I have found that most people have at least one idea for a website that they never follow through on. When I ask them why they never start, the most common answer I receive is that they have no desire to learn about hosting a domain. However, understanding domains can be as simple as learning how to value them accurately.
Domain names are essentially pieces of virtual real estate. Just like with physical properties, digital real estate can also be valued based on a number of factors. Knowing what to look for is key to mastering the valuation process.
This article will show you how to value any domain name you are considering for purchase. It will also help any existing domain holder price their virtual real estate to sell. Those who just want to acquire a cheap domain will also learn more than enough to get the ball rolling.
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The Basics of Domain Valuation
Domain valuation, or domain appraisal, is the act of determining how much a specific domain name is worth. Both buyers and sellers need to figure out how much a domain is worth before doing business. Domain names consist of two components that each affect the price.
The main part of a website’s URL is known as the second-level domain. This is primarily the name of the business or organization that owns the domain. For instance, Google is the second-level domain of Google.com.
Then, the top-level domain refers to what comes at the end of the URL. In Google’s case, that would be .com. The top-level domain can drastically alter the price depending on how commonly the extension is used.
If both of these components feature highly desirable characters, then the domain will be worth a pretty penny. Likewise, if each of these components is relatively unknown, the domain will be dirt cheap.
Which Factors Make a Domain Valuable?
There are several factors that I use to approximate the value of a domain name. That being said, there is no way to get the exact dollar value of any given website. In the end, everything is worth only what someone else is willing to pay for it.
As mentioned above, the top-level domain can really influence the price of a name. Common extensions such as .com are seen as more safe and legitimate than lesser-known extensions. However, bargain hunters may be able to get a steal by choosing a less contested top-level domain.
The shorter a domain name is, the more people are willing to spend on it. Not only does it make for a memorable URL, but the domain appears to be more authentic when a brief name is applied. I would easily pay more for cars.com than I would carsarecool.com.
A catchy name is way more likely to gain traction with the general public. Having the potential to grow a brand will make any domain much more appealing. There is no coincidence that sites with simple names such as Facebook and YouTube have taken off.
Density of Traffic
When determining the value of a domain already in use, the website’s monthly traffic needs to be addressed. As with any business, an existing customer base can be leveraged right away should someone else purchase the domain. It also cuts down on the amount of SEO the new owner will need to engage in.
SEO and Keywords
Keywords are a huge boon for any website’s SEO efforts. Having a frequently searched keyword directly in the domain will boost the value immensely. That is why hotels.com will always appear near the top when I’m searching for a place to stay.
The Three-Step Method for Valuing any Domain
With a basic knowledge of domain valuation in tow, it is time to apply the information and appraise some domains. The process is easiest when divided into three steps.
1. Doing Some Homework
A great way to appraise a domain is to see what similar names are going for. Luckily, there are several websites such as DN Journal or ShortNames that compile this information already. Each resource lists all of the prominent domain sales in recent weeks.
By finding domains similar to the one I’m looking at, I can get a ballpark estimate based on the current market. Since prices fluctuate often, it is important to keep any domain research up to date.
2. Use a Professional Appraisal Service
I also recommend using a domain appraisal service to automate most of the heavy lifting. While every domain can be appraised manually, getting professional assistance was very helpful when I first started out. Plus, the amount of time I save is well worth the fee charged by a reputable company.
3. Determine What Others are Willing to Pay
For domains that are already owned, the best thing to do is simply list them for sale. Since the market will ultimately determine the price anyway, going directly to potential customers is the most beneficial course of action. In order to avoid selling a domain for too low, always set a reserve price.
The reserve price is the lowest amount the seller is willing to take before parting with the domain. I like to set the reserve price absurdly high when first posting a domain. Then, I simply ask anyone who views the page to leave a comment detailing how much they would pay.
If the price satisfies me, I go ahead and sell off the domain. If not, I go back to the drawing board to come up with a more accurate valuation.
Domain valuation becomes much easier with more experience. The key is to start practicing as soon as possible. With time, anyone can master the art of appraising domain names.