Determining Domain Value

[Shane]

I've been trying to look at domaining as an investor would look at stock. However, I've found a few issues that I haven't seen anyone address.

1). Domain price is solely dependent on an end users budget and application.
2). Extensions rely heavily on each other.

For example:

A). You own budget.net - It's value correlates strongly with the budget.com's. So if budget.com is entertaining offers in the $x,xxx range you cannot be asking for $xx,xxx for the .net.

B). You own budget.net and feel it's worth $xx,xxx but budget.com won't even consider offers under mid $xxx,xxx. The unexplainably high asking price of the .com would devalue your .net simply because the domain set (.com/.net/.org) is now unaffordable.

3.) Many of the names considered a strong investment are exact match keywords. How many startups create a business with an exact match domain? How many startups can afford what we feel these generics are worth?

I would love to hear what you guys think! I just see chaos within the domain and website.

 

[katherine]

I don't agree that extensions must always rely on each other.

First of all, people can ask absurd amounts for their domains, regardless of quality. Too many domains are unrealistically priced.
So if the .com is overpriced, your .net should not be overpriced in similar proportions.
Yet in a way, an overpriced .com could benefit you as the .net holder. It makes alternatives more palatable to the potential buyer. But there is a gotcha: the buyer must want that particular keyword and pricing has to be reasonable. The buyer will only consider buying the .net if the price difference is considerable enough to offset the 'lower' extension.

You can use comparable, reported sales as a guide but I feel that experience and gut feeling is very important.
Domaining is more art than science.

Many sales are one of a kind too, just because the .com sold for $,$$$ doesn't mean the .net or any other extension would even sell for a tenth of the price. This is especially true with brandable domains for example. An end user would buy the .com and be done with it. Other extensions would be good only for defensive purposes and difficult to sell to another party because of possible TM issues that might arise.

Then you have ccTLDs. If a .de or .fr sells, that does not imply the same keyword will sell in another ccTLD.

 

[Biggie]

I've been trying to look at domaining as an investor would look at stock. However, I've found a few issues that I haven't seen anyone address.

1). Domain price is solely dependent on an end users budget and application.
2). Extensions rely heavily on each other.

For example:

A). You own budget.net - It's value correlates strongly with the budget.com's. So if budget.com is entertaining offers in the $x,xxx range you cannot be asking for $xx,xxx for the .net.

B). You own budget.net and feel it's worth $xx,xxx but budget.com won't even consider offers under mid $xxx,xxx. The unexplainably high asking price of the .com would devalue your .net simply because the domain set (.com/.net/.org) is now unaffordable.

3.) Many of the names considered a strong investment are exact match keywords. How many startups create a business with an exact match domain? How many startups can afford what we feel these generics are worth?

I would love to hear what you guys think! I just see chaos within the domain and website.

first problem i see, is that you look at investment from single direction


as in, buy a domain, to hopefully resell it for a profit

that's one form of "investing", but more effort is involved to stay profitable.


another is investing in "revenue" domains, which is similar to buying stock that pays dividends.

the effort there, is basically research before buying and optimizing after acquisition.



other options are, invest to develop names and earn returns thru website product sales or by selling the functional websites.



the second issue, is your misconception that "Domain price is solely dependent on an end users budget and application"

this notion is subjective and vague, in that "budgets" can increase and end-users vary.


for each potential end-user, there is/can be different budget or no budget at all

and when a domain can be applicable to more than 1 market, the leverage increases for the seller, which increases the potential for higher returns.


as for start-ups, the majority of them that are into "trends or fads"...trying to capture or get in on the newest thing or be the newest thing probably aren't looking at exact match names.

however, some start-ups in the traditional goods and services arena, who are contemplating the transition to internet sales, would be candidates for emn's.

as well as existing businesses who currently have an internet presence who may want to change, or shorten their url, and those who want to extend their reach by acquiring additional names in their category.


but that's only my opinion....

