Domain names are often referred to as the real estate of the World Wide Web. Domain names can be compared to real estate as it is also often being sold, sometimes rented and abandoned. With ROIs sometimes reaching 500%, more and more people are getting interested in buying and selling domain names. So, how do you figure out what a domain is worth?
Determining the domain value is not always cut and dry. While similar domain names that have recently been sold help to determine the price range, there are other “human” factors to consider in the internet real-estate (domain name) business.
Online Valuation Tools
An appraisal of a domain can be categorically divided into two ways. One is through the use of online valuation tools. These tools can definitely help you out in determining the value of your domain name. However, you must keep in mind that there are no proven formula or tools that can give you the exact value for a domain name. The only thing you can expect from online valuation tools is the estimated amount.
Online valuation tools use different valuation algorithms basing on different parameters which may include keyword metrics, cost per click information and sales figures. The three most used online valuation tools include Valuate, Estibot, and Website Outlook.
Remember, when using these tools, while they provide an immediate response and dollar amount, their abilities are limited to algorithmic calculations. They will allow you to compare one domain to another for the same factors and automatically calculate the numbers for you in no time.
But given the fact that online valuation tools give only the approximate appraisal value of a certain domain, these valuation tools should not be the sole basis or the final buying price of a domain. There are more factors to be considered aside from the parameters that these online valuation tools are using.
You can take a look at the other determining factors used by professional appraisers to determine whether the value should fall above, within or below the selling prices of similar recent domain sales. Some of the metrics you can use to determine the value of a domain may include but not limited to the following:
- Brand Recognition
- Search Engine Reputation
- Revenue Making Potential
- Dot Value
- Name Length
Every appraiser has his or her own opinion regarding the value of a domain. A professional will look at today’s market, market trends, the likelihood the domain is brandable, ease of pronounciation and memorability. Different appraisers may weigh these factors differently. Many will incorporate additional algorithmic signals and take the CPC value of the keywords into consideration.
When working with premium domains, it makes sense to spend a few dollars getting a professional appraisal to back up your price tag or to make an informed decision before placing a bid. Watch recent domain sales and get a feel for the market before you jump in. The domain business can be highly profitable when you make well informed buying and selling decisions.