Domain Name Valuations
Domain name valuations represent a critical step in the divestment or acquisition of any domain name. This holds true even for End Users of Domain Names. Your domain name represents the foundation of your brand and should be treated as an Asset class that typically appreciates in value over time.
Think of your domain name as the seed that gets planted, developed, nurtured and cultivated into a powerful brand. Once you establish the seed (should always be .COM), you need to decide on a development platform, direction, niche, design, and implementation. The domain name should also have a user-friendly SEO footprint and have a clean history around the asset.
Domain Name Accessibility
In 2018, the European Union enacted a new General Data Protection Regulation (GDPR) regulations. As a result, Domain Name accessibility has become harder to uncover. Most Whois information has become redacted, and now, more than ever, it’s increasingly difficult to reach certain Domain owners.
Accessibility is an important factor in understanding a Domain Names value. If you cannot get in touch with the rightful owner, it makes it hard to have all the facts to determine the Value of the assets.
There are two types of Domain Name Valuations. The first is the domain valuation tool or automated algorithm-type platforms that help clients with a quick, generalized snapshot of the value of the assets. An example would be FreeValuator.com, or Estibot.com. This is typically based on pre-populated information and doesn’t always take into account the current market conditions at play around domain names.
This type of Domain Valuation Tool is useful for clients that seek a quick snapshot of the generally perceived value of the asset. This process is automated and most algorithms used are updated every few months. The data can become stale, and no longer relevant.
The second form of Domain Valuation is the manual process of evaluating a Domain Name. This is performed on a per-name-basis and takes about three hours to complete. This is a more defined process that gathers the following data points to effectively evaluate your asset on a case-by-case basis.
We start with the market comps. What other assets have sold that are comparable to your domain name? We look at the anatomy and TLD. Combine that research with the keyword makeup of the domain name. What is the search volume around the domain name on an exact-match-local level? (EML). What type of competition is currently bidding around that keyword, and what is the current Cost-Per-Click for that traffic?
In addition, we gather data that helps identify the full market potential of the Domain Name in question. Search results, generic appeal, easy to spell and pronounce? What’s the commercial appeal and most importantly, what is it worth if you need to go and sell the asset later in the Year.
At NameExperts.com, we are focused on providing fair market valuations based on fifteen metrics, as well as comprehensive market comparable stats—similar to traditional real estate. Our valuation methodology uses manual collection and evaluation of data points; including current market trends and conditions as well as the health of the domain business at large. This process is far more comprehensive and uses third-party proprietary tools to gather the proper information to effectively perform Website Appraisals.
We also perform Website Valuations for our clients. This process looks at the entire framework of a fully functioning Website. We review the backlink profile and the traffic the site has generated over a trailing period. That information is then cross-referenced with the revenue of the property to effectively perform Website Valuations. To effectively evaluate your Website, we would need some form of analytics access and a clear understanding of the opportunity. How many pages are currently indexed in Google, and how long has the Website been generating revenue. We then assign value based on a multiple of EBITDA, or Revenues.
Fortunately, through a simple four-step process, the Domain Brokers at NameExperts.com have made it simple to accomplish the daunting task of valuing a domain name.
Key Metrics Analysis: Every domain name valuation starts with a key metrics analysis. In this stage, we’ll take a look at the most important aspects of the domain name. Does it have a potentially lucrative keyword focus? What is the structure of the backlink profile? What potential would the domain name hold for an end user? These are the question that we seek to answer at this stage of the valuation. We also evaluate the implication of trademarks and how they might affect value.
Strengths Identification: An effective domain name strategy will capitalize on the strengths of the name. In the strength identification step, we analyze what the domain name’s greatest strengths are to inform the overall acquisition strategy. We also look at the alternative URL’s that might be available to help complement your brand.
Weaknesses Evaluation: With key metrics and strengths identified, finding a weakness in the domain name is simple to do. What’s not so simple, though, is evaluating how those weaknesses can be shored up by leveraging the strength of the domain name. For example, a given domain may hold strong value for an end user, but not so much for an investor looking to build a site that wins ad dollars. Knowing the difference between those two is where a savvy domain broker proves his or her value. We also identify other issues that may arise down the road by looking at the larger landscape.
