Domain Name Valuation

 

 

What’s That Domain Name Worth?

Below are some guidelines and concepts you can follow when trying to price a domain name. They are based upon our own opinions backed with nearly thirty years of experience. There are widely varying approaches to domain name valuation, so we’ve tried to offer a high level overview; it is not definitive and our views will not necessarily be shared by everyone but we’ll be close to the mark.

 

The Best Practice

Hellofa.com provides strict guidelines in its platform for domain name pricing and negotiations. What we’re interested in is honesty and getting deals done, for starters the best way to do that is for domain buyers to be informed. Estimating the value of domains is always a subject of controversy among differing views, most importantly between the buyer and the seller.  Quite often there is a disconnect between what both parties view as a fair price, we want to be as reasonable as possible and hope it shows.  It should be noted however, when you finally own the domain you wanted, it’s extremely unlikely you would ever sell it for double or even more!  Such is the nature in this enterprise of nomenclatures.

 

So Let’s Get Real, What’s The Figure?

Unfortunately, it’s not that simple. Domain name value depends on the specific domain name and prices can seem arbitrary. Often the only relatively sure way to estimate value of a domain name is to review what others like it have sold for in the past.   Research of previous domain sales can be done on sites like NameBio.com, doing so is highly recommended for prospective buyers. If your offer is not in line with current market realities, there is a low chance of it being accepted.  More importantly, such lowballing can permanently “sour the proverbial milk” between yourself and the person who owns it.  Remember, there’s only one of these items which you desire and only one person from whom you can get it!  Keeping this in mind can help leave the door open for a future acquisition when perhaps your situation and/or the sellers’ situation may have changed.

 

Someone Must Know What My Domain Is Worth, There Must Be Tools Right?

There are many automated tools online that attempt to estimate the value of a domain based on things like Google PageRank, Alexa rating, search frequency etc. To put it bluntly, these are generally useless. Domain values are far too subjective to be nailed down in such manners, but if you take into account the information below, you should be able to sort out which domains are worth a few hundred dollars, which are worth hundreds of thousands or yes, even millions.

 

It’s “The One”

The biggest factor in determining domain name pricing is the fact that there is only ONE of each particular name in the whole wide world and the better that name is, the more it stands out in a plethora of verbiage.  It’s simple, there are only a limited number of words, names and terms in any given extension (.com, .net, .org, etc.) each having certain descriptive value on their own. 

The second factor is commercial viability, the potential to actually make money with a domain name in the market due to its makeup. If a domain name is comprised of a common term that can be used commercially, the value of that domain name is higher.

Examples: Cars.com, Loans.com, Books.com, Travel.com etc.

 

Can I Get Another Extension?

The saying “.com is king” is true when it comes to domain valuations. Domains ending in .com currently are the most prized domain names in the world, but there is a market for non-.com domain names as well. For example, .org’s are in demand by non-profits, and “country code top level domains” or “ccTLDs” are a strong market useful to country specific buyers and uses not of a global nature. Other extensions like .info .pro .eu .etc are largely of limited value.  In the end, the top dogs will always be those with a .com.  Think about it.

 

To What Length?

Shorter is generally better. Short, concise domains are ideal, but one should avoid the temptation to abbreviate domain names when possible. Let’s look at an example: say you are a tire company “Four Tires Incorporated” and you want to buy a domain name. What is the clearest, most simple to use domain name for your company? Tires.com? FourTiresInc.com? FourTiresIncorporated.com?  Clearly the first domain, Tires.com wins.  However, 4Tires.com or FourTires.com or ForTires.com aren’t too shabby either are they?  The only problem is you need all three as we’ll discuss below.  In the end, the shorter and simpler the domain name is, (i.e. Tires.com) the easier it is to use in marketing and the fewer opportunities there are for typos or misunderstandings to occur.

 

But should length be the primary factor in domain valuation?

For instance, is a 3 letter domain name valuable and if so, what can make it even more valuable?

A 3 letter domain name is valuable firstly due to scarcity and demand. Many companies abbreviate their company names with three letters so, these domain names are often a perfect match for them. (ie. ABC, IBM, ATT etc.) Also, some are more valuable than others simply due to their renown from decades of use and multi-millions spent on advertising in the marketplace.

4 letter domains overall are less valuable than 3 letter domains but the line blurs a bit from there up into 5, 6 and 7 letter domains.  Regarding 3 and 4 letter domains, the English language/alphabet there are over 450,000 four letter domain name combinations compared to 17,500 three letter combinations.  Value for three, four, five, six and seven letter domains is being driven up by speculation which is constantly on the rise.  This of course is why it is getting harder and harder to find a good name for your online business.  To be sure, domain names only go up in value, never down!  Hence the reason that thousands of folks have and continue to invest millions and millions of dollars in them around the world.

 

The Ole Radio Test

An important factor to take into consideration is the “Radio Test”. If someone were to mention your domain name on the radio without spelling it out, will people be able to go to your site? For instance, HereHear.com might read well, but if you just heard that domain name on the radio there are 4 possible variations.  (HereHere, HearHear, HearHere & HereHear) Unless you own all 4 variations, which many companies have went to such lengths in doing, this is an obvious problem.

 

Gut Check

Ultimately the price you finally decide to offer for a domain name will come down to your own reality and gut feeling.  Ask yourself; “how much positive impact on my life or business might the sale or purchase of this domain name have in the years to come?”  Sometimes it’s hard to predict but one thing is always sure in life, if you do nothing you will get nothing.  Nothing ventured, nothing gained is an adage that holds true to this day and surely will forevermore.  The question is always how much are you willing to do or pay to succeed or get what you want?  

 

The Bottom Line

Unless you’ve practically stolen something, wondering if you did good after making any purchase is entirely normal. But don’t worry, that goes away.  On the other hand, losing out and knowing you’ll never have what you feel is a valuable asset for you or your business is like a sore that never goes away.  One is a gain, the other is a loss, simple as that.  However, if you lose solely because your pockets aren’t as deep as another persons’, it’s easier to get over.  In this case we can even say it is fortunate that most folks are used to this part of our reality!  All of that said, it truly comes down to a matter of what you can afford or what you can’t afford to lose.  Don’t forget to be creative!  There are many options to discuss with any seller, leasing is one, financing is another, heck, you could even find yourself a good silent partner.  Always remember this is life, anything is possible, it’s completely up to you!

 

Bidding Wars

In cases where multiple people are interested in acquiring the same domain the final price is usually determined in a *bidding war.  While they are always good for sellers, we actually don’t promote them.  In fact, we prefer that folks make their offers privately and will respect all of such requests.  Hence if we say we have a “private offer” or “PO” with no price listed it means the buyer has included a stipulation for his or her potential purchase price to remain unknown to others which negates bidding wars.  In such cases, other potential buyers can make their offer and see what happens.  In the end, the best advice is to simply decide what the maximum amount you would be willing to pay for the asset is, and offer that amount.  It is in this fashion that you will have done all you could.  If you lose it was of no fault of yours and if you win you’ll know you paid what it was worth to you.  At HellOfA.com if you do find yourself in a bidding war, where applicable, it will come down to “prior use” as defined by the Unites States Patent and Trademark Association.  Whoever can prove earliest use of the mark in any of the 27 trademark classifications will prevail regardless of who’s bid was highest. (*For our purposes we define a bidding war as when two or more prospective buyers compete for ownership through 5 or more incrementally increasing bids aka counteroffers.  Once we hit 5, the amount no longer matters to us and the winner will be whomever has the prior use.  In cases where no prior use exists, the highest bidder after any amount of bids will prevail.)