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How to Determine the Worth of a Domain Name

You’ve settled on a domain name for your new company, and the domain name is already registered and available for purchase on the open market. What price range should you be prepared to accept? Because there are so many high-quality domain names already taken, this is becoming a frequently asked question.

While there is no exact way for finding an exact value for any domain name, there are several aspects that should be taken into account when estimating an acceptable approximate value for the domain name that you wish to purchase.

Please continue reading to learn about some of the ways that professional domain appraisal businesses employ in order to do their business.

Factors Affecting the Value of a Domain

Several technical aspects influence the value of a domain name, and there are differing viewpoints on the relative relevance of the various criteria in determining the value of a domain name. In this section, we will look at a variety of metrics that are typically used in domain valuation.

While not intended to be exhaustive, this collection does provide a taste of many of the finer topics to consider in your own research and decision making.

1) Domain Extension

domain-name-extension

The “TLD,” or Top Level Domain, of a domain name is one of the most essential elements for determining the value of a domain name. This is the extension that appears at the end of the domain name, such as.com,.net,.org, and so on..com is the most common extension.

When all other factors are equal, a.com domain name will often sell for around four times the price of an otherwise similar domain in one of the other major worldwide extensions, such as.net, .org, or.info, among others.

With the rise in popularity and value of mobile-friendly domain names, the.mobi extension, which is used to send information to mobile devices, is fast rising in popularity and value. There are certain highly prominent country-specific domains available, such as the dot uk and dot de (Germany), which may fetch exorbitant prices when purchased in particular circumstances.

At the moment, the .tv extension, which will ideally be used in conjunction with internet-enabled television, only results in a few high-value transactions every now and then (until hardware, distribution, and media companies resolve their mutual “cut of the pie” concerns, there is likely to be little content to drive this market).

2) Word Count and Meaning

The amount of words in a domain name is an incredibly essential aspect when determining the value of a domain name. Single “real word” domains (i.e., no misspellings or abbreviations), particularly in readily monetizable online businesses, may be quite valuable, especially when the.com suffix is used, as can be seen in the example below.

TLDs with two words in them, without any misspellings or abbreviations, may also be highly lucrative, provided that the domain name can be readily monetized and that the top-level domain is of good quality. When you get to three words or more, the value of your words begins to plummet.

Many times, domain names that contain misspellings, abbreviations, hyphens, characters that aren’t found on a conventional keyboard, and other peculiarities are of little or no significance. Furthermore, domains containing terms that have been trademarked may be worthless, since the trademark owner may be able to seize the name and sell it for pennies on the dollar.

3) Niche

The extent to which a domain may be monetized has a significant influence on the value of the domain in question. When it comes to high-value sales, domains in the sex, finance, and health industries are frequently at the top of the list. Domains associated with industries that are unable to produce income on the internet will, in most cases, have limited value.

Generic domains tend to be more valuable than non-generic domains in terms of monetary value. When it comes to domain names, generic domains are those that contain just genuine words (words that can be found in a dictionary) and do not include any contributions from proper names (first or last).

Generic.com domain names in highly monetizable businesses may be quite valuable, yet they are notoriously difficult to secure (especially without paying a lot of money!) in many instances.

4) Character Count

The length of a domain name, as well as the number of characters in it, influences its value. Even though a three-letter.com domain name is completely meaningless, it might be highly lucrative. Four-letter.com domain names are typically valuable because they are pronounceable, but they do not have to be genuine words from the dictionary to be valuable (cool sounding four letter .com names can be very brandable, even if they are made up).

When you get to five letters or more, the worth of the word or words is determined by the quality of the word or words (generic vs. non-generic, monetizable vs. non- monetizable, etc.). It is common for the value of a name to decline significantly after it exceeds 8-9 letters, unless the name is very monetizable.

The extent to which a domain may be branded may be a significant factor in determining its monetary worth. Domain names that are easy to say and remember, easy to type in, highly reflective of predictable monetizable content, and/or generate a significant amount of “type-in” traffic (people entering your domain name directly into their browser address box rather than finding your domain via a search engine) are highly sought after and can fetch a significant amount of money when sold.

It is also crucial to consider the size and profitability of the market to which the domain name pertains. This has a direct influence on the ease with which the domain name may be commercialized. It goes without saying that items and services that do not lend themselves to e-commerce (either directly or indirectly through the sale of advertising space) will most likely be of limited value.

We could go on and on about the various elements that influence the value of a domain name, but the list above should give you a good idea of what to look for.

Where Has All The Beef Gone?

You’ll note that the talk thus far hasn’t included any magic formulas for determining the appropriate amount to pay for your new domain name registration. I would love to be able to provide you with a nice formula that has a slew of interesting arithmetic symbols, but unfortunately, things aren’t quite that easy or beautiful. Understanding what you will have to spend for a domain name after market is essential in order to determine how much you will be required to pay.

