What is a Internet domain name really worth? Part One.
Value is a matter of individual appreciation. There is no such thing as a overall Market Value for a product or a service, and there is nothing like a Fair Market Value.
Value Estimation is just Estimation. Always subjective to opinions, thus never objective.
Any whatever third party value evaluation (appraisal) is just a opinion that can be rejected or accepted. Since a buyer always has a motivation to buy, the decision is De Facto subjective to the buyer. Idem dito for what concerns the seller.
Talking about subjectivity in domain trade is complete nonsense. However, there are systems to suggest a realistic estimation of the value for any Internet domain without revenue from any source. The basis is that all domains have a bottom purchase price, namely the registration fee. Here, the existence of a website is not taken into consideration. However, although numerics seem objective, the interpretation is individual - thus subjective.
If a domain is unregistered, it's intrinsic value is equal to the registration fee. If a domain is registered, then the value at any given moment is the intrinsic value plus any added value that is claimed by the current registrant of the domain and any other person. Indeed, domain and web elements that may appear to be positive to one person can just as well be considered not really good for other people.
Reference to an earlier sale of any domain can be a reasonable basis for negotiation. By example, if a domain was purchased for $8,000.00 then it should be acceptable to a number of people that the current owner is not likely to sell beneath that price.
Also, it is reasonable to expect that domain buyers will by any and all means try to make a serious ROI from their domain purchase. Usually, a domain seller does not know what the new owner will do with a domain, but some options are:
Do nothing, just renew the registration each year.
Offer the domain for sale immediately As-Is.
Park the domain somewhere to collect advertising income.
Have a web and sell advertising space via banners and links to collect revenue.
Have a web to sell product(s) or/and service(s).
Have a web and offer it together with the domain for sale.
Any combination of the items 1 trough 8.
The bid price by the potential buyer often (if not mostly) depends upon what the buyer intends to do, and what revenue is expected. The asking price by the seller is usually indicated by how many money is needed or wanted, and how urgent it is.
Scientific domain value estimation as offered by most domain appraisers is clearly not possible. Because appraisers are not supposed to know much (or even anything) about both the seller and the buyer's financial, business and social situation, and because nobody can predict the future, the only more or less realistic approach is to put numbers on elements of a domain itself and then negotiate considering personal added value elements.
Indeed, if a domain is sold without web, then any and all popularity and revenue etc. will depend of the new content. The value of the new web will be different of the old one. That should have no effect upon the domain, because a domain is the location (address) and the web is the storefront (product).
Think of this as a building with a business at a given address. When the business moves away, the building stays. Is the building now less worth? Yes, for some people - No, for some people. It depends for a great part from who advice is asked.
The thing is that some people shall accept that the value is unchanged, while other people will believe the value has somehow changed.
A matter of Belief ...
In domains, there are some basic metrics:
There are the part before the separator dot (name, SLD, Second Level Domain) and the part on the other side of the separator dot (extension, TLD, Top Level Domain).
There is the number of characters in the name (SLD).
There is the number of characters in the extension (TLD).
There is the total number of characters in the domain (SLD+TLD).
There is the extension that can be General (.com, .net, .org, .biz, .travel, etc.) or Country Code (.cc, .it, .to, .nl, .md, .fr, etc).
Why bother to have a short SLD if a longer TLD is wanted? Example: go.travel, fly.aero.
The SLD can be a word, a sentence, an abbreviation or an acronym in a language.
The SLD can be just random characters.
The SLD together with the TLD can have a meaning.
The shorter a domain is, the more easier it should be to remember it, but the less likely it will be a word or a sentence, and the lesser it will describe something.
The more words in a domain, the better it usually can describe something.
Many people find it important that the SLD has a direct relationship with their personal name, business name, product brand or use etc., location, slogan, mascot, trademark, etc.
Other often suggested domain related elements as keyword strength, search engine result position (SERP), backlinks, traffic, Overture and Alexa rankings, etcetera are not domain elements but web elements. They are web elements because they depend upon the web content, and because search engines usually check for web content. And any of these elements have only the importance that each person attaches to it.
Of course, personal elements can influence value estimation. Everybody attaches an individual priority to the elements above. Also, investments as the price paid before for a domain, can play an important role.
Examples of domain elements:
A. Domains with random characters that do not necessarily have any meaning in any language.
B. If the SLD is descriptive (name of the founder of the company, activity, business slogan, abbreviation, acronym, etc.), the value may well move up.
C. If the TLD is relative to the SLD (go.to, sit.in, fabri.com, fish.net, on.tv, pain.sm, etc.) the value could be easily accepted to be even more higher.
D. If the domain has been sold earlier, then the highest selling price is likely to be accepted as a reasonable basis for negotiation.
All this, of course, is to be considered and to be accepted by the parties involved in the deal. Some flexibility on the side of seller and buyer may be helpful.
AsSeenOnTV.com was sold for far more that it should have been, considering the table here. But there were obviously more factors playing a role in the price decision-making than just domain length: It was not only a strong domain (very descriptive) but there was immediate use for it on a revenue-generating web.
Using the table, ScientificDomainAppraisals.com might go for just the registration fee, but that is not an option because it appears on top in most search engines upon searches with "scientific domain appraisals".
Most appraisers say that they appraise a domain, while they really suggest a price for a domain + web + current or expected traffic + current or expected revenue + backlinks and ranking in some search engines etc.
Some thinking should make it clear that all those elements are only relevant for the name (sld) if it appears in the web content, and if it was part of the search string, and appears not too far in the search results.
