How to accurately value a domain name.

[aqls]

Taking some examples of what I consider reasonable domain names.

It would be interesting for Sedo to walk through the Sedo valuation process.

examples:

htmltutor.co.uk
britishpubguide.co.uk
cheapestdebtconsolidation.com and .co.uk
cheaptraveltotokyo.com and .co.uk

All are currently unregged to make it fair to members of the board!

A generous answer from Sedo and I'll swallow some of my complaints ;-)

-aqls-

 

[retired_member11]

What are your complaints?

 

[aqls]

Many and varied.

I will keep them to myself in exchange for them sharing some of their fundamentals of valuing a domain name.

-aqls-

 

[olebean]

This will be interesting, I wonder if approval will be waivered?

aqls, you sure have marked you card!

Never mind appraisals, what about their calculation of CT payments? I don't know any industry where the advertisers don't know what rates they are working for!

 

[sedo]

Ah come on, don't me wrong here. I'm not interested in any bribery of any sort! Just thought we'd try and bury the hatchet with aqls. But any domain would do. And while that doesn't mean they aren't worth any less than the reg fee, these domains aren't too great. So here's what I'll do: I'll go through two ends of the spectrum, looking at a premium domain (earth.com) and one of the domains on this list that is regged (britishpubguide.co.uk).

PS: This might take some time though, I'm warning you all beforehand.

Ash

 

[aqls]

ok, whatever.

The process and decision making is what is important to me.

- sorry, my whois lied, I didn't realise britishpubguide was regged.

but lucky him!

[added]
a) I find the middle ground more interesting than say earth.com
and b) we should perhaps do .co.uks?


-aqls-

 

[sedo]

Probably a good idea aqls. I’ll stick with britishpubguide.co.uk, and to illustrate CPC values, I’ll also look at securedloan.co.uk. Again, I’ll go through some of the factors that we use in valuation. I’m not going to spell out the entire process, as that would take forever, but I will mention some of the most important factors.

TLD and Market
The first thing I’d look at is the TLD obviously, and we all know that .com is the king of the castle. Most people rank .net 2nd, and outside of the UK and parts of Europe, many people do not recognize the full potential value of the .co.uk market. However, I think most of us here recognize that in many cases .co.uk domains have a higher earning potential than a comparable .net domain. In cases where a term is distinctly “British,” then .co.uk’s can be worth more than their .com counterparts. So when we look at TLD, we don’t just look at what the TLD is, but also where the intended market is, and how that might compare to other TLD variants of that name. I think you’d all agree that bangersandmash.co.uk would probably have more traffic than bangersandmash.com for instance, and consequently could be worth more. While britishpubguide.co.uk is a term that would be better served with a .com, we could make a case that securedloan.co.uk would be the most desirable variant. With britishpubguide.co.uk, I think the main market here would be tourists, so .com would be the best. However, I think .co.uk would be the 2nd best TLD here. In securedloan.co.uk’s case, the desirability would be based on the fact that secured loan is a term used primarily in the UK. You’d have to leverage that with the inherent limit in the traffic coming from the UK, however a quick look at Overture (discussed later) shows that secured loan is searched far more in the US than in the UK. So in this case, securedloan.co.uk could potentially be worth more than securedloan.com.

Memorability and length
The next thing we look at is the languages the domain is in and the length. Unlike most everything else in the world, shorter is better with domains. English is the most valuable language for all gTLDs (.com, .net, etc) and prove to be the most valuable with some ccTLDs (.cc, .tv, etc) and 2nd most valuable for others. German is the best for .de, French for .fr, … you get the idea. In this case we have two medium-long length domains in English. Securedloan.co.uk fares much better than britishpubguide.co.uk, which is not only longer, but consists of more words. Going hand-in-hand with length is memorability. The shorter it is, the easier it is to remember, and the harder it is to make mistakes when you’re typing it in.

 

[sedo]

Industry Benchmarks
We also make full use of publicly available metrics, such as overture, Alexa, Marketleap, and so on. Overture is especially helpful when looking at search engine popularity and bid prices. Overture brings up 37 results in the UK for british pub guide, and 323045 for secured loan. As for the Bid Tool at Overture, the highest advertiser’s bid is £3.65 for “secured loan,” and 12p for “british pub guide.” It’s pretty clear that the more search results and higher max bids, the better. In this case, secured loan clearly has a great deal of inherent value, be it via a developed site or a parking page.

Brandability and Commercial Potential
Brandability ties in with both length and memorability. We’re looking for domains that are catchy and could provide ideal as branding opportunities. These factors also link into commercial potential, where we try to gauge where this domain fits into commerce on the internet, and it’s chances in it’s industry to make money. Both domains do well here. “Secured loan” is an often searched term in the Finance field, a field that is quite visible online. “British pub guide” could be classified under a Travel related term, another industry that has an extremely strong online presence.

Related Domains
Not to advertise, but one resource that Sedo has better than most valuation companies is it’s large database of past sales. We draw on not only all of our public past sales, but also all public sales available to us. This really helps us gauge the value of similar domains.

Traffic and Revenue
One of the more prevalent trends that we’ve been seeing is buyers solely looking at traffic and revenue when purchasing domains. Domain speculators are the main culprits here, and we’re seeing a great many mainstream investment companies considering or already having domain holdings. These investors look at the bottom line, and pay based on revenue multipliers. They might range anywhere from 1-5 years for typo domains, to 5-10+ years revenue for good generics. If you want to sell your domain hassle-free, this is obviously the best way to go, as these buyers will go for anything decent as long as it legitimately makes money. This is something we consider as well when making our valuations.