 

[Shane]

I do see your point but I still believe the .com sets the bar. If all three extensions were for sale a buyer would expect to pay more for the .com. I'd also imagine if the .com is unreasonably price many end users would move on to the next name without considering the .net and .org alternatives. Shouldn't there be some type of system to justify pricing? It seems all to speculative while so many in the industry use the term "investment" to describe their businesses. Do you buy solid domains and just wait? How is that sustainable? How can you securely support yourself without any constants?

 

[Shane]

Big,

I definitely agree that there are multiple income models. I personally only buy domains that I could develop and profit from. I'm more interested in those who flip domains. The concept intrigues me but also confuses me lol.

 

[Biggie]

I do see your point but I still believe the .com sets the bar. If all three extensions were for sale a buyer would expect to pay more for the .com. I'd also imagine if the .com is unreasonably price many end users would move on to the next name without considering the .net and .org alternatives. Shouldn't there be some type of system to justify pricing? It seems all to speculative while so many in the industry use the term "investment" to describe their businesses. Do you buy solid domains and just wait? How is that sustainable? How can you securely support yourself without any constants?

.com may be king, but .net and .org have established themselves as viable alternatives or/and as a first option.

as many entites choose .org to establish presence, where .com isn't considered as it may not fit well for the service.

there are constants, which i mentioned... but if you don't want to see or acknowledge them, you will always miss out.

Big,

I definitely agree that there are multiple income models. I personally only buy domains that I could develop and profit from. I'm more interested in those who flip domains. The concept intrigues me but also confuses me lol.

"flip, flipper, flipping, flippa" is a newbie's term which came from their basic assumption, that one can simply buy a domain today and resell for higher profit tommorrow.

that's why you're still confused.


a flipper is not really investor per se`

they are not looking to hold long term, they want quick profits and cannot afford to wait for a sale.

they must make sales consistently to sustain or reach a goal.

 

[Shane]

If flipping doesn't actually work or exist than the domain market makes much more sense. What do domain investors do? Buy and wait for the right offer? That strategy makes much more sense from a business stand point however the lack of liquidity seems to be a huge
downside. I do like the idea of developing for steady income and selling when the price is right but can that generate enough income to be a full time job?

 

[Gerry]

3.) Many of the names considered a strong investment are exact match keywords. How many startups create a business with an exact match domain? How many startups can afford what we feel these generics are worth?

I would love to hear what you guys think! I just see chaos within the domain and website.

One of the best questions EVER on the forum.

What I have found is many startups do choose an alternative extension or even a different spelling of their name because the domain name is not available or the owner wants too damn much. Later, they realize they are not getting the traffic they need nor is their spelling (regardless of language) really all that appealing. I have been in negotiations for a LONG TIME with a particular dot org. What I have is an exact match to correct English spelling to their really butchered namesake. This is a name that I have owned for years because of a direct personal interest and collection that I have. It is 100% generic and could not even be confused as infringing on anyone.

But, I have had several strong sales directly to the start-ups. This is much better use of time than trying to sell a name to an existing company simply because it is a different extension (which might put the seller in jeopardy of getting C&D's) or simply trying to convince a company of it looks like and smells like and tastes like their name/brand. It is a much better use of time simply because they contact me for negotiations. Lucky? Yes...and no. Because these have been some names that have been dropped and I snagged up. I utilized my own formula when getting drops...and it may only make sense to me.

The most recent strong sale to a start-up was a name that was about 14 years old and a common expression. I had to laugh when I sold it because I remember a certain someone chastising me about putting such names in my siggy, lamblasting me for putting worthless names up as if it was actually going to sell. Well, the bottom line is that name in the siggy was a five digit name when sold. And, the beautiful part...each and every post I made actually helped it in the rankings because there was - yes - BACKLINKS established to this forum.

In fact, I have sold two of my signature names to non-domainers, non-lowballers, non-"dealer prices" and both WERE STARTUPS! ...one being mid x,xxx and the other an xx,xxx. And if anyone is wondering which ones they were...well, look at what hasn't been showing up in my siggy and the hint is: two words, it had a microphone in the graphic.