Also, since people tend to be too lazy to browse more than one page with some 30 results, the value of SERP is questionable. Most people seem to forget that most things that are promoted by domainers are almost only valid and useful in the domain industry.
The yellow pages in a telephone book are far more easier and faster to look trough than to use a Internet search engine, especially for people who need the nearest supplier for a product or a service.
The domain appraising industry provides third party opinions that are just based on individual methods using individually chosen elements. Almost all users of appraising services are occasional or professional domain traders who use the appraisal to resell their investment. End users usually do not discuss prices: They pay what it takes, and then they are sure to have it.
Indeed, asking about the value of a domain brings it to the attention of the appraiser who is usually always seeking for easy business. Some things do really happen.
Many (if not all) domain appraisers offer domain value estimation that is based on a number of elements that are relevant to the appraisers and that they want people to believe they are relevant for them too. Simply said: Appraisers try to introduce their ideas about domain value as widely accepted truth.
Anyway, assuming that a value estimation standard would be worldwidely accepted, then buyers and sellers will negotiate best deals anyway.
This is why a domain value estimation can never be more than an opinion.
Each domain has at any time at least the value of the registration fee.
People are free to pay whatever they want to pay to have a domain.
Value estimation is a strictly personal matter.
Domain appraisal systems can not be scientific.
Most appraisers mix up domain (name, address) with web (content, revenue, etc.).
Appraising systems are usually not transparent to the client.
Whatever a domain has been paid for in the past is no guarantee for a similar sale.
Paid prices are often easily accepted as a basis for negotiation.
The ultimate decision rests by the buyer, based upon urgency and budget etc.
The Domain Appraising Industry is a Opinion Industry, where people advance some in-house valuation method to become a standard. Free for everybody to believe in it or not, absolutely not scientific, sometimes a basis for negotiation.
What is a Internet domain name really worth? Part Two.
Let us remember that value does not depend of what is valuated, but of the opinions of the owner(s) on the one side hand and the people who do are interested in acquiring it. In fact, nothing is wordth anything if nobody is interested in it. Period.
Some people prefer small cars, some people only want big ones. Some people want to live nearby their parents, children, work, etc. while other people prefer a location based upon other preferences: Out of the country, beachfront, near the workplace, etc. Some women like tall sportsmen, while others prefer slim and smart guys. Some men prefer blondes, and others like redheads or brunettes. Some people prefer opera classics while others want rock-n-roll.
Preferences vary in place, time, subject, activity, mobility, and other somehow predictable or unpredictable factors. That makes any whatever decision subjective to theavailable information, and what part of it is used to base the decision upon, and furthermore the way things are interpreted.
People with somehow similar ideas often seek each others company, to exchange information and to improve their knowledge/skills in the field of their common interest, or to just feel better.
As a proverb says: Like attracts like. Groups often agree upon certain values, and often try to promote their ideas either for free as a hobby, sport, religion, belief, etc. or find a way to commercialize their activity. Thus creating a local business or a whole industry.
Anyway, it is a matter of Belief in the validity of a doctrine. The believer agree that their common viewpoint is reasonable or absolute truth. It is clear that all things in the Universe can be seen by every being in another perspective. Knowing this, it is easy to understand that there are groups that agree about certain viewpoints, while some other groups reject viewpoints.
Competition can be friendly or fervent. Leaving religious and moral doctrines aside, let us focus on business. And particularly on Internet domain name valuation. Domain name appraising issort of a spin-off industry from the second-hand domain name market: The Domain Name After Market or just the domain aftermarket.
Here, the appraising industry takes into consideration a number of objective domain-related factors such as the number of characters in the Second Leveld DOMAIN (SLD) and the Top Level Domain (Extension) that also can be a Country Code (CC).
An other factor is the meaning of the SLD: The domain name language and what it means. Is it a word? Generic or not? Singular or plural? Is it a sentence? Etc. etc. These are subjective factors. While the name itself remains the same whatever happens, the relationship of the word with the meaning (origin, source, item, address, business, brand, etc.) can change more than once.
Also, selling and buying motivation plays an important role. It is acceptable to believe that the effective selling price vary depending of elements such as a forced sale or acquisition. End uses often have other motivation and budget than resellers. While valuation arguments can seem just as valid for some resellers and for some end uses, it is not a rule.
Eventually, a domain is worth what the seller let it go for and what the buyer pays to get it. What other people want to pay for does not matter, once the deal is closed and the domain is gone until offered for sale again. Simple.
Whatever third party opinions based upon whatever argumentation, a deal depends upon the motivation of seller and buyer. And it is very likely that both the seller and the buyer will not make available all motivation details. Not to each other, not to outsiders and certainly not to appraisers.
It can be safely concluded that domain appraising is a unscientific approach for decision-making in domain selling and buying. Appraisers use all sorts of mathematical and wet finger models to compare domain elements insystems they pretend to be objective. However, since only the SLD and TLD are permanent and all other elements are variables, any and all conclusions about a domain are Instantaneous (valid only right now) and Local (by this appraiser).
If You really want something, negotiate but pay what it takes before somebody else gets it.You may want extra third party information, but what is good advice? Appraisers sell appraisals. They always win. Underpricing and Overpricing only exist between the ears of jealous people and manipulators. A price is what it takes to get something.
No more, no less. The basics of demand and supply.
So, then, away with the appraising industry? Not necessarily. Advice needs not to be accepted as obligatory, but can be a basis for negotiation. Especially if an appraiser forwards halfway the asking price and the budget of the candidate buyer.