October 18, 2024

How to Value A Domain Name

written by

Joe Uddeme

Joe Uddeme

How to Value A Domain Name

Did you make a speculative investment in a domain name some years back and are now wondering what it’s worth? In this article, domain name specialist Joe Uddeme provides expert insight into how to accurately value what you have in your portfolio.

 

How to Value A Domain Name

Valuations can be confusing whether you are the buyer or seller. “What’s my domain worth?” is a question that many owners ask themselves. “Why are domains so expensive?”, an intending buyer may ask after seeing the price of the asset they want.

Utilizing an appraisal services tool is crucial to accurately assess the value of certain names for various purposes, such as buying, selling, or evaluating brand name changes.

We will dive deep into domain valuation and the factors that affect the value of a domain, but first it’s helpful to understand why they cost money in the first place.

 

Key takeaways

  • Domain name values rise and fall as with other asset classes
  • Accurate domain name valuation ensures both buyers and sellers leave the negotiation table happy
  • Understand what makes one domain name more valuable than the next
  • Access evaluation tools to help you arrive at a fair price

Understanding Domain Value

Domain value is a crucial aspect of the online business world, and understanding it can help individuals and businesses make informed decisions about their digital assets. Remember, values could rise and fall according to market trends and the desirability of a name to a particular buyer at any point in time.

Knowing the value of a name is essential for both buyers and sellers, as it ensures fair transactions and helps in strategizing future investments.

In this section, we will delve into the concept of domain value, its importance, and the factors that influence it – as well as offer a complete review of the best-known domain appraisal services.

What is a Domain Worth?

Domain worth refers to the monetary value of a name. It’s an estimated amount that an asset could be sold for on the market. This estimated value is influenced by various factors, including the domain’s length, keywords, and extension.

Domain worth is a critical factor in determining the value of a business, as a high domain worth can significantly enhance a business’s overall value. For instance, a memorable and relevant name can attract more traffic, improve brand recognition, and ultimately lead to higher revenue.

Why Do Domain Names Cost Money?

A domain name is an online property – and property is not free. They are scarce by design; once a person buys an asset, it belongs to them as long as they pay the renewal fees. Likewise, it costs money to maintain the vast computing infrastructure that powers the internet, and selling digital domains is a way for registrars to recoup their costs.

Expertise in buying premium domains is crucial to ensure accurate appraisals and competitive pricing, helping buyers avoid over-payment.

Why Would You Need To Value A Domain?

It is important to have an estimate of what a name is worth, whether you are the buyer or seller for any potential sale. Understanding a domain’s worth ensures that a buyer won’t overpay for an asset and a seller won’t sell their domain for a price far below what they could have gotten from another acquisition partner.

Domain name valuation helps buyers or sellers assess the worth of a domain and pay or receive a fair market price.

What Makes An Asset Valuable?

The Top-Level Domain (TLD)

The TLD refers to the last segment of a domain name that comes after the “dot” symbol (.com, .net, .ai, .co, .xyz, etc.). It plays a big role in the value of your asset due to supply and demand insight and data. For instance, .COM is the most popular option for buyers, so domains with this TLD tend to be more expensive than others with less interest. Some other TLDs also have a reputation for being expensive because of a strong market, like .ai and .io – according to current data.

Domain Length

The number of characters of an asset also affects its value metrics. The rule of thumb is that the lesser the number of characters, the more valuable the asset.

Number of Words

Similarly to length, the number of words in a name affects its valuation. The lesser the number of words, the more upside an asset has. This happens because domains with one or two words are easier to remember and thus command more brand power.

Age or Domain History

How long a domain has been owned by someone else contributes to its value. The longer the period of ownership, the higher the chances of that domain being recognizable. So, domains owned for a long time tend to command higher prices than new or short-lived ones.

Domain Popularity

If a name is already in use, the volume of the traffic on the site using it contributes to its value. High-traffic domains are more expensive because the new owner can leverage the existing traffic to drive eyeballs to their own website.

Likewise, if an existing asset has backlinks from other websites, it will command a higher price because backlinks improve search engine rankings and help generate organic traffic.

Understanding the domain marketplace is crucial for accurately estimating values and optimizing URL investments.

Availability of Alternative Domains

Can the purchaser find a similar asset elsewhere? (for instance Trucks.com > Trucks.co or Trucks.net or the .org). If the buyer can’t find a similar name somewhere else, then they may be more willing to pay a higher amount for it.

Market Interest and Characteristics

Market interest and characteristics are two essential factors that influence the names. Internet market interest refers to the level of interest in a name, which can be driven by trends, industry relevance, and the popularity of certain keywords.