For starters, there is far more supply than demand. This may appear to be hopeful at first glance, but it is not the case. Despite the fact that the majority of domain resellers are novice, they have a tendency to overprice their domains, driving away potential purchasers. Most of the time, haggling leads in little or no change in the price.

Second, the truly fantastic names, one or two actual word.com domains in high traffic, high margin internet industries, are practically all snapped up by the most powerful investors. They do occasionally become available for purchase, but they are always sold at exorbitant rates.

Third, while purchasing non-generic domain names, you must use extreme caution (domains containing words that are not in the dictionary, or domains containing words that are in the dictionary but combine to form an unusual phrase that the courts will not consider “public domain”).

These domain names may be protected by trademark registration. In such circumstances, the trademark owner may be able to file a claim for ownership in court and, in certain cases, may be able to seize your domain name without paying you any compensation.

What’s the bottom line?

money

You’re probably thinking how much you should spend for the domain name on the secondary market at this point. As previously indicated, I am unable to provide you with an exact formula. I can, however, provide you with some recommendations based on the aforementioned concepts and supported by sales data from the recent past.

Fundamentally, the idea is that I can present you with projected price ranges (although fairly broad ones) that appear to be in line with recent domain auction closings, if you so like.

Generic domains with one word and extremely high quality two word extensions in easily monetizable online sectors are available at the very top of the price spectrum. Some of them may sell for $100,000 USD or more, and they will almost always be in the.com extension, though occasionally they will be in other high-value TLDs as well (such as .net, ,org, .info, .mobi, .co.uk, and .de). The most valuable of these domains might be worth more than $10,000,000.

Other than .coms, global (non-country specific) top-level domains (TLDs) seldom sell for more than $100,000. Once again, one word and extremely high quality two word generic domains in easily monetizable online sectors sell for between $10,000 and $100,000, with some going as high as $250,000 or more.

Price ranges of $10,000 to $100,000 are possible for the finest country-specific extensions, primarily.co.uk and.de, which are comparable to those of the non-.com global TLDs ($10,000 – $100,000). There are several outstanding domains available in the.eu (Europe),.se (Sweden),.tv (Tuvalu), and.ch (Switzerland) extensions that are starting to command these rates as well.

Every week, several dozen.com names in the $10,000 to $100,000 price range are sold on the open market. These are usually one- to two-word generics, however they are not as easily monetizable as the ones that sell for more than $100,000 per domain name.

In two to three word.com domain names that are lengthy (10 letters or more), there is a thriving aftermarket where names trade for $2,000 to $10,000. The majority of them are generic, while there are a few non-generic options available as well.

This group of domains will generally be more difficult to monetize than the more premium names, either because of the industry (not being in a high profit online area) or the scope of the domain (serve only a subset of a larger sector).

There is also a market for global top-level domains (gTLDs) other than.coms, with prices ranging from $2,500 to $10,000. The domain extensions.net and.mobi tend to dominate this sector, however you will also find.org and.info in this category. These are often one- to two-word generics that are less monetizable than their otherwise comparable cousins who sell for a higher premium.

Certain country-specific domains have a tendency to sell for between $1,000 and $10,000 on the open market. These are usually one-word or two-word generics in the most appealing nation extensions, and they are usually short and sweet (especially .co.uk, .de, .eu, and .tv). To put it another way, these are not as monetizable as their more expensive counterparts.

If the domain name you desire does not fit into one of the categories listed above, you should consider long and hard before spending more than $2,000 or more to get it. Without a doubt, there will be instances in which acquiring a certain non-generic brand name will be unavoidable (e.g., you already have an offline business name which is not trademarked, and need the corresponding domain for your online presence).

The important aspect to remember is that these domain names are not particularly valuable unless there is evidence of pre-existing high traffic and/or revenues from a web site that has previously been launched at the domain.

Finally, I’d want to say

It is my goal that this post has assisted you in becoming a more informed domain purchase in the future. The most important message should be that, unless you have a genuine need for a certain domain name, you should adopt common sense principles and avoid overpaying for domain names.

Remember that, despite the fact that there are a plethora of good domain names already taken, the great majority of domains simply sit and wait at aftermarkets such as Sedo and Afternic due to the massive supply overhang.

Try to be creative and come up with alternatives if the owner of the domain you desire would not sell for a fair price. For example, consider using a different TLD, pluralizing the phrase words, rearranging the phrase words, and so on.

The internet domain market, unlike the financial securities market, will never allow for discounted cash flow pricing, and the value of a domain is basically nothing more than what the market will bear.

The last determinant of value is established by the sale prices of similar domains. Hopefully, this essay has provided you with the knowledge you need to bargain with confidence moving forward.

morgan azhari
 

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