When looking at domains, I view perhaps the number one criteria as being "market size". If the market is massive (ie, global, generic, something everyone uses, does, says, knows), moderate (still large but perhaps limited to country, region), medium(still narrower, perhaps language, city, state), small (even more regional or "towny") or niche (certain service or industry sectors). When going niche, usually you can get some decent hand regs. But be prepared to either sit on them for a while (especially for techno stuff) or be prepared to sell quickly (trends and trendy items are short lived).

 

[katherine]

I do see your point but I still believe the .com sets the bar. If all three extensions were for sale a buyer would expect to pay more for the .com. I'd also imagine if the .com is unreasonably price many end users would move on to the next name without considering the .net and .org alternatives.

Yes, very often the end user will move on and find another .com. That's why you want to own .com domains if you want to make sales, .net is not usually the first choice.

Shouldn't there be some type of system to justify pricing? It seems all to speculative while so many in the industry use the term "investment" to describe their businesses. Do you buy solid domains and just wait? How is that sustainable? How can you securely support yourself without any constants?

Yes, domaining is speculative.
Few domainers are doing it full-time, and the vast majority are probably losing money. So it's more a hobby or learning the ropes before it can be described as an investment :worried:

Each domain name is unique, like a piece of art. So are the circumstances of a sale.
Some people have tried to develop (automated) appraisal models, that have all failed, for a reason.

So you can use reported sales as a reference.
In practice, I would say the sweet spot when selling to end users is somewhere in the 4-figure range.

For example I have often sold real estate domains. You can justify the asking price based on business revenue: sell a house, or rent two or three flats, and you have recouped the price of the domain. A better domain will normally get you more traffic, more clicks, more leads, and more credibility. Also compare the one-time cost of acquisition vs regular/online advertising and recurring branding-related expenses. Domains are cheap in comparison. Some end users do get 'it'.

If flipping doesn't actually work or exist than the domain market makes much more sense. What do domain investors do? Buy and wait for the right offer? That strategy makes much more sense from a business stand point however the lack of liquidity seems to be a huge downside.

Bingo. Lack of liquidity is the problem with domain names.
There used to be more liquidity on the reseller market, so flipping worked for some domainers but times are tough right now.

You can sit and wait for the right offer to come in, or be proactive and reach out to end users (without spamming) to speed up sales, move inventory and build cash flow. But your bargaining position is much weaker, and you'll have to explain people why they even need a domain, let alone yours.

 

[Shane]

In fact, I have sold two of my signature names to non-domainers, non-lowballers, non-"dealer prices" and both WERE STARTUPS! ...one being mid x,xxx and the other an xx,xxx.

I find that very interesting. It seems like the buyers and sellers have very different criteria for what actually makes a domain valuable. I personally would never ever ever buy an exact match domain for a major business (unnecessary for ranking). I do see the value in exact match domains for niche markets; that being said, the whole benefit of entering a niche market is the low startup cost. I think the domain market could become pretty mainstream if the everyones interests were aligned. Unfortunately, a good domain doesn't guarantee success or sales. So how can we justify our selling prices? We can't continue just coming up with prices.. I ran into an issue with a guy selling a .com I wanted. He was asking for 50,000 when the domain (optimistically) was worth in the low X,XXX. It's hard to negotiate with "Cause I said so".


@Katherine

What's the point of owning speculative, non-liquid assets that lose you money annually? Doesn't it make more sense to just develop the shit out of a bunch of websites?

As of lately I've been putting up tons of niche sites and waiting to see what sticks. They earn more than they cost but it's a hard business to scale. What would you recommend? Do you play online as a job or a hobby?

 

[Biggie]

I ran into an issue with a guy selling a .com I wanted. He was asking for 50,000 when the domain (optimistically) was worth in the low X,XXX. It's hard to negotiate with "Cause I said so".

if one is confused about the various domain buying and selling strategies, then how can they "optimistically" be in a position to tell a seller his domain is not worth asking price?

 

[Shane]

if one is confused about the various domain buying and selling strategies, then how can they "optimistically" be in a position to tell a seller his domain is not worth asking price?

