This post was originally published on Sept. 14, 2015, and was updated on Nov. 20th, 2019.
Why might you want to learn how to value domain names? Sooner or later most entrepreneurs 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 you might 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.
How to value domain names: 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 when valuing domain names.
Bucket No. 1: Names like la.com
Domain names such as la.com, sv.com and movies.com are perfect examples of Bucket No. 1 names.
These are prime domain names that I would value at high-six up to eight figures in some cases.
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.
Buying a domain name only makes sense if the buyer will gain some kind of advantage through ownership.
Related: Top 25 most expensive domain names
Bucket No. 2: Names like Glance.com
I’d put a domain name like Glance.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 low-six 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.
Want to search for the perfect domain name? Go ahead, give it a spin:
Tips for valuing domain names
Some of the things I would consider to get domain names into one of the three buckets are:
Make money/Save money
A domain in almost all cases is only valuable in that it can either make someone money or save someone money.
If I have a domain like Kars.com, I need to advertise constantly that it is Kars with a K. If I bought the domain name Cars.com it might save me a great deal in advertising funds over the years.
I also might be seen as a leader in the field as opposed to someone who owned Kars.com or mycar.net. When a potential buyer comes to search for a big purchase like a car, if I win over more buyers because they trust my brand name, I can make more money on my sales.
It’s important to figure out what similar domains have sold for. I like to use these resources for checking comp sales:
- Try GoDaddy’s online and free Domain Name Value & Appraisal tool. This is based on a large data set and includes comparable sales at the end of the valuation results page.
- 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. They have data going back to 2004.
- 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 has 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 fewer 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.
The names with less available TLDs to register are typically worth more as they are more popular and harder to get.
Related: Domain extensions guide
When valuing domain names, 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
Start your bucket list
There you have, my top tips for valuing domain names. To recap:
- Create three buckets: High-value, mid-value and lower-value domain names.
- Consider if the domain name has the potential to either make a buyer money or save them money.
- Check comparable domain name sales.
- Consider how widespread the domains’s appeal might be.
- Pay attention to the TLD.
- Research the popularity of keywords in the domain name.
- Use the “radio test” to help determine the domain’s branding value.
And if you want to learn more about getting started with domain investing, Andrew Alleman of Domain Name Wire created a thorough guide, Get Started Selling Your Domains: How to list your domains for sale through GoDaddy. It is well worth the read when you’re learning how to buy and sell domains.
The post Wondering how to value domain names? Create a bucket list. appeared first on GoDaddy Blog.
Source: Go Daddy Garage
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