About a week ago I decided to purchase a domain name in order to start up a small online project. To my dismay the domain name was taken. It was then that I decided to inquire whether the owner of the domain name was interested in selling the domain name as the domain name wasn’t pointing me to any website or to a parked page.
My initial inquiry into the matter with the owner of the domain name returned a price tag of $5,000. I personally found that to be a bit too steep for that particular domain name, considering I intended to use the domain name for a small scale project. After spending $39 for a Premium Domain Appraisal with Sedo.com, I found out that the domain name was actually worth somewhere around $950. So where did the value of this particular domain name come from?
Sedo.com is one of the leading providers for domain solutions. Their Premium Domain Appraisal takes 12 factors into consideration when appraising a domain name. These factors are:
- Whether the domain name is a top-level domain name (a .com, .org, .co.uk, etc.) and whether the top-level extension is appropriate for the domain name (a .com would be more appropriate and valuable for a commercial website than a .org would be).
- The length of the domain name is another factor that is taken into consideration. They use several different length brackets in valuating a domain name, but the most notable are: a. 2-7 characters in length, b. over 10 characters in length, c. more than 20 characters in length.
- The linguistics and phonology of the domain name is also extremely relevant. How many words the domain name is composed of, how theses words relate to one another, and how common the words in the domain name are, are just a few of the factors that are taken into consideration.
- How sensitive the domain name is to typing errors is the fourth factor that is taken into consideration, and in my opinion is one of the more important ones.
- The legality of the domain name in relation to trademarks and how prone the domain name is to trademark disputes is another factor taken into consideration. How generic the terms in a domain name are is a huge factor here.
- Part six of the appraisal discusses whether a domain name is suitable for international usage. According to Sedo.com it seems as though at .com, .net, or .org domain name is suitable for international usage, therefore increasing the value of a domain name.
- How friendly is your domain name with search engines? That is what this part of the appraisal takes into account. Simply put, this part of the appraisal mainly looks at how many times in the past month have the words in your domain name been searched for via the leading search engines.
- The branding and advertising potential of domain names seems to be an important factor. A domain name with generic terms is worth a lot more than a domain name with a brand name. But then again a domain name that includes a brand name, if marketed, advertised, and promoted properly, will be worth a lot more than a generic name.
- The likelihood of acquiring the domain name successfully is what is discussed in this part of the appraisal. It seems that the purpose of the domain name has to do a lot with the value that the owner of the domain name will assign to it. The domain name that I wanted to acquire was being used as a domain name to catch or bring in traffic. Simply put, this means that the owner of the domain name that I intended on purchasing, wasn’t going to let go of the domain name so easily.
- How much potential the domain name has for commercial success is looked into in this section. Basically what industry is the domain name attributed to and how well that industry is doing are the major factors in this section.
- The second to last section takes a look at previous domain name acquisitions that have taken place in the past that are relevant to the domain name that you are having appraised. The characteristics of comparable domain names include: a. the domain name extension, b. the number of words in the domain name, c. and the commercial potential of the domain name.
- The final section states the estimated value in an amount that should be reasonable for the buyer and seller of the domain name.
With the above being stated, I would like to state that I personally find the domain name industry to be quite an attractive one. Using a cheap registrar to register domain names, such as 1&1, one can easily build an attractive domain name portfolio that could be worth something in the future as more and more domain names are no longer available for registration.
Great post Chafic! A very important aspect which was overlooked in the sedo evaluation was traffic. Traffic alone can boost the valuation of any domain name exponentially and send a website into the 6 figure-7 figure mark.
Hey Benoit,
Thanks for your comment :). I would have to agree that traffic is a huge factor, but I also believe that traffic becomes a huge factor when the domain name is associated with a website and the behavioral patterns of the visitors can be tracked and traced.
My reasoning behind that thought is simply because there are many sites out there that will direct traffic to your domain name for a fee in order to inflate the traffic and make the domain name look more appealing for potential buyers, etc.
Your right, traffic is nothing with out relevancy and in many cases that boils down to conversion ratios, which is the great significance of the traffic in the first place.
Good article. I’ve been buying domains for awhile now, but don’t know where to sell them. I see people sell them on ebay, but for crap money. Any ideas?
Hey Adam, I wouldn’t recommend going through eBay. You should get your domain name appraised and then have a broker such as Sedo.com list it for you as being for sale. There are many other domain name brokers out there and many websites dedicated to domain name auctioning, such as The Domain Name Aftermarket (www.tdnam.com).
Hope this helps.