In the simplest terms, a domain name is your internet address. It’s the place where people can find you. But it’s more than just a string of characters that people type into a browser bar to access your company’s website. It’s a reflection of your brand.
Your domain name says a lot about your business. Are you traditional and old school, or contemporary and edgy? What industry are you in? What value do you offer? What country are you based in? A domain name can answer any or all of these questions.
Domain names are also limited. Only one person or entity can own the rights to a domain name at one time. And as is the case with any product or service, this finite supply coupled with increasing demand impacts valuations and creates a marketplace for buying and selling domains.
Some domains have no demand-side interest in the marketplace and cannot be sold, while other domains can sell for five-, six-, and even seven- and eight-figure sums with interest from hundreds or thousands of potential buyers.
In this article, we’re going to explain why domain name valuations matter, factors that impact domain name values, and a few methods you can use to valuate your own domain name. But first, let’s dig into some of the more interesting tidbits about domain names and what makes them special.
A website URL includes two main parts. In the illustration MyWebsite.com, the “MyWebsite” portion is the domain name and the “.com” portion is the domain extension. When we discuss domain names, we’re really talking about the proprietary coupling of the domain name and extension. With that being said, here are some interesting facts and data points that you may not know:
It’s possible that you’ve owned a domain name for years and never thought about its valuation once. For many business owners, entrepreneurs, and investors, this isn’t an element that gets much thought. But perhaps it should be. Domain name valuations matter for a number of reasons.
First off, knowing your domain name’s valuation can make a big difference in the valuation of your business, should you decide to sell. In some cases – like the Cars.com example – a domain name can account for as much as one-third of the entire price of a business. Other times it’s just a small fraction. But either way, knowing the valuation gives you some leverage in negotiations.
Secondly, domain name valuations matter from a buyer’s perspective. If you ever find yourself in a situation where you’re looking to buy a website, acquire another domain, or expand your business in some capacity, being able to appraise and accurately value a domain will help you make a more informed offer and acquisition.
Domain name valuations can be impacted or swayed by dozens of factors. And in true internet fashion, a domain can go from being obscure to in high-demand in a matter of hours. But anomalies aside, here are some of the general principles, factors, and characteristics that are considered important in domain name valuations.
Much like real estate or other investments, value is determined by how much someone is willing to pay. So while you might think you have a million-dollar domain name, it depends on what the marketplace tells you. If there are only two prospective buyers and they’re both unwilling to pay more than $50,000, that’s your price. You can take it or leave it.
The reverse is true as well. You might not think your domain is worth anything, only to get a slew of high-dollar offers in a two-week span. It all depends on what the marketplace thinks.
All of that to say this: It’s helpful to have a basic understanding of what drives domain name valuations so that you can be an informed buyer or seller. And the more tools you have to zero in on specific numbers, the better off you’ll be.
Now that we know why domain name valuations matter and which factors impact these values, it’s time to turn our attention to some of the different methods, equations, and techniques you can use to valuate your domain name (or one that you’re interested in purchasing).
The most helpful yet least scientific approach is to perform a comparative analysis. In other words, you research the data from recent sales to see what the marketplace is paying for certain domains.
The challenge with this approach is that the data can be limited and the correlating factors don’t always carry over. A domain name that’s similar to yours might sell for $25,000, but you don’t always know why it sold for this much. Your domain could be one character or TLD off and it might only be worth $200.
Comparative analyses can be useful in understanding the marketplace, but they aren’t perfect. They give you a rough idea of general values, but can’t be used to zero in on a specific dollar amount.
Another option is to use a domain appraisal service. These services generally rely on a combination of algorithms and human analysis to determine a ballpark estimate of what your domain is worth.
EstiBot is the most commonly used appraisal service. (And because of this, it’s become a very real factor in domain transactions.) It’s the most authoritative voice on website valuations and can be used for additional leverage when buying or selling.
One of the neat elements of the EstiBot tool is how it will show you comparable domain sales and other advanced analytics. This allows you to see and understand why a domain name is being valued at a particular price point.
Other good domain name valuation tools include DomainIndex and Sedo. When using a service to determine a price for your website, it’s a good idea to get as many valuations from as many different places as possible. Take the average of the three, and this should give you an informed number to work with.
The third primary option is to put your domain name up for sale. Based on the factors mentioned above, set a starting price and minimum price. You might not sell your domain the first time around, but you’ll learn a lot about the potential valuation based on the feedback.
Did people bid? What do the listing analytics tell you? Did people favorite the listing? Did people complain that it was overpriced?
If you’re not interested in selling at the moment but want to get a better idea of the market value for your website, you can always set a ridiculously high minimum and see what happens. Actual bids amount to concrete data, which enable you to properly estimate tangible worth (as opposed to theoretical values).
Flippa.com is definitely one of the top auction sites for domain names, though there are a handful of others as well. We’d recommend starting with Flippa to see if you get any traction on their platform.
Another option is to hire a third party appraisal service. These are companies that specialize in appraising website domains. And while they may factor algorithmic appraisal tools into their calculations, they also use a combination of common sense factors to determine fair market rates. Here are a few good services:
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