What’s A Domain Name REALLY Worth?

While recently trying to purchase a domain I had an interest in developing, I received a very dumb email from the broker I was negotiating with. He said that “domain appraisals are only for accountants” and that a domain was worth whatever two parties agreed upon.

No – really?

Of course a domain is worth what whatever two parties can agree upon. However, an independent appraisal should always be the starting point for a negotiation. Otherwise, one of the parties is getting taken advantage of.

Domains Are Not Commodities

Once a domain is registered, it takes on a new value. Generally speaking, that value is based on three factors:

• Revenue the domain currently generates
• Any inherent search or brand value of the name itself
• Any speculative value the domain may have

When it’s time to determine how these factors combine to come up with a price, the most accurate way to determine a domain’s value is to auction that domain name in an open marketplace. Auctions – provided that they have a sufficient number of potential buyers and sellers – determine the market value of any non-commodity.

Domains and fish have a lot in common - both are often auctioned off to the highest bidder.

This Wikimedia Commons image is from the user Chris 73 and is freely available at http://commons.wikimedia.org.

So what about situations where a domain isn’t available via auction? Without an open marketplace, it’s very difficult to determine the true value…which is where a professional appraisal comes in. Domain appraisals conducted by companies like Sedo and Moniker are useful in that they can be a good starting place for a negotiation. These companies use a combination of recent auction values, experience, and revenue data provided by the seller to arrive at an estimated value.

With an independent appraisal in hand, you have a starting point for any domain sale or purchase. Without one, you’re pulling numbers out of thin air. When a seller doesn’t want to work from an appraised value, that should be flashing red indicator that the seller wants more than market value.

Check Your Options Before Buying Or Selling Any Domain

The other thing to keep in mind when you investigate buying or selling a domain is to look at plausible alternatives. While no two domain names are the same, there are many international domain auctions held throughout the year. If a buyer and seller can’t agree on a price, there are alternatives for both parties.

Finally, be extremely wary of any domain owner who mandates a “minimum bid” before they will discuss selling a domain. I’ve found that many of these domains are unreasonably high-priced. For the “minimum asking price” there are a number of high-quality alternatives – any one of which will fit most businesses with a little creativity.

Questions? Thoughts?