How Do You Value a Domain Name? | DomainInvesting.com
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How Do You Value a Domain Name?

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This morning, I wrote a post about the launch of Valuate.com, an automated domain valuation website. Over the years, people have discussed the process of placing a value on domain names, and I tend to say (as well as others), “a domain name is worth what someone will pay for it.”

Perhaps this isn’t entirely accurate, because it’s impossible to gauge what anyone would or could pay for a particular domain name. There are many things to consider, and perhaps my statement is too much of a generalization?

It’s known that I don’t trust or generally believe professional appraisals, as they are almost always biased. When someone tells me they have a professional appraisal for a domain name that I am trying to buy, I generally reply by saying something like this:

“I don’t believe that appraisals can be accurate for a number of reasons. It’s in the appraisal company’s best interest to make the appraisal very high, as they hope to have repeat business.  If they gave you an appraisal of $200 and you had 50 other names that needed appraisals, would you return to that company? It’s much more likely that you would return if they told you that your name was worth $15,000.

I think it’s impossible to say what a name is worth officially, because you might be able to get much more than I am offering for the domain name eventually, but that isn’t a given and that day could also never come.”

The point I try to make by stating this is that the value of the domain name should be what I am willing to pay for it, and if they are still talking to me, they obviously have never had a higher offer. They can either take the opinion of a company that is making 100% margin on a domain appraisal and wants more business, or accept the cash offer I made.

In any case, the real question here is how do you place a value on a domain name?


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 (10)

    Kevin

    The first part of the process is understanding the seller’s objectives and time frame.

    If a seller is seeking a high price sale than there’s going to be significant time involved in marketing work and scouting out potential corporate end users or domain buying clients who don’t mind paying top dollar.

    If a seller needs cash now, then it’s important for them to realize they’ve got to go with a lower value on the price to facilitate a quick deal.

    Next you have to analyze the quality of the domain, the inherent traffic, the search volumes, the niche, the value of traffic to the advertising market, it’s age, what’s been done with it prior, past and current revenues, comparable sales for like domains, and a number of other factors that come into the equation. It’s quite a bit of analysis work when you do it right.

    I like structuring long terms deals where sellers retain equity in the domain and revenues going forward. That can be very lucrative as long as the buyer has the resources and capabilities to take the development to a high level.

    Another technique to max profits for the seller is joint venturing with private investors. This enables the seller to keep control of the domain, get some liquidity and cash out of it, and have a large amount of capital to build it out properly with a nice sized advertising and marketing budget. I’ve built up a large database of private investors looking for high risk high reward jv equity deals and corporate equity partners over the past 32 years of business. This is my personal favorite strategy to really get the value out of a gem domain and not need to sell it. You need a good domain name with this type of plan so it’s exciting for the jv partners, but it can be done for both high end deals and under $100k deals as well. Then in a few years sell it for a really good number with the business on it to a corporation and grab a big profit score.

    Kevin@BigTicketDomains.com

    October 26th, 2009 at 4:26 pm

    Duane

    I see it as Kevin, long term with developed websites is the way to go.

    All the quick deals flipping domains IMHO is going broke in slow motion.

    Having to constantly flip domains just to pay the bills is close to playing the lottery. At the end it is a loosers game.

    For those which are willing to pay high dollar for a domain, they usualy already have a full blown business plan.

    What is a domain worth if you truly have no idea how to develope it, or if it’s market opertunity has a uncertain future. Like ( ElectricCarMotor) or others.

    The price of a domain as i see it, has to do with emotions and timing.

    A true price tag can only be made by the seller and buyer.

    Appraisal services is a waste of time & money, the only winner is the appraiser.

    October 26th, 2009 at 7:34 pm

    Michael

    In my opinion, it is impossible to appraise a domain when you’re talking about an end user sale. You can look at traffic, CPC, whatever you like, but that domain won’t be worth the same to Microsoft as it is to a small software company, and it won’t be worth the same to a big company launching a new product as it would to a new company trying to launch on that domain.

    So I would say the best way to appraise a domain is to find out as much as you can about the buyer and their ability to pay, more so than looking at the domain itself. However, deep pocketed buyers are usually smart enough to have some kind of broker or middle man so you can’t find out much about them.

    It all seems like a waste of time to me. I see domains sell for way more than I expected, and way less than I expected. End user sales are totally unpredictable… so why even try? Is iReport.com worth $750k? You certainly wouldn’t think so, but Rick got that much for it. Maybe he used Estibot to come up with the price, lol.

    As for reseller valuations, it gets a little easier because resellers are much more predictable. They look at previous sales to justify their purchase, they look at traffic, revenue, search frequency, end user potential, etc.

    October 26th, 2009 at 9:37 pm

    David

    I went to Valuate to test one of my domains, properties.mx and it said <$50.

    Go figure!

    October 27th, 2009 at 2:08 am

    "The Dude"

    Hi El Silver,

    As a domain appraiser with over five years experience and blah blah blah… I tell my clients up front that any domain appraisal I give them is based on “minimum value” of the domain. This means, try not to sell UNDER the price I give you for this domain. I appraise most domains at wholesale pricing for that very reason. I could care less if they want to hire me for more appraisals, I care more about my reputation and helping my client understand the process.

