IMPORTANT: It doesn’t matter who or how many people you ask about the value of a domain, each appraisal will vary based on a person’s individual experience with a niche and their research. You can crunch all the data in the world and still not hit the same number that a potential end-user is willing to pay. There is no way possible to hit the exact value of a domain on the head due to a wide spectrum of variables that change slightly with each target market.
At the end of the day, a domain is truly worth what a seller can pitch/present it for and what a buyer is willing to pay to see their vision come to life. Check out the article I wrote in Feb 2017 about selling domains.
This article isn’t about who does it right or wrong, it’s simply an outline of how I evaluate domains based on my personal industry experience and with a primary focus on reseller value.
Why focus on reseller value? Because as domain investors it’s comforting to know that there is still meat on a bone so that we don’t pay too much with little return or end up in the red with a loss.
With the above in mind, I’m going to share my personal domain evaluation/appraisal strategy that I’ve expanded on over the years as a community administrator and member of NamePros (Since 2009) and brand developer (Since 2005). Many people may disagree with my technique and have their own specialized evaluation system in place that works best for their own business model.
If you are just starting out and haven’t wrapped your head around evaluating domains for your own business model yet, this could at least provide you with a foundation to start from.
Now, let’s roll up our sleeves and get dirty!
Domain Evaluation/Appraisal Variables
let’s start off with the main variables I look at when evaluating a domain.
- Brandable/Pronounceable: Can the domain be easily pronounced in English? If so, this value is subjective to your experience in the niche.
- Memorable: Is the domain easy enough to remember without confusing it with another brand? If so, this value is subjective to your experience in the niche.
- Domain Length: How many characters/words does this domain have and how does it benefit the target end-user? This value is subjective to your experience in the niche.
- Premium Letters: Is this domain being sold as an acronym or is it based on a premium letter niche? If premium, does it exclude non-premium letters like A,E,I,O,U,Y? This value is subjective to your experience in the niche.
- Developed: Is this domain currently developed with a unique design and not a stock template? If it’s a unique design we need to calculate at least some of the time it took to code and design. A per hour rate is subjective and you really need experience developing yourself to estimate how long it took and what the average per hour rate should be (Based on quality). $10 per hour is usually a fair starting point.
- Indexed: (If Developed) Is the domain/website listed in popular search indexes? If so, what page is it on in Google? I like to kick out a $10 bonus for every 1k organic searches per month on the exact term. (E.g. Page one for a term with 10k unique searches = $100)
- Original Content: (If Developed) Is the content original or did they scrape/copy/spin someone elses content? If original, $1 to $25 per unique page/article (Depending on quality and length of content).
- Previously Developed: Can some of the old pages be redirected to new ones using archive.org to uncover the old site links so new pages can be created to capture the potential lost traffic? This value is subjective to your development experience.
- Development Possibilities/Target Markets: What are at least 2 or 3 clear development ideas for this domain investment? If you can’t think of any, a potential buyer might not either. This value is subjective to your experience in the niche.
- Revenue: Does this domain currently generate revenue through parking, services, products, PPC, etc.? If so, multiply the average per month by 12 to 18 months and add that into the total. (Be sure you can verify the revenue)
- Traffic and Sources: Does this domain currently receive traffic? If so, where does it come from? Is it from referrals, traffic blasts, traffic generators, organic search, direct type-in, redirects, etc.? You’ll want to focus more on organic, referrals, and direct type-in. Anything else is going to be hard to convert into sales. Be sure to get traffic proof before you factor this variable in. Generally, I like to put $0.10 per unique visitor (E.g. 500 unique visitors per month = $50.00 per month x 12 to 18 months if consistent)
- Keyword Value (cpc): Honestly, I don’t really use this as a factor personally since I target my own products/services. However, this metric shows a potential for 2% of the cpc cost x verifiable traffic = a safe potential PPC value.
- Keyword Competition: Are the keywords low, med, or high competition? Higher competition usually follows words/phrases that are in higher demand and thus more valuable. This value is subjective to your experience in SEO/SEM.
- Alexa Score: I don’t really use this metric since it’s dependent on people using the Alexa toolbar.
- PageRank: This metric is obsolete now that Google discontinued PR.
- Dictionary Word: Is this domain a dictionary word? If so, how popular is it? This value is subjective to your experience in the niche.
- Language Match Extension: Does the extension match the language of the word or phrase? If not, I generally don’t place much value on this variable. This value is subjective to your experience.
- Extension: Is it a .com? If not, all extension based value depreciates. .com is still the most desirable and sought after extension to this day. Anything other than .com losses it’s face value and becomes subjective to your experience in the extension and niche.
- Backlinks: Does this domain/website have any backlinks? if so, are they from authoritative sites or are they from link-wheels, bookmarks, signatures, exchanges, blog comments, etc.? Quality authoritative backlinks are worth their weight in gold. For authoritative backlinks I generally like to put $10 on each (If they are permanent and not temporary or limited time ad spots). Anything else is just fluff and could get you penalized. I see no value in fluff backlinks.
- Sales History: Has this same domain sold before? If so, how much did it sell for and how long ago? Markets shift and the value of a domain last year could be completely different this year. This variable is subjective to your experience in the extension, niche, or trend.
- Similar Domain Sales: Everyone likes to compare similar sales to try and guess the value of their domain. Unless the comparison is spot-on, there really isn’t a comparison. (E.g. Comparable = HealthQuotes.com Vs. HealthCosts.com / Non-Comparable = HealthQuotes.com Vs. HealthFoodAlternatives.com)
- Trademark Filed: Is there a federal Trademark filed? Filing a TM can run around $250 for 7 years. This cost can be factored into the value along with any additional brand reach factors.
- Trend: Is this domain following a trend (E.g. CHIPs) with a limited window of peek interest? If so, the value is subjective to your experience in the trending niche and flatlines as soon as the trend ends.
- Age: How long has it been registered without dropping? I like to add a little value for every 10 years. Keep in mind that just because a domain is aged 10 to 20+ years, it doesn’t mean there is any demand for it. Because of this, I usually don’t put much value on age.
- Taken in other extensions: While in theory, this sounds like a good variable to add some value to, you really have to check and see if it’s the same person that owns most the extensions or if they are all independent developments. If they are undeveloped, chances are there won’t be much value to add at all. The value is subjective to your experience with multi-extension investments.
IMPORTANT: The above list of evaluation/appraisal variables is by no means comprehensive or set in stone. Each investor may have their own set of variables they look for based on their investment business model and experiences. It’s very common to see some investors only using 2 or 3 variables from the list above so they can stay focused on what works best for them.
Note: As far as automated appraisal tools/scripts go, you’ll want to try and avoid them. Most of them use outdated (Automated) metrics that don’t compensate for market shifts or deep niche values. You truly need to research each domains target market and talk with people that have been in those niche industries for years to get a better idea on their potential value.
You wouldn’t ask a Plumber to do a heart transplant and you wouldn’t ask a heart doctor to fix your clogged sink. Chances are, neither of them would be very good in each others industry. The same rule applies to successfully appraising domains. It really comes down to hands-on experience in each industry niche (Separately) to get a closer look at the real potential value of a domain.
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Since 1996, Eric has managed companies with 240+ employees, online communities with over 1 million members, attended numerous industry related events/conventions and has personally worked with start-ups, personalities, small mom and pop businesses, corporations, freelancers, news outlets, and a variety of domain investors one-on-one from all over the world. That equates to a lot of years behind the scenes with his fingers firmly on the pulse of multiple industries.
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