Easily when a 50,000 sale would land you a position on the top 100 YTD list. Just sayin'

 

[Bill F.]

B). You own budget.net and feel it's worth $xx,xxx but budget.com won't even consider offers under mid $xxx,xxx. The unexplainably high asking price of the .com would devalue your .net simply because the domain set (.com/.net/.org) is now unaffordable.

I think you have this backwards (though it depends on you reasons for buying). When I'm buying a name to develop a site, I'm delighted when I can get the .net for a reasonable price while the .com is being marketing for some astronomical figure. My biggest worry as a .net owner would be to have to compete with the same term in .com. When it's priced way over the market, this means I have clear sailing ahead. I love seeing my most dangerous competitor being used as a parking page.

 

[Gerry]

I personally would never ever ever buy an exact match domain for a major business (unnecessary for ranking). I do see the value in exact match domains for niche markets; that being said, the whole benefit of entering a niche market is the low startup cost

You are making too many assumptions about businesses that have no bearing. If the business wants it, they go after it. As for niche markets, because too many of the businesses are typically tech startups (health, technology, etc.), their startup costs can be gigantic. Especially after the example I mentioned of one business deciding to go a different "cutesy" way of naming its site, services, and products only to find that perhaps they made a mistake. Nothing is more costly than re-branding which is what they are looking at doing.

 

[Shane]

Rebranding is awful.. Ill agree with you there. I'm still not sure it always justifies the cost though. I think it's important to ask "why" things are the way they are. Why do you think domains haven't gone mainstream yet?

 

[DigiNames]

Gave my two cents below in red. In regards to flipping, sometimes you may get lucky and buy a name for cheap just to turn around and sell it for a good profit. Although it happens, I don't see domaining as just looking for these quick scores. I look at it more like running a store. You buy domains at wholesale prices and sell them at retail (end user) prices. There are other ways to monitize, as others have pointed out, such as development or parking; But as far as buying and selling names, this is the way to be successful imo.

I've been trying to look at domaining as an investor would look at stock. However, I've found a few issues that I haven't seen anyone address.

1). Domain price is solely dependent on an end users budget and application. Not solely, but in great part. If it is in a high dollar industry, the value of the domain is going to be much greater. Also, the competitiveness of the industry.
2). Extensions rely heavily on each other. I don't think they rely on each other as much as you seem to. .com is king, and if you own it you are not likely to leak much traffic to other extensions. If you own a .net, .org, or (god forbid) another extension you are losing traffic to the .com.

For example:

A). You own budget.net - It's value correlates strongly with the budget.com's. So if budget.com is entertaining offers in the $x,xxx range you cannot be asking for $xx,xxx for the .net. Probably true, but if the .net is worth $xx,xxx then the .com is going to sell super fast for $x,xxx and be off the market (or you should buy it!).

B). You own budget.net and feel it's worth $xx,xxx but budget.com won't even consider offers under mid $xxx,xxx. The unexplainably high asking price of the .com would devalue your .net simply because the domain set (.com/.net/.org) is now unaffordable. I see your point and that may be true in the minds of some buyers, but I don't think people are looking for sets of names very often. Most people want the .com, and if the seller wants xxx,xxx they might look at the xx,xxx priced .net as a more affordable alternative. This might actually increase demand for your name which increases value.

3.) Many of the names considered a strong investment are exact match keywords. How many startups create a business with an exact match domain? How many startups can afford what we feel these generics are worth? I think generic domains are a good investment for start ups, because one thing start ups need is legitimacy. If you start a new online bookstore and call it jimsmithbooks.com, I think people are less likely to want to deal with you, where as the domain BookStore.com gives you an instant brandname and people take your new business seriously. The value of the generic domain depends on the quality of the name, industry, and demand. Start ups in high-dollar industries are often very-well funded and willing to spend a great deal on a domain.

I would love to hear what you guys think! I just see chaos within the domain and website.

Best of luck!

 

[Shane]

@Digi

Thanks for your reply and I definitely see what you're saying.

@All

How do you guys determine the price of your domains? Do you have a strategy or just slap a price tag up and see if it sticks?