Valuation of Domain Names
When it comes to owning a domain name, you first need to check if it’s available. If the answer is yes, then you’re good to go and can register your domain name with ease. If the name is taken, you need to buy it – that’s where domain value comes into play.
In this article, we’ll show you how domain value works and what to think about when you buy a domain name.
|– An available domain name can cost around $10 a year, but buying a taken one could costs much more|
– Domain name value depends on several factors, such as domain type, name length, and brandability
– You can use appraisal tools to get an accurate valuation
– There are online marketplaces where you can buy and sell domain names
What Is a Domain Name Value?
A domain value is the $ value of a taken domain name and the potential benefit from the traffic you might get to the domain name.
Prices can range vastly – you can get a domain name for free or pay millions of dollars, depending on the name itself and the reseller. However, the average is around $10–20 a year for an available domain and $5,000–20,000 for a taken one.
As always, the value of anything is whatever the seller wants to get for it. While there is some science behind it, you can auction your domain for millions of dollars. Granted, probably nobody will buy it, but the option is there. While the practice is slowly dying out, many companies still have a business model centered around domain flipping – buying and reselling domain names.
If you want to buy a domain name, you can find its value on one of the auction platforms, such as GoDaddy. However, if the goal is to sell your domain, there are plenty of appraisal tools you can use to best determine your domain value and see what the realistic price for that domain is.
Some of the popular appraisal tools include the following:
Understanding Domain Valuation
You can be liberal with your domain valuation. If you use several appraisal tools, you’ll often receive different results. However, these are not shots in the dark – all tools consider similar factors. These factors are as follows:
- Domain type(e.g. .COM)
- Name length
- How memorable it is
- How universal it is
- Previous sales and usage
- Demand for similar names
For example, if the domain you want to sell has the word shirt in it, its usage is limited to a clothing store.
Domain valuations can get pretty big. For example, in 2019, Voice.com went for an eye-watering $30 million. So, as with any purchase, it’s important to evaluate whether the domain valuation is acceptable for you to make a return on your investment.
Learn more about domain value and the most expensive domain names in our video.
How to Calculate Domain Value
When you’re buying a domain name, you will want to know if it’s worth the listed value.
One way to do this is to check out marketplaces and see what people spend on similar domains. Then compare domains based on the factors as discussed above. For instance, yourdomainname.com will be more expensive than yourdomainname.tk.
You can also use domain appraisal tools to get a quote. There are both free and paid tools available, and the results you get will vary depending on the complexity of the algorithm behind the tool.
Buying a Domain Name: Is It Worth It?
Calculating a domain name is important if you want to sell your domain name to someone else. If you’re looking to buy one for your business, the process is essentially pointless since it’s the seller that dictates the price. You can always try to lower the price, but it’ll still be the seller’s valuation.
As a business, you should calculate whether the expense of (someone else’s) domain name value is worth it. In other words, if you decide to spend thousands of dollars, will your business benefit enough to get a return on your investment?
First of all, check whether the current owner has some legal issues, such as trademark infringement, with the name or if the website has a history of unethical practices, such as spamming. The name itself won’t mean much if the name is already flagged.
If all is clear on that front, it’s time to do some cost-benefit analysis. Try to answer the following questions:
- How much do you want to spend on website building and maintenance?
- How many visitors do you envision having?
- Will you generate direct sales, or do you plan to earn through advertising?
- Will your customers recognize your brand if you have a different domain name?
- Is the same name available but with a different extension?
For instance, if you have a local business, and you can’t see more than a few hundred people visiting your website, it’s not wise to spend $10,000+ on a domain name.
MORE: How to register a domain name
6 Domain Valuation Factors to Consider
As we’ve mentioned above, there are factors that you need to consider when you evaluate a domain’s worth. The six top factors to focus on are:
- Domain name history
- Name length
1. Domain Name Extension
Generally speaking, the more common a domain type is, the more valuable it is. The .com extension is usually the most valuable extension, also called top-level domain (TLD). The same domain name with a .net TLD will probably go for less.
As always, there are exceptions to the rule. In some countries, country code TLDs are more common (for instance, .de in Germany) and can be more valuable to a buyer that’s focusing on a particular geographic area.
Some TLDs are also suggestive of the industry. If you’re looking for a domain name for a streaming service or a television station, the .tv TLD may prove more valuable than .com.
MORE: What is the .io extension?
Most commonly, domain buyers are companies that want to use the name as their brand. Descriptive, unique, and memorable words can become a brand more easily than, say, laptops.com.
With brandability also comes the factor of spelling. If the name is misspelled or may be read wrong, the brandability value will plummet.
3. Domain Name History
A domain name history is a list of past and present owners, and facts on when it became active for the first time. The history also includes what type of content was present on the website. Check out the table below to see how you can check out a domain name’s history and what to focus on:
|Domain Name Element||Explanation|
|Age||An older domain name with an active website is more valuable than one that’s been registered for the first time only recently.|
|Previous sales||If the website has been sold before, check out what it went for and determine your value accordingly. For example, if the owners of Voice.com decide to resell it, they will demand a high price.|
|Past usage||If the previous owner had a questionable website that had become popular for negative reasons, the value would go down as fewer people would want to become associated with the name’s past usage.|
4. Name Length
The name length doesn’t necessarily mean you have to have a character limit. Instead, it’s about how memorable the domain name is. When you see one you’re interested in, read it out loud and try to gauge whether people would memorize it and spell it without any difficulty.
Another important factor is the universality of the name. Think about how many people (or companies) can use the name. If the domain name is yogateacher.com, the usage is pretty limited to a specific industry – an ice cream parlor won’t be interested. The fewer people interested, the less money you’ll make.
Domain name traffic represents the number of people that visit your website. You can monetize traffic through sales, ads, branding, and other forms, which brings value to a domain name.
When somebody buys a domain name, they don’t get just the name – they also receive all the traffic that comes with it. If Google decided to sell its domain, you wouldn’t only pay for the brand but also for the billions of people that visit it monthly.
What Increases the Value of Your Domain Name
Once you buy your domain name, there are several factors that increase the value of the domain name, including:
- Building a website: Having a website instead of an empty domain name can help you boost your value. If you work on SEO optimization, you can increase the name’s recognition and its Google rank. Consider getting some backlinks to improve your chances.
- Using social media: Create profiles with the same name on all major social media platforms. Make sure to link to your website and add info about it. This will expand your reach, and you can increase the value by offering the accounts together with the domain.
- Registering domain variations: If someone sees a great domain name going for premium money, they can undercut you by registering the same name with a different extension. If you own similar variations, you can sell them as a bundle or drive up the demand for the original domain name.
A quality domain name can go anywhere from $5,000 to $20,000. If you get a creative idea and are fast enough to register the name before anyone else, you can earn a lot of money. In 2010, Quinstreet bought carInsurance.com for almost $50 million!
If you can’t come up with a perfect domain name by yourself, you can use our AI-powered domain name generator for free and get 1,000+ name ideas in an instant.
If your goal is not to flip domain names but get one for your business, when choosing a domain name, you should consider whether it’s worth it to buy a taken domain name or go for a different one. Remember, your domain and business names don’t have to be the same. Using a similar but different name can help you branch out later on.
MORE: Who owns a domain name?