What Is a Domain Name Worth?
The Inexact Art of Domain Name Appraisal

I'm not a fan of domain speculation, that is, buying up a lot of names and holding them to see how much you can get for them. But I've had to purchase one domain name from a previous owner, I've tried to negotiate purchases for clients, and now I have a domain name to sell. Like it or not, marketers sometimes have to enter into the strange world of after-market domain name selling and buying.

The biggest question, of course, is what is a particular domain name worth? Peruse the listings on auction sites such as Afternic.com and GreatDomains.com, and you might get the idea that there are no domain name "dogs" according to their owners, that all are worth something, and some are worth a great deal. But if so many domains are worth something, why do they sit on auction sites for months without any bids? Lack of demand. Face it. It takes a particular buyer looking for a particular kind of name to give a domain name any value at all.

A new cottage industry on the Internet is domain name appraisal, an expert assessment of how much a domain name is worth. One firm claims they have made 100,000 domain name appraisals. Amazing! No guarantees, of course, just opinions. Each appraiser, however, uses some set of criteria to judge value as objectively as possible, and then adds his own subjective twist based on his experience of what domains are actually selling for. While no appraiser's guide is quite like any other's, they all focus on three basic elements: domain name structure, word impact, and marketability.

Now this may sound a lot like the advice offered in my recent article "How to Select a Domain Name for Your Company." http://www.wilsonweb.com/wmt5/domain-select.htm But this a different angle -- perceived value on the open market. Ideally, when you are selecting a domain name you aren't considering market value, but value to your company. However, domain name appraisal is looking at the value of a domain on the open market.

I have no intention of writing a new appraisal guide; you can find a number of good ones in our sidebar to this issue. I just want to outline the logic that goes into making a judgment of domain name value.

Structure

The easiest to assess is the gross structure of the domain name. It's also the easiest to quantify.

Dot Value is first. In the US, .com names are considered best, with .net valued at only 20% to 25% and .org only 10% of what the same .com name would bring.

Initial i-,e-, or v-. JoAnn VanDesart of DomainIQ.com believes that the breed of domain names beginning with i-, e-, or v- are of lower value than the domain name without them. Names that include "the," "and," "-est," or "-ing" are less valuable than those without.

Length. Short names tend to be more valuable. Names over 15 characters or so are felt to be less desirable.

Hyphens and Numbers in the domain name also lessen the perceived value.

Impact

Next, appraisers look at the overall impact of the domain name. There's a real attempt at objectivity, but this can't help but include some subjectivity, as well.

Recognition is considered highly desirable. A domain name like Google wouldn't fetch a high price because it isn't a common word or expression. It's value was developed from clever marketing. Domain names like Business.com, ForSaleByOwner.com, or Monster.com, on the other hand, have high recognition. Lower recognition results from the ways words are crunched together. Cars4Sale.com is still recognizable, but Cars4U.com is less so. 411Cars4U.com is pitiful.

Industry Relevance is another factor. If the domain name would immediately tell a customer what products or services are being offered, it increases in value. Phone.com, for example, has industry relevance in the telecommunications industry. Monster.com has no generic relevance in the employment industry, on the other hand. But clever marketing has taken a recognizable word and used it to effectively brand a job posting site. Phone.com, Garden.com, and Art.com would score high on Industry Relevance, while Monster.com would score low on this criterion.

Clarity is important, too. Is the domain name confusing when you hear it on the radio? Could it be spelled two or three ways? Lack of confusion adds value. So Beyond.com is clear while There.com could be confused with Their.com.

Positive Tone adds value. GoBeyond.com sounds customer-focused and altruistic. Cheap.com makes you wonder if you should find a better place to shop.

Strength and Memorability. Does it stick in your mind? How original is it? How easily is does it become muddled in your thinking with two or three similar domain names? Tell several friends about a domain name today and see if they remember it tomorrow. Strength is pretty subjective, but still very important.

Marketability

You can have the clearest, most memorable domain name in the world, but the next question is, who might be interested in buying it? And do they have any money to spend? A good question is, "What would a venture capitalist spend to purchase this name?" And these days, when venturers are tighter with their capital, can astronomic prices be sustained? Another question: What will the domain name be worth five years from now when .com names are not readily available at all and will be looked upon as classics?