Characteristics, on the other hand, refer to the attributes of the name, such as its number of characters, extension, and keyword density.

A URL with high market demand and desirable characteristics can command a higher price. For example, short, memorable domain names with popular extensions like .com are often more valuable sales due to their high demand and ease of recall.

Google search box to denote the importance of a domain name

 

How To Determine A Domain’s Value

There is no specific formula for this activity. However, there are some free tools and services to help you estimate the cost of a domain name.

1. Research Tools

The first step in figuring out how much a name can sell for is checking out the rate of similar domain names. Thus, you can use a research tool to see what similar domain names are selling for and compare them to your own. This will help you select a fair market price. Some sites are free to use while others charge a fee.

DN Journal is a good example of a platform that collates sales figures and displays them to readers for free.

Namebio, much like DN Journal does a great job cataloging recent names with an easy to use scan tool. They offered a monthly service fee for multiple inquiries.

Domain Name Wire is another free resource. You can find blog posts about notable domain sales to help you estimate what you can sell yours for.

Godaddy is a great resource to see what names may be available. They also offer a fast transfer service.

There are many others, but these a few good places to start.

2. Use An Appraisal Service

A domain appraisal service estimates the market value of a name. They appraise a domain based on many factors, including popularity, search engine ranking, social media shares, TLD, and by comparing it to similar domains.

These domain appraisal services platforms make it easy to get an educated answer on how much a domain is worth.

A free valuation tool can give you an overview of the appraisal value, such as godaddy.

3. Find Out What Others Are Willing To Pay

A more direct way to answer the question of “what is a domain worth?” is to understand the domain sales marketplace and see what others are willing to purchase it for. The easiest way to do this is to list your domain on a marketplace like Sedo and Afternic and see what offers you receive to purchase. Create cool landing pages to help drive leads. This data can help set better pricing. You can use the offers as the yardstick for valuing the domain.

Combining AI and Human Expertise

To accurately determine domain value, it’s essential to combine artificial intelligence (AI) and human expertise. AI searches can analyze vast amounts of data, including market trends, search volume, and similar domains, to provide an estimated value request. They are vast resources for information.

These automated tools can quickly process information and identify patterns that might not be immediately apparent. However, human expertise is necessary to interpret the data, consider the nuances of the domain name, and provide a more accurate appraisal.

Experienced domainers and brokers can offer insights that go beyond raw data, such as understanding the potential for future trends and the strategic value of a domain within a specific industry.

How To Increase Your Domain’s Value

There are several ways to boost the value of a domain, including:

Search Engine Optimization (SEO)

This refers to optimizing a web page such that it ranks high on search engines. You can do this by including relevant keywords in your niche and getting backlinks from other websites. If people can find your website on Google algorithms, they will click on it more often and give you higher conversions, which translates into a higher domain value when you analyze the data.

Market Your Site

You can advertise your website on appropriate venues like social media services, search engines, or even use free word of mouth for your Company. This lets people know you exist and will likely drive higher eyeballs to your domain, giving it a greater value.

Availability of Other Domains

People are less willing to pay a high price for a domain if they can get something similar for cheaper elsewhere, e.g., Cars.com > Cars.co. One way to avert this is to buy the keyword across multiple TLDs, e.g., Box.com, Box.org, Box.net, etc. This way, the intending buyer will have less leverage.

Build An Online Presence

You can create profiles on social media platforms to build an online presence. This gives your domain more brand power and, in turn, a higher evaluation figure.

Types Of Domain Name Valuations

There are three main types of domain name valuation:

Retail Pricing

These are domain names directly offered by the owners to end users with a clear use case. The end users already have something in mind to do with the domain, usually for a website, so are more willing to pay a higher sum than the estimates.

Liquid Pricing

This comes into play when domain names are being offloaded by an owner, court order, or a bankruptcy proceeding sales. The domains are typically sold as a group and are cheaper to buy because it is a fire sale. However, the chances of finding domains with liquid pricing estimates are slim compared to the others.

Liquid pricing is usually between 20% to 30% of retail pricing.

Investor Pricing

This is when domain names are offered for sale by professional domain brokers or flippers. You can find these types in an auction where you will likely bid against other people to acquire a domain. Some people may exchange domains with other Internet portfolio investors or team up to acquire a single valuable name for their domain portfolio.

Investor estimates pricing between 40% to 60% of retail pricing.

Working with Domain Investors and Brokers

Domain investors and brokers play a crucial role in the domain name market. They help individuals and businesses buy, sell, and appraise their names, leveraging their expertise to ensure fair and profitable transactions. Brokers, meanwhile, act as an expert go-between the buyer and seller of a domain name.