    However, the more important feature I offer my clients is EVALUATION. This process is hugely important as a first step, and I learned it evaluating hundreds of thousands of domains for registrars on the drop. The difference? You don’t give a price, you just say “keep, dump, build, Premium, or WOW”. This gives the domainer an idea of their portfolio’s value AND direction, it costs less than a $1 a domain usually (bulk is cheaper), and it defines a client’s portfolio without them spending tons of money just to find out the domain is a throwaway.

    As for “automated” appraisers… there are some “benefits” to them, but basically if you’re depending on an appraisal without eyeballs, you’re not going to get the truth. The analytic process and AI with automated appraisals need to be tuned to taking in a multitude of conditions that just isn’t possible right now. (Is the domain name a category killer for a highly niched product with few buyers but huge prodservs conversion profits? EX: Flocculator – million dollar system)

    After the EVALUATION process, you can give the client a choice to appraise the domains that were evaluated as “Premium” or “WOW!”, instead of them wasting money at the start by appraising domains that are just so-so.

    Readers take heart, even “so-so” domains can make you 10,000% profit, so the ROI sweet spot is “how much did you pay for the domain?” and “did I at least double my money or more?”

    In my 10 years of domain investing, I’ve NEVER lost money on a domain name that I sold. That doesn’t count the thousand domains I’ve bought and let go in the drop, but 99% of those were OOTB buys, so $7 each… no big deal. It’s a small pizza.

    I wouldn’t reveal this much info if K-Let hadn’t put out his secrets here too, so thank him for sharing his expertise. His comments I agree with 100% in the buyer market understanding. He’s someone to listen to.

    October 27th, 2009 at 6:01 am

    domainshouse

    i totally agree with the article and the conclusions about appraisal pros. i tend to use valuate.com and already used and it seemed to me a very balanced and stats based valuation.
    however generally when you make a statement like this ““I don’t believe that appraisals can be accurate for a number of reasons. It’s in the appraisal company’s best interest to make the appraisal very high, as they hope to have repeat business….” most of the times you are not generalizing.

    I gave you a n example: one of my domains (portuguese language), casamaravilhas.com was appraised by Godaddy (where it is hosted more than 6 years) for a value of $200.
    Can you believe honestly that a domain that get daily 1.480.000 on Google search and it is the first to be found (the first gogofun pay to Google to be there), only values $200? A domain that has a web site since 1997 with more than 200.000 visitors in total and even today with more than a thousand for week it deserves only 200? ok it is in portuguese and Godaddy experts simply can´t valuate this type of domains (very unnational for their tastes) but it would enough for them to make a search “casa maravilhas” to find so many results and references to this domain and web site (dedicated to artists and shows, parties, etc.). It simply do not need to use adwords and with adsense it reaches hundreds a year.

    The domain is now “for sale” at Sedo for thousands that is the real value mainly for portuguese language domainers and end users. That´s it.

    Thanks for the article.
    Regards
    Carlos Martins
    domainshouse

    October 27th, 2009 at 6:12 am

    nSathees

    I have FREE appraisal from SEDO and Valuate.com for onResearch.net and co.uk

    SEDO priced the .net version at 590 Euro and less than 100 for co.uk

    Valuate priced 15k for co.uk and less than 50 for .net version.

    Now can anyone tell me where are we going tomorrow?

    Each and every domain is unique. Like we human. The value depends on seller and buyer.

    Like Elliot said “The price of a domain is as much as the buyer willing to pay”

    AEIOU is gone and now Valuate!

    October 27th, 2009 at 9:36 am

    nSathees

    If and when a appraisal algorithm comes to the market place, than it is most probably originated in a university or other statistic analysis firm, which is going to cost them a lot to figure out the relationship between domains.

    October 27th, 2009 at 9:40 am

    CasualDomainer

    Good to see people discussing valuations.

    On September 11, I posted about this with a nearly identical heading (How do you value domains?) at CasualDomainer.com

    Although, I was talking about “http://www.groupvaluation.com/”

    GroupValuation.com has a social aspect I liked – you can add a domain after YOU value 10 other people’s names. You get real people ‘guessing’ value.. I think that works well because after 10 valuations you get a pretty realistic picture of what people might pay at auction IMO.

    Francois’ Valuate.com gave similar results – have not asked if it’s new to estibot via some deal, but Valuate seemed to give better results than estibot used to – although it’s been a while.

    I like Valuate.com and would say there’s no harm in trying and getting to grips with any differing method of attempting to find a value.

    Agree with so many above – Kevin, yes I like equity and long term value over multiples of PPC which I see as short changing.

    End user sales are one thing – End USE is still a goal for me. I’ve taken the “for sale” signs off all my domains.

    October 27th, 2009 at 10:03 am

    Stephen Douglas

    Hey Domain Appraisal,

    Did you intentionally post a comment stealing part of my post word for word?

    “However, the more important feature I offer my clients is EVALUATION. This process is hugely important as a first step, and I learned it evaluating hundreds of thousands of domains for registrars on the drop. The difference? You don’t give a price, you just say “keep, dump, build, Premium, or WOW”. This gives the domainer an idea of their portfolio’s value AND direction, it costs less than a $1 a domain usually (bulk is cheaper), and it defines a client’s portfolio without them spending tons of money just to find out the domain is a throwaway.”

    Explain your post, as you have stolen a comment by me about my services, without commenting on it. If it was a mistake, no harm…

    November 12th, 2009 at 12:17 pm

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