Likely Buyer Industry. The truly flexible domains, like beyond.com, are more marketable because of their flexibility. But most domain names tend to slant toward usability in one industry or another. Some industries for high ticket items just have more money to spend, such as the auto industry. "Likely Buyer Industry" is the closest thing domain name appraisals have to real estate's mantra: "location, location, location." SolutionHome.com and HitDomains.com have prepared a list of the top 10 sectors based on new venture capital money flow and e-commerce transactions being made: (1) business services, (2) telecommunications, (3) financial services, (4) entertainment/music, (5) software, (6) retail, (7) healthcare services, (8) medical devices, (9) consumer services, and (10) biotechnology. But just because the domain points to an affluent industry doesn't mean that it is worth a lot more. Its desirability might be to second-tier companies within an industry, such as suppliers for the big companies. All these factors need to be taken into consideration in valuing a domain name.

Development Potential. Can this name be built into an instantly recognizable site? Does the domain name describe the content of a commercially viable Web business? If so, the value of the name is considerably greater. Can the name be branded? If so, this keeps its value up.

Trademark Conflicts. You want to be very careful, however, buying names that might infringe on trademarks or are involved in trademark conflicts. These reduce the value of a domain name dramatically. You can check with the US Trademark and Patent Office or your own country's database. http://trademarks.uspto.gov

Current Traffic and Revenue. If the domain name points to an existing website, how much traffic does the site get? How many links on other sites point to it? The more traffic, the more the domain is worth to a purchaser. If it is already bringing in good revenue, that is another plus.

Comparables. Appraisal in the real estate industry thrives on comps. What have similar homes in the same neighborhood sold for? But on the Internet, comps are hard to come by, since the sale doesn't have to be registered with the county clerk showing an indication of the sale price. You can see the megabucks paid for famous domains, such as: Autos.com, $2,200,000; Loans.com, $3,000,000; Drugs.com, $823,456; and Speaker.com, $120,000. (See other record sales at http://www.domainiq.com/domainprices.htm ).

One approach to comps is to look for similar names for sale in various auction sites. Another is to examine a list of expired domain names. You can also see what existing sites seem to be doing with similar names. In the Research section of Afternic.com you can search on appraisals of similar names to see how they are valued by amateur appraisers. http://www.afternic.com/index.cfm?a=research In Afternic's Auction section you can also see how many bids have been placed on similar names, and what minimum bids are asked. http://www.afternic.com/index.cfm?a=auctions Of course, all this is hard to quantify, but it gives you some clues to value. Also check the lists of expired domain names (though these will cost you a subscription fee) to see if similar names are available and been let go by their owners. http://www.unuseddomainnames.com/ A free source is available at Yell Creative. http://www.yellcreative.com/expired_names.htm

These are the factors that go into determining a domain name's value on the open market. As you might guess, appraisals can fluctuate widely. The true value of a domain name, I suppose, is what a particular seller is willing to pay and what a willing buyer agrees to accept at any point in time. Other ways of fixing value are only educated guesses.

How to Purchase a Previously-Owned Domain Name

Here are the steps involved in purchasing a domain name:

1. Find a currently-owned domain name that is right for your company.
2. Pay for a couple of appraisals to help you decide how much to offer and to give you leverage in your negotiations. You can purchase an appraisal from the experts at SolutionHome.com and HitDomains.com https://www.solutionhome.com/appraisal/index.cfm?af_id=459 or from one of the many other appraisers. You can also ask the community at Afternic.com to appraise your name for free, and take the average of their appraisals.
3. Solicitation
• If the domain name is available on an auction, then bid on it, making sure you are aware who will pay the costs of the sale.
• If it has not been listed for sale, consider whether you should have a domain broker, such as GreatDomains.com represent you, or whether you would like to negotiate with the owner yourself. If the domain name is worth a lot, you're better off with experienced representation in your corner, thought that comes with a price. http://www.greatdomains.com/services/escrow/broker_trans.asp
4. Complete the purchase. You may want to use an escrow service, such as that offered by GreatDomains.com, to make sure that both parties are treated honestly in the sale.
   http://greatdomains.com/services/escrow/escrowservice.asp

I wish you every success in your domain name shopping. It may not fun, perhaps, but you could find just what you are looking for.