Role of Domain Investors

Domain investors are individuals or companies that buy and hold domain names with the intention of selling them at a profit. They often have a deep understanding of the domain name market and can provide valuable insights into the value of a domain name.

Investors typically maintain a domain portfolio as part of their business, which includes a variety of domain names that they believe will appreciate in value over time. By analyzing market trends and leveraging their experience, domain investors can identify undervalued domains and acquire them at a lower cost, with the aim of selling them at a higher price in the future.

 

About the author

Joe Uddeme is Director and Principal of NameExperts.com, one of the world’s leading domain name brokerage services. He has overseen domain name sales and acquisitions totaling more than $150 million and is renowned worldwide as a go-to expert in buying and selling premium domains. Contact us at: [email protected]

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There are hundreds of thousands of prime opportunities to invest in the domain space – and as the last 30 years have shown, the .com is the most credible TLD on the market, both domestically and abroad. This holds true if you are buying your domain for your business or to hold and transfer at a later date. Whether this is your first domain or you own many, the .com creates easy accessibility for consumers and brands alike. Brand Protection: Companies work hard to protect their domain brands, accounts and marketing tactics. They invest millions of dollars and countless resources at building that beach-front real estate and maintaining their Internet presence in the world. As leaders in the domain space, the NameExperts.com team continues to recommend the .com as the superior domain with considerable upside and long-term equity potential. Case Study: Tesla.com domain acquisition Here’s a case study of a .com domain acquisition transfer that highlights the importance and benefits of acquiring a premium .com domain for a business. The study involves Tesla’s acquisition of Tesla.com. Background: For many years after its founding, Tesla, the electric vehicle manufacturer, operated under the registered domain TeslaMotors.com. Despite its growing success, the entity didn’t own the highly sought-after Tesla.com domain. TeslaMotors.com was functional, but having Tesla.com would better align with the company’s image as it expanded beyond cars to include energy products like solar panels and batteries. The domain Tesla.com was originally owned by a man named Stuart Grossman, who had registered it long before the organization existed. Grossman wasn’t actively using the domain, but he also wasn’t interested in selling it easily, making the acquisition a challenging and lengthy process. The Acquisition Process: Need for Rebranding: As Tesla grew and became a household name, the organization realized that TeslaMotors.com was limiting its branding. The “Motors” in the domain name suggested a narrow focus on cars, whereas Tesla’s long-term vision encompassed energy solutions, solar products, and batteries. The organization needed a simpler, cleaner domain—Tesla.com—that reflected its image as a leader in the broader tech and energy sectors. Complex Negotiation: Elon Musk, Tesla’s CEO, revealed that acquiring Tesla.com was a difficult process, taking over 10 years of negotiations. The domain owner, Grossman, was reluctant to sell the name for many years, leading Tesla to offer a significant amount to finally secure it. Musk later hinted that they had paid $11 million to acquire the domain, though exact figures weren’t officially disclosed. Hands-on Approach: Tesla’s approach to acquiring the domain involved: Patience: Tesla waited until the domain owner was ready to sell, all while continuing to build their company. Persistence: Tesla remained in contact with the owner over a long period, signaling ongoing interest and ensuring the owner knew they were serious buyers. Strategic Timing: Tesla finally closed the deal when they were ready to reposition their entity from just a car line to a broader energy and technology company. Outcome: In 2016, Tesla successfully acquired and completed the transfer of the Tesla.com domain and immediately rebranded their website and digital assets. This acquisition allowed Tesla to secure its concept and image across all its product lines and simplify its online presence and customer support tools.     About the author Joe Uddeme is Director and Principal of Name Experts, one of the world’s leading domain name brokerage services. He has overseen domain name sales and acquisitions totaling more than $150 million and is renowned worldwide as a go-to expert in buying and selling premium domains. Joe’s specialty is helping clients secure .com domain names that appear unreachable – and at the right price, too. Contact Joe at: [email protected]

Why Work with Name Experts

Name Experts offers personalized domain brokerage services, assisting clients in buying or selling premium domain names with expert appraisal, negotiation, and complete transaction management while ensuring confidentiality.

Some of our most
successful stealth acquisition and sales

Aid.com

Fit.com

Mine.com

GLD.com

Jeff.com

Fora.com

Nori.com

Secure.com

Guitar.com

F*ck.com

Radian.com

MetaData.com

Prize.com

Link.com

Loop.com

Programs.com

Claim.com

Quince.com

Hook.com

QXO.com

NQ.com

Rest.com

Humani.com

Max.com

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