Domain Names
How To Value A Domain Name
With the upcoming Domain Focus event (www.domainfocus.com) with perhaps the strongest ever showing of .co.uk generic domains for sale, now is the time to establish how you'd go about valuing a domain name.
The Domain Buyer
For the Domain Buyer when you know exactly the domain you want, it is very frustrating when it seems to be offered at an unreasonable price. The problem is that you may not be the only one after the domain and a quick look at comparative domain prices will show that companies are prepared to pay a great deal for the right domain.
Many of the top generic names are not usually on offer, so this Domain Focus event will be quite unique with its high quality domain line up and you will soon get an idea of the market price for the really good domains. It is worth following some auctions and reading below to begin understanding the decisions, experiences and stresses of the typical seller, in order to offer a good pitch to the domain owner for that very special domain you are after.
This article is written from a domain seller's perspective.
The Domain Owner
First of all, many, many requests for prices for your domain by email are from timewasters offering tiny figures for worthwhile domains, so don't get your hopes up if someone approaches you to buy your domain name.
Then, figure whether you want to sell the domain name or not. Sounds simple but in my experience it is a tough decision to sell some names. There is of course no reason not to hold onto your precious names for another 10 years and watch them go up in value.
Depending on how tough that decision is, you can then establish a low or high price.
In short the minimum value of a domain is the price of its nearest useful alternative.
This leads to a high spread between the prices for excellent domains and the rest. For one word fully descriptive generic .com domains there are very few useful alternatives for a self respecting brand. Once the brand owner starts to worry about price then suddenly all sorts of much lesser alternatives seem to look attractive to a boardroom discussion - especially with the Chief Financial Officer sitting, judging in the corner!
There is a domain specialist site (there are many) but a good one at acorndomains.co.uk on which there are many legals and experienced domain sellers and buyers with whom you can discuss your domain. You can also see what prices different quality domains are on offer for.
There are also websites that list recent sales of domains that will give you an idea of how much similar domains have recently been sold for.
.co.uk lists are at Domain Name Sales Prices from DomainPrices.co.uk
.com and others are at Domain Name Journal at DNJournal.com
live auction prices are at Sedo and GreatDomains Domain Parking Program (same owner)
also look at afternic, pool.com, snapnames.com etc for prices
A good site to see more genuine traffic and parking revenue details is Namedrive. As well as a good place to advertise your name, this site is a good parking site that can earn you small amounts of money while you are not developing the domain.
If the buyer or market that the domain describes is UK based then it is an advantage to have both .com and .co.uk
Valuing a domain can be easy - finger in air, a look at the overdraft balance, rules of thumb
or it can be difficult.
Even armed with the lists of recent sales the most challenging aspects are:
How to compare domains with the ones listed given that each domain is unique
How to negotiate How to complete
Comparisons
Comparisons of domains can be done if you consider aspects of domains that are applicable to other domains.
Here is a short list of comparison aspects.
- length of domain
- genericness/genericity WTF how generic the words are and whether they tread on any tm toes.
- number of words
- extension of domain
- how many other extensions are registered under that phrase
- whether the marketplace described by that domain is a rich one e.g financial or insurance
- whether the domain is keywords and the value of the keywords as judged by ppc ad prices for those words
- how much traffic the domain gets naturally, and if this is type in, or s.e. related
- the age of the domains as se's are currently giving advantage to older domains
- Whether the domain has had a site on it, is in archive.org, is in search engines and directories, has page rank or whether it has been banned.
- Useage of the alternative extensions
- Whether people keep asking to buy the domain is also a good guide.
- Fashion and trends also play a large part. domains with i prepended seem to be all the rage at the moment, also 3 letter .coms seem to have no limit to their upside. It is worth knowing what is fashionable.
It is also worth knowing what is in the news. eg missold pensions and mortgage fee refunds are all the rage at the moment.
In evaluating the words, look at whether they are brandable or describe a market place or product.
The best domains are either short and memorable e.g. delighted.co.uk or describe a huge value market eg mortgages.co.uk
How close to purchase the domain words are: eg cheap travel insurance is closer than travel insurance advice, although you can of course build to the latter.
