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Domain name appraisal FAQ


Assessing the Value of a Domain Name
While there are numerous valuable domain names, there are essentially an infinite number of domain names (actually 6.2 to the 98th power in.com alone).  As such, most domain names are worthless.  It is very challenging to determine which domains have monetary value and even more challenging to determine what that value might be.

One complicating factor is that the value of a domain name changes over time depending on market conditions.  The domain "loans.com", for example, sold for $3 million in 1999 during the height of the Internet Gold Rush.  As so-called "New Economy" technology companies failed due to lack of financial viability and the NASDAQ market fell precipitously into 2001, the whole Internet landscape changed.  Today, most domain names, including "loans.com", are likely worth far less than in 1999 as a result.

Obviously, the best way to determine the true value of a domain name is to let the market forces of supply and demand determine it -- in other words, let a buyer and seller negotiate a price.  Nonetheless, it is beneficial for a buyer and seller to estimate the value on the front end to engage in an optimal negotiation. 

While there is no exact science to assessing the value of a domain, we present our general valuation model below.  In addition, there are a number of companies that provide commercial appraisal services for a small fee (usually less than $25) that you might wish to use.

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Valuation Model
Based upon our research, the market price of domain name depends upon six key factors:
  1. TLD

    Domain names in .org and .net have value, but, all other aspects being equal, .com names are significantly more valuable.   Based on our research,  .com names are worth 1.7 times the same domain in .net and 2.2 times the same domain in .org.

    Since .info and .biz domain names are new, they are less valuable because they are not widely known among Internet users. 

     
  2. Number of Characters

    Domain name values follow the laws of supply and demand.  Shorter names are in smaller supply, and thus are worth much more.  Our research indicates that a 6 character domain name is worth over 3 times a 12-character name in the same TLD.   Good names of 4 characters or less are very, very valuable.

     
  3. Genericism

    The most valuable domain names are common English words that relate directly to a viable product or service.   One of our favorite listing sites, for example, GreatDomains.com, place the following domain names among it's highest value sales:

    Domain Name Sales Price
    Loans.com (sold) $3,000,000
    BroadBand.com $975,000
    StockMarket.com $900,000
    Media.com $700,000
    Human.com $600,000

    Words that are more narrow in meaning -- "mortgageloans.com" as opposed to "loans.com", for example -- have less value.

    A special note: domain names that contain or are similar to any trademarked or private-use words ("coke.com" and "tomcruise.com", for example) have no economic value to anyone but the legal owner of the name.  Trading in such names can bring about civil and criminal penalties under U.S. law.  In addition, the Uniform Domain-Name Dispute-Resolution Policy , adopted in 1999 by ICANN, gives the owners of such terms (trademarked or not) the right to the use of related domain names.   Stick to generic words and phrases and consult your attorney if you are uncertain about a particular name.

  4. Memorability

    Most of the economic value of a domain name depends upon it's ability to generate traffic to a website.  This ability to drive traffic is directly influenced by people's capacity to remember the domain name (from a magazine ad or TV commercial, for example) and properly enter the URL into a browser.  Simple but unique words and phrases are easiest to remember and make the best brand names. 

    The domain name "Amazon.com", for example, has nothing to do with books but is a short word that is easy to recall.  It is one of the most recognizable corporate brands in the world today.

     
  5. Spelling

    Sure "dbcq.com" is only 4-characters long, but it's meaningless.   "g0lf.com" is a legitimate domain name, but much less valuable than "golf.com" due to the zero.  "Lawyer.com" is a better domain name than "attorney.com" because the latter is harder for most people to spell.   Words that don't spell anything or are difficult to spell are worth less.

     
  6. Market Potential

    Any potential buyer willing to pay you more than the $20-$70 necessary to register a new domain name has to be able to justify that additional expense.  That implies that the domain name in question must be able to generate income, which in turn implies that the domain name must likely relate to a product or service that can be provided over the Internet.  Words that relate to products and services with the greatest income potential have the most value.

    What is the annual revenue expected in the online marketplace for the good or service?   How much revenue would be generated by a company with 1% share in that market?
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Appraisal Services
We recommend the following appraisal resources to assist in determining a domain name's value:
Recommended Services Comments
GreatDomains.com Automated appraisals are $14.95; premium appraisals from staff expert are $75
Domain Name Forum Free domain discussion board with sections on appraisals, domain selling, and more.
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