Comparables Summary: If you’ve ever purchased or sold a home, you’ve probably received a comparable summary—an analysis of similar homes. The concept is no different from domain names. Except with domain names, you’ll be looking at the potential brand value, rather than granite countertops, to arrive at a domain name valuation. Comparable sales should be recent, and not older than three years. You should not pay attention to comps from 1999, or even 2005 as these periods represented different markets in the Domain Name Business.
At this point in the game, we are now ready to try and assign value to the TLD. For many years, we have grown accustomed to .COM/.NET/.ORG and a handful of others including.INFO, .ME, .CO, and .IO. Since 2015, ICANN has authorized the release of more than 1500 additional extensions. Now you can secure anything from.AOL, too.LAW and many others.
Let’s take a deeper look at the top 25 global TLDS based on a percentage of registered domains Worldwide.
In reviewing the information outlined above, there are now more than 1,572 top-level-domains. The .COM/.NET/.ORG still makeup, about 52 percent of the total Worldwide domain name registrations. As a result, we will generally adhere to the following valuations on domain names, dependent on individual commercial appeal and popularity around the term.
.COM—100 percent value
.ORG—1/8 value of the .COM
.NET—1/10 value of the .COM
.DE—1/5 value of the .COM
Domain Name Valuations should always be performed on a manual basis, using all relevant and suitable data points to evaluate the asset in full. This is critical in developing a market strategy for any potential Domain Name. We also need to establish criteria to determine the Fair Market Value of the asset in question.
How do you Determine Fair Market Value? (FMV)
Your Domain Name asset is very similar to real estate. Let’s use the analogy of “Beachfront Real Estate” in this example. On the oceanfront, we feature the highly sought-after Domain Name, Boat.com, then on the Ocean Block sits Boat.net right behind Boat.org. Bayside across the busy highway, you have .co and .io and a slew of other extensions. A good chunk of the inferior TLDS then can only be accessed by jumping in the car and heading inland. The further you drive, the better chance you have of reaching one of the much weaker GTLD extensions, such as; .Hair, .Baseball, .Volvo or anything else.
The point is that domain names are worth what someone is willing to spend on them. Over the past thirty years of domain names, we have attached tremendous advertising and marketing dollars exclusively to the.COM, and as a result, the.COM becomes the benchmark for all domain name valuations—at large.
SEO Value of your URLs
You found your perfect domain name for your next project. It most likely ends in.COM, and now you want to start adding bricks to the foundation and frame of your real estate. The SEO strategy should always encompass unique and useful web content that is rich in structure and adds some value to the reader. Additionally, this is where you should start building backlinks for your new Website.
The Backlink strategy helps with the Authority of the Website and can build credibility and ultimately, strengthen the foundation of your brand.
Domain Name Valuations—End User vs. Domainer
Buy low, sell high. Everyone’s dream is to find the best deal possible. They want to secure the perfect domain name, either for a specific use, or intended use. They might want to hold for a period of time and try to make a few bucks.
The End User has a clear and specific need for the Domain Name. They are willing to pay a higher price to secure their perfect brand. They have most likely already performed diligence and trademark clearing to understand if their asset is even accessible. The End User assigns value based on many factors, including the business model (B-to-B, or B-to-C, Etc.). The End User is pre-conditioned to buy and is not always as price-conscience as the domain investor.
Domain investors are always looking for a deal. They tend to low-ball owners with offers that would allow them to in turn; flip the domain name to another investor, End User, or hold for some other intended use.
Other Domain investors might scour the net searching for Domain Name deals. They might constantly try to acquire assets of popular keywords or target Domain Names that might be trendy in the future. Most investors are happy to wait for the End User to come to them to express interest in their asset.
NameExperts.com removes the Guesswork
Domain Name Valuations can be a daunting task and sometimes, the value seems arbitrary. At NameExperts.com, we take the guesswork out of the valuation process. We only Valuate Domain Names based on our outlined criteria and assign value based on many criteria. Your domain name represents your foundation for your brand, and should always be treated as such.
We provide a comprehensive report on your Domain Name Valuation and dig deep to gather all relevant material to assign current, and fair-market value.
We encourage you to get in touch today to learn more about our comprehensive Domain Name Valuation Services.