Etc
We also look at variants of the domain, the past history of the page (be it content or ownership history), and potential legal problems among other factors.

This gives you all a rough idea of some of the major factors we look into with regard to domains. This is by no means an exhaustive list, as each domain always presents its own research challenges. We do explore other factors, so if you don’t see something you think is vital in the domain valuation process, more than likely we do look at it as well. We are in the process of looking into way to improve and enhance our appraisal, and I’m hoping that some major changes will be in store somewhere in mid to late 2006.

As for these two domains, I don’t want to come out to exact values as there are owners of each respective domain and they may get offended. So this is by no means an indication of the accurate value, I will say that I feel that britishpubguide.co.uk should be valued at mid-high 4 figures GBP, while securedloan.co.uk should be worth low 5 figures GBP.


Ash Rahimi

 

[olebean]

Ash

Thanks for that.

Intended market and industry benchmark?

Indended market suggests that all domains have "one" intended market, how does multiply markets figure in calculation?

What happens if there as no know industry benchmarks?

 

[aqls]

Ok, Ash,

Thanks for your time.

Comments anyone?

-aqls-

 

[Lucky Luke]

I'm not up on valuing domain names by any means, but Ash's reply is helpful. He's been good enough to enter the den.

I am surprised that Ash reckons the britishpubguide.co.uk is worth as much as he says (low to mid £x,xxxs). To back Ash's view, though, both the .com and the .co.uk were regged in 1999, so someone back then thought they were of value and have held on to them. (Mind you, a lot of junk was regged back then and is still being held on to ... I have one or two myself )

As for securedloan.co.uk, I would have thought that this was only £x,xxxs at the most. If it was unsecuredloan.co.uk, then perhaps it could top the £xx,xxxs.

All in all, I am surprised at the higher than expected value of these domains.

Cheers, Luke

 

[sedo]

Hi Guys,

Thanks for the kinds words.

OleBean: If there are mutliple markets, we try to take into account all of them. Obviously, the larger the market and the higher number of markets, the higher the price. If there is no existing market, then we make an attempt to at least predict the value or size of that new or emerging market.

As for the high prices, domain valuations, like most valuations, do have a bit of subjectivity involved on the part of the appraiser. With these domains, I think the values would be very attainable if/when a decent enduser comes along.

Ash

 

[FC Domains]

If britishpubguide.co.uk is worth low to mid £x,xxxs, how come gbpubguide.co.uk isn't worth the reg fee?

 

[retired_member11]

To me value is based on ROI. That might be ppc earnings for a domainer or leads that are convertable into sales for a company. Nothing else can be truly measured, and imho value cannot be assessed by a third party. Each domain is unique and the 'buyer' makes their unique judgement. I always tell a potential buyer to assess what value the domain will bring to their business over x time and for them to then make an appropriate offer based on that calculation AND not to be tempted to offer more than they can afford with the costings of their business. They should be able to do this. If the offer is not good for me I politely decline. End of discussion. It's sound business sense, for both parties. A third party has nothing to do with this part of the process, just escrow security. I don't like third party valuations. Their not buying, their not selling. Their input can hinder a sale.

For example, if I sell a random three letter domain for x,xxx this doesn't mean that I would necessarily sell another random three letter domain for the same sum to another party shorty thereafter.

 

[paymatters]

Is securedloan.co.uk for sale?!

 

[Nigel]

As it happens securedloan.co.uk is one of our domains, as is unsecuredloan.co.uk. Funny seeing sedo giving a free appraisal of our domain on this forum . We would place its value above unsecuredloan.co.uk although we believe both of them are, in our opinion, of 5 figure value. However they're not currently for sale.

 

[retired_member11]

Secured loans are great business. Risk free for the lender. They love it.

Unsecured is risky. Repayments are higher and therefore less attractive. Less of that kind of lending is being done.

Therefore the 'secured' domain has got to be more valuable.

 

[paymatters]

Yes a good secured lead is probably worth 20 times an unsecured lead BUT you'd probably get 20 times as many people looking for an unsecured loan!

 

[wwwdomain.name]

Ash

Excuse my ignorance... slightly off topic may be but still relative re: pricing...

How come hive.com (amongst others) is featured in top domains with a 'sky high' $1.25 mil price ticket?

Appreciate their is some value but how much? How is that derived in this case....

It's probably my ignorance but as you guys require prior approval for listing over 5k, how is it's price tag justified?

Seems overly excessive to me...

Appreciate your feedback..

 

[sedo]

Our listing system essentially works like this:
If you want to list your domain for over $10k, then you have two options:
1. Order an appraisal
2. Email us, and when a domain is clearly worth more than $10k, and we can allow a higher listing price. We don't have any pre-set rules for defining what is clearly over $10k, but obvious candidates are one word .com's, decent one word .co.uk's, etc etc. I know this might sound a bit subjective, but if we didn't include this choice, it'd just seem we're forcing people to get appraisals!

We do this because if we did not, you'd see 80% of domains listed for sale above $10k, with many domains probably listed at $999,999, and that just doesn't reflect the market value of most domains. This way, domain owners will at least have a better idea of what a neutral party might think their domain is worth. After an appraisal or permission has been obtained, people are free to list their domain at whatever price they want, because we cannot after all set prices. It might sound a little contradictory, but it's the best solution we've come up with for now.

So, finally(!), to answer your question, I believe the owner ordered an appraisal, so he is now free to list the domain at whatever price he'd like. He won't sell it for $1.25 million, but he can try his best!


Ash