Often a domain has what I'd term "extras" like online, or web, or uk or hyphens, or net, or i or e prepended. THe more of these the domain has the lower its value becomes. e.g insurance is good, insurance online is good but not as good ukwebinsuranceonline is worse still.
In valuing a domain, it is often a mistake to think that a domain is valued highly because of what site you can put onto it. A site can be put onto any domain and it is the site that does the work not the domain. The value of the domain itself is what the domain name can add to the value of that site.
Many domain name sales have fetched large prices on the back of revenue multiples attached to an attractive sounding name. Domains like business.com and creditcheck.com are examples of this. Strong names but not nearly strong enough on their own account to reach the $400 million dollar and $3 million dollar price tags respectively put on them.
Third party input can sometimes help. Collect together a bunch of very similar domains that you know the price of and slip in your own domain into that list. Then ask someone to rank that list in terms of value. That can give a good indication of what it's worth.
How to negotiate
This is an individual thing.
Many offers come in at £50 or even less, and in my experience only a very small minority ever reach a decent £x,xxx or even mid £xxx price from these starting points and in my view these are often time wasters.
Even for domains that are worth in excess of £xxx,xxx you'll still get hoardes of £xx bids. Either they're pretty ignorant or they're trying it on.
There are many nice domainers that will reply to everyone who makes an offer on their domain in the hope that something comes from it. I can't say I've always done that!
If they ask for a price it is your decision as to what you want for it. It is a more common mistake to ask for too much, as everyone tends to overvalue their domain names. However, it is a lasting bad taste when you know you've underpriced a domain.
It is always worth asking for them to put in a price, but if they don't then don't be afraid to ask a negotiable amount above what you actually want for it. It is unusual for someone to take the first price offered.
The biggest sales are done using a broker or a confident sales pitch with all the traffic details, history etc at hand, if the domain is worth X then go for X x 1.5 and be quite strong with your negotiations.
Chances are immediately the buyer will say its way over budget in which case be prepared to say "bye bye".
Some buyers will insult you to the point of ridicule for owning the domain, or even owning more than a few domains expecting to embarrass you into reducing your price. You may or may not have an opinion about that but the negotiation is not the place to be embarrassed by it.
Some buyers will ask for traffic - and given that 90% of good brandable domains don't have traffic, will then negotiate on the back of its lack of traffic.
Don't forget to include VAT and Escrow and commission and Nominet transfer costs, and transfer out costs from some ISPs in the negotiation.
Completing
The best deal for you is to transfer only once money is in your account. Ask for bank transfer before you transfer the names and give them appropriate invoices and paperwork to show that the deal is done.
If you have to then use escrow. In my opinion this is unnecessary expense as it confuses all the issues and doesn't really get you any guarantees. Using sedo for instance is usually worse than not using them given their poor record of client communication. Moniker is ok provided you use them when they are not busy. Escrow.com I've used with some success but as infrequently as possible.
Don't forget to establish who pays the Nominet fees. and for .co.uks dont forget to change the tag or they can get stroppy having to pay extra to change the tag after the purchase. Nominet have recently changed this by putting the new tag requirement into the transfer form but it has been a problem in the past.
For a valuable domain it is worth asking a broker to handle all the above for you.
Rob Taylor (at rob.co.uk) is the broker I'd recommend. He has experience of high value domain transactions and is very knowledgeable about the market.
Also as a final tip, I wouldn't post your opinions of your domain on the forums, post the domain name itself by all means because you may get more interest in it and can start an auction process, but I wouldn't say things like you don't really care about the domain or were going to let it expire anyway. You may be honest but it doesn't help much when trying to get a good price. Similarly getting board members to publicly value your domain is also a mistake as the buyer can easily see these and use them against you. Instead, always state the positives about it.
Domain Focus website is at domainfocus.com
Acorn Domains website is at acorndomains.co.uk
Domain Prices website is at domainprices.co.uk
Domain Journal website is at dnjournal.com
NameDrive website is at namedrive.com
Sedo website is at sedo.com
Great Domains website is at greatdomains.com
Afternic website is at afternic.com
SnapNames website is at snapnames.com
Pool .com website is at pool.com