5 Exterior Factors I Consider When Valuing a Domain Name
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5 Exterior Factors I Consider When Valuing a Domain Name

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I buy and sell all types of domain names related to various trades and industries. One day I might be negotiating to buy a real estate domain name and the next day I might be trying to sell a domain name related to cosmetic surgery.

There are certain standard domain name factors I generally consider when I am trying to place a value on domain names, and I think other domain investors look at these as well. I use the Keyword Planner tool to see search numbers, and I find the Adwords CPC to see how much advertisers are paying for clicks. I also look at the age of the domain name and number of extensions registered (and by whom). Comparable sales and prices for similar domain names are also standard factors.

There are other general domain name factors I also consider, but for the sake of this post, I’d like to discuss five of the exterior factors I consider to place a value on a domain name I am trying to acquire or sell. I welcome your feedback, and I invite you to share some other considerations you make when placing a value on a domain name.

Cost of product or service – I look at how much people are paying for the product or service that the domain name covers. For higher end products and services where trust is important, I believe exact match keyword domain names may be critical in attaining that trust. If it’s a high end business, the value of the domain name may reflect that.

Commission or margin on product or service – If I am looking to buy or sell a domain name related to an industry where the commission or profit margin is high and one closed deal can pay for the domain name, the value I place on it will reflect this. Having higher profit margins means that an excellent lead producing domain name should be worth more.

Types of domain names other companies use – If companies who operate in the space use variations of a domain name I own or am trying to buy, I would likely value it higher as a result. To give you an example, when I bought LakeWinnipesaukee.com, I saw that a number of local businesses use variations of this as well as different extensions, so I valued it higher. I think it’s the best domain name of those in use, and when I build it, I believe there will be a higher level or trust.

Size of market – The more businesses involved in the market, the more valuable a domain name should be. For a category defining domain name, I have found at least one company wants to have the prestige of owning that domain name or to prevent a competitor from getting it. If the market is small, the value would probably be less.

Size of companies involved – The actual value depends on the companies, but the size of the companies is a consideration. If it’s going to be tough or impossible to contact a decision maker or the domain name probably wouldn’t be of interest to any companies in the space, the value would be lower.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (16)

    Tony

    I think the 2nd paragraph of this article is pretty much what a modern domainer should do in a nutshell. Of course, there is also the “gut” feeling that is involved with brandables but that is subjective and only those with a lack of humility can say their opinion is superior.

    March 8th, 2014 at 10:54 am

    Wayne

    I learn a lot on your blog and enjoy it.
    I would differ on one point though…
    “LakeWinnipesaukee.com” should be devalued substantially
    because not one person in a hundred could spell it, pronounce it, and type
    it into a browser.Just my opinion. It’s a very small niche.

    March 8th, 2014 at 11:19 am

      Elliot Silver

      Thanks much for the compliment, but I disagree with your assessment for a few reasons:

      1) The search numbers (27,100 monthly searches as of now in the offseason) don’t jibe with what you’re saying, so I assume people familiar with Lake Winnipesaukee know how to spell it.

      2) Google Autocorrect will help people as they try and spell it, and if they spell it wrong, Google will help them again.

      3) Right now, in the winter offseason, the undeveloped / never developed domain name is seeing a bit of type in traffic. It isn’t a lot, but it shows there is some interest without ever having been a website.

      I also believe that if I build out a nice looking website that has information about the Lake, hotels, real estate companies, home rental owners, and activity managers will want to be featured on it to promote their businesses.

      Of course I could be wrong, but ultimately, I believe people will figure out the spelling.

      In reply to Wayne | March 8th, 2014 at 1:17 pm

    todd

    “I saw that a number of local businesses use variations of this as well as different extensions, so I valued it higher. ”

    This by far is the number 1 thing to look at in my opinion. You have a much more likely chance of selling a domain for a substantial profit when there are people using those words in their domains.

    For instance if you had teethwhitening.com and researched to find out that almost 1500 dot com domains end with the words teeth whitening than your chances of selling it for good money go up tremendously.

    March 8th, 2014 at 11:44 am

      Tony

      “For instance if you had teethwhitening.com and researched to find out that almost 1500 dot com domains end with the words teeth whitening”

      Curious as to how you do that?

      In reply to todd | March 8th, 2014 at 11:59 am

      Elliot Silver

      I haven’t used it since it was revamped, but DomainTools’ domain search tool was helpful in doing that.

      March 8th, 2014 at 1:24 pm

      John

      The “revamping” means people now have to pay ~$50/month or ~$500/year in order to do that, so I suspect the vast majority of domainers will no longer feel able to use it.

      In reply to Elliot Silver | March 8th, 2014 at 8:05 pm

      Elliot Silver

      It is important, although the downside is that a local business might not know enough about domain name values, might not have the capital to pay, and it might not have the desire to go from local to worldwide.

      In reply to todd | March 8th, 2014 at 1:05 pm

    Raider

    Taking all these factors into consideration, how much less do you value a domain other than dot com?

    March 8th, 2014 at 11:49 am

      Elliot Silver

      I don’t think I’ve “invested” in a domain name other than .com. I’ve speculated on several but haven’t paid much in the aftermarket, nor have I sold many non .com domain names.

      In reply to Raider | March 8th, 2014 at 11:51 am

      Raider

      I’m big on dot com as well, but I still have about 5% in my portfolio consisting of other TLD’s, mostly .net and .org, and I’ve good success in selling when a inquiry comes along, but sometimes I feel I left money on the table, Thought you may of had a formula for the lessor TLD’s… Thanks anyway

      In reply to Elliot Silver | March 8th, 2014 at 7:54 pm

      John

      I sure hope this new gTLD phenomenon will result in changes for .US in terms of awareness and desire.

      In reply to Raider | March 8th, 2014 at 8:08 pm

      John

      I let a lot of really nice ones drop as the years dragged on, but definitely not all.

      In reply to Raider | March 8th, 2014 at 8:10 pm

    Todd

    @Tony

    ZFbot.com

    March 8th, 2014 at 1:48 pm

    Leonard Britt

    If one “mines” the drops or below the radar keywords in long-existing extensions where one regularly sees aftermarket sales, there is really no need to pursue the new TLDs. It will take years before a meaningful aftermarket develops for these new domains meaning they are illiquid investments at best and very possibly a total waste of money.

    March 8th, 2014 at 8:56 pm

    Troy

    Do you ever factor into the equation the total number of search page results from Google or Yahoo that have paid ad placements on the right, top, or bottom of the page for that particular keyword in the domain?

    March 10th, 2014 at 2:44 am

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