How much is my domain worth?

This is probably the most common question that new domainers have. They want to know if they have struck gold with their latest brainwave or at least a little more than it cost to register that domain.

The bottom line

Your domain is worth what someone will pay for it. Sounds annoyingly obvious and totally fails to answer the real question. The real question is “what is the objective value of my domain?”. Unfortunately domaining is an area where there are no true agreed upon objective criteria for valuation.

You will see all sorts of numbers touted as differentiating the good from the bad. Which ones are useful and which ones are not?

Domain length

The shorter the domain name, the easier it is to remember and the more valuable it is, we are told. Untrue. Will you remember YBVX.com tomorrow? You may say ok, lets add that the name has to be a proper word to the criteria. Yahoo and Google and many others have gained value through branding so we must add that the domain name should be a generic proper word.

This is still not objective. Gambling.com would likely be worth more to a domainer than top.com. Why? Because gambling is a big industry with demand online. A potential buyer is far more likely to pay top dollar for a gambling domain. The extreme might be true e.g. domaining.com versus multiculturalmystery.com but multi-word phrases can be quite memorable.

LLLL.com

A subset of this “rule” are the short domain names that are not proper words. There are various valuations given depending on the letter used (L stands for letter so LLLL.com is a 4 letter domain). While many companies do use 4 letter acronyms, the vast majority of buyers in this area are resellers looking to offload to another reseller and turn a bit of a profit. There is also a common fallacy that these domains are not subject to trademark. LLLL acronyms can be trademarked and you should be careful to research if you buy in this area.

Traffic

The more visitors the more valuable a domain. Not true. Visitors to different industry domains convert differently and the ads pay differently often varying from pennies to 10s of dollars. Be highly suspicious of traffic statistics as they can be manipulated all too easily. Be especially aware of statistics collected over a short period e.g. 1 or 2 months. If you were to base your domain valuation of Christmas.com on traffic in July or December, you would end up with wildly different valuations.

Traffic on an expired domain may come from previous clients of the website but this will drop off as the clients realise the site is gone. These days with arbitrage out the window, you will not gain much from links to the domain either.

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Earnings

At first glance, this seems like a good objective criterion but it too is fatally flawed. Unless it is a stellar parked domain, the earnings number will not be that large and so calculating based on a multiple of yearly earnings will not result in a large number. This however becomes more reasonable if you are looking to value a large portfolio since the usual driver for the buyer are earnings.

Perhaps the biggest flaw in this method is the potential unrealized earnings of a domain. This is the potential for development. The best sales will be to end users ready to develop. These buyers will largely ignore any parked earnings and be starstruck by their dreams for a website. They will often value a domain at a much larger price than a domainer or reseller.

I will review other valuation criteria next time and tell you what you can use as a guideline.