Domain Valuation

You've decided on a domain name for your new business, and the domain is already registered and for sale. How much should you be willing to pay? This is becoming a common question, as so many quality domain names have already been taken. While there is no scientific method to determine a precise value for any domain name, there are some considerations that go into determining a reasonable value for that domain name you want. Here, we learn about some of the techniques professional domain appraisal companies utilize to ply their trade.

Valuation Factors

There are quite a few technical factors that determine what a domain name is worth, and there are differences of opinion as to the relative importance of the various factors. Here we will examine a number of commonly considered parameters in domain valuation. This collection is not necessarily meant to be all-inclusive, but is instead intended to give you a flavour of many of the fine points to consider.

Top-Level Domain: One of the most important considerations in valuing a domain name is the "TLD," or Top-Level Domain. This is the extension that appears at the end of the domain name, such as .com, .net, .org, etc. All other things being equal, a .com name will generally sell for about four times the otherwise equivalent domain in one of the other common global extensions, such as .net, .org, and .info. The .mobi extension, utilized for content to be delivered to mobile devices, is rapidly gaining popularity and value, especially for domain names suitable for such devices. Some country specific domains, such as dot co.uk and .de (Germany) are very prestigious, and can also command high prices in certain cases. The .tv extension, later to hopefully be used in connection with internet enabled TV, results only occasionally in high value sales at current (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).

Number of Words a domain contains: An extremely important consideration in the value of a domain name is the number of words it contains. Single "real word" domains (no misspellings or abbreviations), especially in easily monetizable internet industries, can be enormously valuable, particularly in the .com extension. Two-word domains, again without misspellings or abbreviations, can also be quite valuable, as long as the domain name can easily be monetized, and the TLD is of high quality. Values really plunge when you get to three words or more.

Mis-spelled domains got little value: Domains containing misspellings, abbreviations, hyphens, characters not on a standard keyboard, and other oddities often have very little value. Also, domains containing phrases that are trademarked may be worth nothing, as the trademark owner may go to court and may be able to summarily confiscate the domain.

Monetization: The extent to which a domain can be monetized has a major impact on its value. Domains in the sex, financial, and health industries often top the list in terms of high value sales. Domains related to industries that cannot easily generate revenue on the web will usually have little value.

Generic domains tend to be more valuable than non-generic ones. A generic domain is one that contains only real words (ones you can find in a dictionary), and has no contribution from proper names (first or last). Generic .com domain names in highly monetizable industries can be immensely valuable, and are for the most part very hard to obtain (without spending a lot of money!).

Number of Letters: The number of letters in a domain name also affects its value. Three letter .com names can be quite valuable, even if they mean nothing. Four letter .com names usually need to be pronounceable to have value, but they need not necessarily be real words in the dictionary (cool sounding four letter .com names can be very brandable, even if they are made up). When you get to five letters or more, value is driven by quality of the word or words (generic vs. non-generic, monetizable vs. non- monetizable, etc.). Once you start getting over 8-9 letters, value tends to decrease a lot, unless the name is highly monetizable.

The extent to which a domain can be branded may be very important in determining value. Domain names that are easy to say and remember, easy to type in, highly reflective of predictable monetizable content, and/or generate a lot of "type-in" traffic (people typing your domain name directly into the address box in their browser rather than finding your domain via a search engine) are highly sought after, and may transact for significant sums.

The size and profitability of the market to which the domain name applies is also important. This directly impacts how easily the domain name can be monetized. Needless to say, products and services that do not lend themselves to e-commerce (directly, or indirectly through selling ad space) will most often have little value.

We could go on almost forever listing factors that impact the value of a domain, but the above gives you a sense of what to consider.