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Domain Name Valuation

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Domain Name Valuation

Domain Valuation

There’s been a lot of talk about domain name valuation on the web recently. Tim Kissane, a fellow Facebook friend and domainer asked “how relevant are the stats to the value of a domain?” Instantly I knew this was going to be one of those thought provoking threads that drew a lot of people in and got them to spill the beans on what they thought domain valuation was based on. I read a few valid points and ultimately it comes down to different opinions on where the emphasis should be placed when considering a valuation for a domain name asset.

There’s a few basic motives behind acquiring a domain and the emphasis you place will usually be based on your buying patterns. Lets explore different scenarios where the domain valuation may change based on an individuals reason to acquire a domain:

 

The typical brick and mortar business owner sees value in:

  • A domain that takes their Domain Branding efforts to the next level
  • Ways to improve localized search results (we can use all the help we can get with Google Places dominating local search results. If you get a chance check out a related article by Morgan Linton)
  • Exact match keyword specific domain names for more search traffic
  • Product or Service specific domains that may assist with landing page and conversion optimization
The typical domain name investor is interested in:
  • All of the above stats
  • Generic terms preferably one or two words
  • How quickly one can flip to an end user or to another domainer
  • What the development potential might be and if it’s something they can streamline to create a passive and residual income
  • How established the domain is on the web
  • Popularity of a given niche
  • PPC strength
And how could we forget the SEO…
The professional SEO does not care how pretty a domain name might be or how high it’s appraised on domain tools like Estibot. He cares about the stats:
  • How is this domain going to provide value to my clients?
  • Existing Backlinks specifically .Edu & .Gov
  • Domain Age
  • Page Rank
  • Search Volume
  • Advertiser Competition
  • Alexa rank
  • Existing traffic
One might argue that even an SEO should understand the benefit of a pretty two word generic domain. I’m here to tell you they are buying for a completely different reason. The reasoning behind their purchase pattern is to help drive traffic through existing momentum that only a previously registered, developed, indexed, backlinked domain with a low acquisition cost can provide.

Domain name valuation is an art and a science. If you are purchasing domains in the $xxx to $x,xxx range then you can crunch numbers, check stats, reach out to industry mentors, calculate multiples of revenue, etc. But, if it’s a one or two word premium domain that is fetching $xx,xxx – $xxx,xxx,xxx then leave the domain name valuation process to an expert and experienced domain broker like Kevin Leto or Brad Larson.  There have been studies that prove having a third party involved significantly improves the entire process by eliminating the emotional aspect of a negotiation.

In my humble opinion a domain is strictly a marketing vehicle. The purpose of a marketing campaign is to provide measurable results. With that said I believe stats are the underlying reason to acquire a domain and it’s the foundation for a proper domain name valuation. Speculation is the root of all evil.


By Nima Jacob Nojoumi
By Nima Jacob Nojoumi
Die hard entrepreneur, startup adviser, world traveler, blogger, inbound marketing addict and evangelist of the American Dream. Helping people is my passion, business is my vehicle.
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Showing 9 comments

  • Tim Kissane
    Reply

    Thanks, Nima, for a very clear, well-organized exposition.  Domain name valuation has been the single most confusing aspect of the industry for me.  This helps a lot.

    • Anonymous
      Reply

      @google-9b732560f5693150f9cfe625c125f2b5:disqus – Thanks for posting an awesome question that inspired me to write this article. Domain valuation is very challenging and can be a cumbersome process since domains aren’t like tangible real estate. We don’t have zip codes to work with, but we have comps and other stats that help with the domain valuation. If I can ever be of further assistance please let me know.

  • Ben Racicot
    Reply

    Great advice on the $xx,xxx arena. Reminds us to keep our head on straight!

    • Nima Nojoumi
      Reply

      @facebook-1464943772:disqus – Thanks for the positive feedback. Last time we had a chat you had questions regarding the UDRP process and US Law. I remember forwarding some info your way. Let me know if you need anything else. 

  • Anonymous
    Reply

     I really enjoy how this article differentiates what a typical business owner VS. what a domain investor finds value in when acquiring a domain name.

    Now, the discussion of SEO brings up a topic which I would appreciate an opinion on. I recently saw a video on SEOmoz (http://x.co/ZisR) which ended with a discussion regarding backlinking practices. It sounds like reputable SEOs frown upon directory link submission, do follow or nofollow commenting, as well as reciprocal link exchanging (leading them to say, “No. No. No. No. No. No. No. No. Just no. Okay.”).

    What gives? I understand some of these methods might not result in noticeably higher ranking, but why would a reputable white-hat SEO speak so negatively about them? Should I not be submitting links to directories?

    • Nima Nojoumi
      Reply

      @BrianMarkham:disqus – Thanks for the feedback. That’s a really, really good question and I’m happy you asked. I absolutely love SEO, but there’s one element that has always frustrated me. Search engine optimization professionals are overwhelmingly quick to share general information. I’ve read for five years straight on SEO and not once have I found a good read on a backlink campaign that is current. That’s the secret sauce that no one shares.

      I thoroughly disagree with them. I don’t think SEO was designed to be one size fits all and with that said your off-site SEO campaign will vary significantly depending on the momentum that the client has already established. 

      When you’re new to an area how do you join a community or new social circle? You sign up for a new activity, club, church/temple or go to restaurants and bars to meet people. A website is apart of an internet community and it’s no different. It’s important to engage leaders in your online circle by guest blogging, posting comments on popular niche specific sites and submitting to relevant and high quality directories. 

      I believe everything in moderation is the best practice to follow. Make sure your backlink campaign is evenly distributed between one way, reciprocal, follow and no-follow backlinks.A good practice is to think of your SEO campaign in terms of how Google would evaluate it, rather than what your objectives are. 

      Would it look suspicious if you were Google and you crawled a site that had 99% of its backlinks setup as do-follow? Does that seem organic? 

      • Brian Markham
        Reply

        Thank you for the quick response!

        I like the point you made about how, ” […] everything in moderation is the best practice to follow.” With search engines continually working to refine their process of returning relevant results, they surely will want to see varied inbound link types. Makes sense to me!

  • Nima Nojoumi
    Reply

    @02719551c60dc1aca0959e7ac5680891:disqus – That’s a great idea. I’ll be sure to add it to my list of things to blog about. Thanks for the suggestion. 

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