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January 19, 2016

Domain Names: What’s Your Internet Real Estate Worth?

 

from the Intelligent Collector, By Aron Meystedt

Several factors should be considered when estimating the value of a domain name. They include traffic, advertising costs, the age of the domain name, the extension (.com, .org, etc.), comparable sales, advertiser competition in the category, industry growth and overall marketability.

To give you an idea of which types of domains sell for eye-popping amounts, here are a few of the top domain sales as reported by Domaining.com:

►Hotels.com sold for $11 million to Hotels.com GP, LLC in September 2001
►FB.com sold for $8.5 million to Facebook Inc. in September 2010
►Casino.com sold for $5.5 million to Mansion Limited of Gibraltar in November 2003
►Loans.com sold for $3 million to Bank of America in January 2000
►Investing.com sold for $2.45 million to Fusion Media Limited in November 2012

Numerous companies have acquired an exact match domain name for their market. These companies have determined that an investment in a premium domain asset helps increase customer awareness and retention:

►A&W Restaurants Inc. owns RootBeer.com
►Barnes & Noble Inc. owns Book.com and Books.com
►The Clorox Company owns Bleach.com and Grease.com
►Burlington Coat Factory owns Coat.com
►Kraft Foods Group Inc. owns Dessert.com and Dinners.com

So how do you arrive at an estimated value for a domain name?

It is important to understand that free valuation tools are available on the Internet. While valuations can vary drastically, they do offer a good, quick test to determine if a domain name has great value.

Two free domain valuation sites are Estibot.com and DomainIndex.com. As an example, let's get an estimate for RunningShoes.com. The EstiBot value is $718,000, while the DomainIndex value is $721,000. The values are similar, but this is likely because RunningShoes.com sold in 2011 for $700,000. Both Estibot and DomainIndex use past sales history to generate their data.

If we estimate the value of a name that has not been sold recently, such as Tablets.com, we see that estimates vary drastically. Estibot places the value at $143,000, while DomainIndex values it at $575,000. These valuation tools generally use a mix of criteria to determine value, including the search volume of a particular word in Google, length of the domain name, the extension (.com, .net, etc.), age of the domain name, and past sales of the name in question.

Free tools will give you a general idea of domain name value, but nothing can replace human analysis. It is important to note that all domain names are unique. No two are the same. Because of this, there are no identical comparable sales and there isn't a standard valuation method. Many one-word .com domain names have sold for $1 million, while others have slipped through at a fraction of this price. In fact, most domain names sell for what a buyer is willing to pay. Since there can only be one owner per domain name, if an entity decides that a particular name is something they strategically must own, the sales price tends to be significant.

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