Sooner or later most business owners buy at least one domain. It’s not uncommon, in fact, to name your business based on what domain name is available at the time. Without a doubt, you’ll need to buy a domain at some point and find that it’s already taken. When that happens you might wonder, “what’s a fair price for this domain?” Or maybe you’re lucky enough to be sitting on a great domain name that you bought for a business idea, and you want to know a fair selling price.
Real estate prices are relatively standard. For instance, if you’re selling your house and a comparable home in your neighborhood — a place with the same square footage and basic features — recently sold, there’s a good chance your home is worth a similar price.
On the other hand, domains are unique. There is not another domain exactly like the one you own or want to buy. You might be able to purchase another 2,600-square-foot home with a pool in your ZIP code, but you can’t go out and buy another lions.com. Lionz.org or lyons.xyz? Maybe. But lions.com? No way.
Create a bucket list
Since domain names are so unique, it’s better to think of their valuation along the lines of a rare jewel or classic car. The market sets the value — but, to a certain extent, so do the buyer and the seller. It is also important to note that a domain is not a liquid asset, as you need to have the right buyer, seller and market conditions to make the sale happen.
While the ultimate value of a domain is up to the seller and buyer, domain valuation isn’t a black hole with no point of reference. I like put domains into three basic buckets when evaluating them:
- Bucket No. 1: High-value domain names.
- Bucket No. 2: Mid-value domain names.
- Bucket No. 3: Low-value domain names.
Putting names into buckets is much easier than putting an exact price on a domain — and it’s a solid starting point valuing domain names.
Bucket No. 1: Names like la.com
A domain with widespread appeal like la.com — which can represent huge markets such as Los Angeles and Louisiana, and appeal to Chinese domain investors because of its slang uses in that language — offers the potential for an incredible return on investment (ROI) for the right buyer.
Bucket No. 2: Names like Goliath.com
I’d put a domain name like Goliath.com in Bucket No. 2 because it’s got excellent brand appeal and is short and thus easy to remember and spell. I’d value names in this bucket in the high four- to five-figure range.
Bucket No. 3: Names like keyboards.net
Domain names such as keyboards.net and trombonesheetmusic.com would fit in the third bucket. Likely valued in the three- to four-figure range, these names are good but not great. Why? They likely have a more limited appeal. In addition, it might require more marketing dollars to keep a domain name that ends in .net rather than the more popular .com top-of-mind.
Note: I’m not going to talk about names that aren’t worth much beyond their registration fee, such as yourverylongandhyphenatedbusinessname.org.
Tips for valuing domains
Some of the things I would consider to get domain names into one of the three buckets are:
It’s important to figure out what similar domains have sold for. I like to use these resources for checking comp sales:
- Dnjournal.com offers a great compilation of top sales by week and year. You can see two-letter .com sales in the six- to seven-figure range.
- Namebio.com is a searchable site with past sales. You can search using various options to find domains similar to yours.
When I typed “trombone” into namebio.com I got one result: trombonesonline.com sold for $305 in 2013. This is arguably a better name than trombonesheetmusic.com. Why?
- It’s got broader appeal as an attractive domain for anyone interested in trombones in general versus only those seeking sheet music for trombones.
- It’s shorter and easier to remember and type.
Does the domain name appeal to a wide audience? What about international audiences? If your name is targeting a smaller audience, you have less potential customers in your target pool, thus less opportunity to earn revenue. So a name like flowers.com is worth more than newyorkflowers.com, which is worth more than mayberryflowers.com.
In today’s global marketplace, it’s also important to consider spelling in different countries. Think color vs. colour, or theater vs. theatre. Even within the English-speaking world certain words or phrases mean different things in different countries or different regions. A name with wider appeal will help reach more customers.
Not all top-level domains (TLDs) — like .com, .org, .xyz., nyc and .vegas — are created equal. Some TLDs have a wider appeal and acceptance and are thus worth more than others. Currently, we see .com selling more frequently and at a higher price point than most other TLDs. The availability of different TLDs for a name also affects value.
To see what names are available, search by keyword at GoDaddy. For example, search “trombones” instead of “trombones.com” and see what results come back as available in other extensions.
You’ll also want to research the popularity of the domain’s key terms. How many people are looking for the term online? How many people are advertising on the keyword, and what does the advertising cost?
You can find answers via a simple web search and by using Google’s Keyword Planner tool. By experimenting a bit here, you can quickly learn which terms top Google searches. Greater public appeal tends to equal higher domain value.
Use the “radio test” to help value the domain name: would you remember it if you quickly heard it on the radio or saw it in an advertisement? Can you easily spell the name? Is it misspelled easily? Are you using the real spelling for the domain?
For example, cheese.com is worth much more than cheez.com. When you hear cheez.com you can easily mistake it for the correct spelling, cheese.com. In contrast, cheese.com would not easily be mistaken for cheez.com — thus cheese.com has much greater value.
Hangout to learn more
Is your interest piqued? If you want to learn more about valuing domains, please join us live at 10 a.m. Tuesday, Sept. 22, for the next Aftermarket Hangout. Domain industry legends Ammar Kubba and Page Howe will join us to discuss why they value names the way they do and to evaluate names submitted by our customers. You can sign up here: http://x.co/domainvalu.
To get your domain name evaluated live, please send an email to firstname.lastname@example.org.
Hope to see you then!
Also published on Medium.