. Yes, some people make money on these but best to stick to generic names and avoid the hassle.
TLD
TLD (top level domain, sometimes called the extension) does affect domain valuation. The .com tld will almost always have a higher valuation than any other tld. This is because .com has become the “default” type-in tld on the web. I won’t go into a detailed breakdown of which tlds are more valuable than the other because again there is no hard and fast rule. There are many extensions available these days and most are not worth much unless you are very sure what you are doing. Abuse or low quality sites on some extensions have made them less desirable whereas tightly controlled extensions such as .ie (the Irish extension) retain more value.
Comparative sales
Monitoring or looking up previous sales of similar domains is helpful. Justifying a high valuation is much easier if there is a previous sale to point to. My favorite place to start is Domain Name Journal.
Sales are only a general guide. Names like MySpace and YouTube increased the registration volume of domain names with “My” or “You” prefixes because of the large press coverage they receive. However most of these have no inherent value and many are worthless. Similarly high profile sales can temporarily inflate the valuation of low quality, similar pattern domains. Quality will almost always win out and good quality domains that are truly comparable can benefit from a high profile high price sale.
Ad inventory
The availability of ads for a topic described by the generic term in the domain name affects valuation. Whether you park the site or develop it, you want a good ad inventory as a revenue source. Chironomid.com is not likely to have a large ad volume (family of midge fly larvae if you are interested!). Some sites ignore ad inventory revenue streams and sell their own products or services but many more rely totally on third party ad inventory.
The quality of the ads matter also. Some industry sectors pay out at the dollar or 10s of dollar level while others pay pennies. Some ads have high conversion rates (turning an ad view into a click or a click into a sale depending on the arrangement with the ad company) which others do not. If you are getting paid based on a sale resulting from a third party ad and there is a low conversion rate, the payout per sale better compensate you for it or you will have little income.
Demand
Supply and demand regulates prices in many industries and domains are no exception. The supply of .coms is inherently limited and so the most desirable domains will be the most sought after and of the highest value.
Prior abuse
This is a factor that is often overlooked but can affect the value of a domain. The history of a domain can be checked in the Internet Archive. Prior abuse may have resulted in a ban from the search engines index and make it difficult to get re-included. This reduces development potential and dissuades the knowledgeable end user from buying. Remember that the end user usually pays the highest price for a domain.
Desire/Motivation
The strength of the desire or motivation on the part of a buyer is hard to quantify but it greatly affects the final sale price. This is the major hidden and therefore variable part of a domain’s value. When you look at previous sales, you are not aware how much this hidden factor played into that price. However if you are negotiating a sale of one of your domains, this is a critical piece of information to help you get the best price.
I will comment further on buyer motivation next time when we get to selling a domain.
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Great summary – thanks! I think that there is also a “pizzazz” factor as well – does the term generate some sort of excitement or prestige or leadership, etc.
As well, domains that are commercially oriented tend to have higher values.
Absolutely. I want to touch on that when I talk about selling domains. How you position and market a domain is really important and having pizzazz and a commercial orientation are strengths that should be played.
Nice Post – you are doing a GREAT “Job” there.
Many books can be written about domain names – yours is a GReat READ
Good tips there.
estibot and dnsaleprice is the 2 tools I usually use to get the info quickly for a domain.
Other than that nothing beats experience
Hey.
nice gist of things there mate.. I had done a similar series last year (linked to name) .. it’s great to see more stuff and perspectives on the topic..
looking forward to more now..
This is an absolute read for people who are just starting in the domaining business like myself. In my recent humble beginnings, I started buying 5 domain names so far and I’m into developing them at the moment. It’s good to know that I had the right idea in mind and I was thinking in the same lines as you are.
I’m looking forward for more of these. This blog will definitely get my subscription.
Thanks for the comments. Keep on reading all you can get your hands on and not just here. Take your time buying domains. I think the biggest mistake for a beginner is to jump into investing too quickly. Understand the various strategies and choose one or find a mix or blend that works for you. Most of all, enjoy it.
Hey, this is a really wonderful article. I have a very good feeling that my domain http://hedgeagainstspeculation.com is pretty much worthless, any suggestions as to what I should use instead?
For a blog where you are actively posting, the domain name is only a minor part of the valuation. The name you chose is definitely a mouthful. At this point it is probably not worth changing. I tend to stick to areas i know and your topic isn’t one of them.
The best way I have found to brainstorm is to carry a piece of paper around with you and write every name that comes into your head without censoring it. After you have collected a lot, go through them and see if any might work. Other than that, try the techniques I describe in my other posts e.g. press releases and so on.
Seems like the value of your domain varies with the trends, but over time, the good domains have “staying power.” These include domains with dictionary terms, catch-phrases, or pop culture references.
Here are the ones within my area of expertise (web):
web.com – short and catchy. This is a squandered domain with a business model that could use more creative mojo. Cookie cutter sites and hosting packages…imagine that.
creativepro.com – been around for ages. Bought up and commercialized to oblivion. I come around and there’s a good read every now and then. But nothing extremely sticky.
googlealliance.com – not taken, but could be used for some cool search engine company. Let’s see how long it will be available for after this posting
adbasis.com – Just cancelled this one, so it will be up for grabs soon. Go and get it! Great domain, if you buy this one let me know what you do with it.
needa.com – very clever name, friendly hosting company that has been around since Day 1. The owner used to own autos.com and sold it to fund this startup company.
needadesigner.com – spinoff from the name above. If you’d like it, let me know and we can start the transfer. Haven’t had the energy to do anything with it.
dreampod.com – my own domain, which has evolved from a corporate services site to my blog site. It’s going to be the destination for an e-magazine, job bank for creative pros, and social network.