After being in the domain space for almost 10 years, I’ve had the opportunity to work with companies large and small to secure their online identity, i.e., their domain name.
I often hear the same story time and again: Established businesses and startups alike go all-in on a name for their newest venture only to find the domain name is in use or far outside their budget. By the time they speak to someone who specializes in domain acquisitions and appraisals, it’s far too late to change. They have to either settle for an inferior domain name or break the bank to acquire it.
You can follow these six steps early in the naming process to put a basic valuation on the domain you would like to purchase. Just make sure the valuation is done early enough in the process so you can make a change if necessary, and don’t let the world know of your new brand name or how much funding you have, as this could position future negotiations in the seller’s favor.
There are three types of extensions that affect the value of a domain.
• Top-level domains: Standard TLDs are .com, .net, .org, .biz, .edu and .gov.
• Country code top-level domains: Some of the largest CCTLDs are .de (Germany, which is the second most-registered TLD next to .com), .co.uk (United Kingdom) and .ca (Canada).
• Generic top-level domain: Some examples are .agency, .email, .rentals, .xyz, .link and .auto.
Generally, the more common an extension, the more valuable it will be. For example, in almost every case, a .com is going to be more valuable than a .biz or .agency. However, depending on the target audience for the domain, there are certain circumstances when a country code extension or another generic extension might be preferable to a .com or other top-level domain.
Pro tip: When registering a domain, think about your audience. If .ai or .io is trendy, make sure the customers you are targeting know those extensions exist. You will have a lot of lost customers going to the wrong place if you do not make the right decision.
How many characters make up the domain? For example, “cool.com” is a short domain name, while “nightwatch.com” is longer. The shorter the domain, the more valuable. This is because shorter domains are typically easier to spell and remember (and, in my opinion, they look better). Telling someone you work for Ai.com, for example, immediately gives them the impression that your company commands market dominance.
Think about how the domain could be used in other countries with differences in language and culture. For example, if you’re appraising shoes.com, “shoe” is a word that’s only relevant in the English language. On the flip side, “yoga” is universal in many languages.
Universal domains allow owners to roll out services and products worldwide and have a larger market, so they are worth more than less universal domains.
Likewise, the value of a domain can be limited if it contains a locality or region in its name. For example, if your domain name is BostonCatering.com, people will likely think you’re only serving markets within the Boston area. There are exceptions to this rule, such as Boston Market or Kentucky Fried Chicken, but for the most part, if a domain is regional, it will have less value than a universal domain.
How difficult is it to spell the domain? If it’s hard to spell, your target audience will have a harder time remembering, finding and returning to your business. The goal is to make it as easy as possible for people to find you, remember you and tell their friends about you.
If you decide to name your company a word that is not easy to spell, make sure to purchase all of the possible typos.
5. Market Trends
This is one of my favorite parts of the valuation process. When appraising, you can look at trends for many different situations. One easy way to find trends is to visit trends.google.com. It’s a search tool that shows you the number of searches for any term over time. From this data, you can discern the interest or demand for a domain name you might be looking to purchase. If your domain were suntanlotion.com, for instance, you would likely see that searches spike in spring and summer and start to fall in autumn.
On the other hand, if you’re looking to purchase a brand name, the trends of the word might not be relevant for an appraisal. For example, trends for the word “shout” would not be helpful when looking at trends for the cleaning brand Shout. If I owned a PR firm, I might want to buy shout.com, but the people looking for shout.com are probably looking for the detergent brand. Those search results could artificially prop up the value of the domain name “shout.” This is something that I’ve learned from years in the industry.
6. Comparable Sales
This metric is similar to appraising a home. You look for domains that are inferior and superior to the value of the domain and try and find some middle ground. For example, if you were appraising StLouisRealEstate.com, you’d compare it to other regional domains like ChicagoRealEstate.com or IndianapolisRealEstate.com. Then you’d compare it to RealEstate.com or other universal domains in the real estate market.
All of these metrics should help you find a basic — certainly not exact — evaluation for the domain name. It might seem complicated, but if you consider these six things, you can make a wise decision.
You can even use free domain appraisal tools to help you, such as EstiBot.com or Valuate.com. If you need something more than a free appraisal tool, you can speak to a professional domain appraiser. But proceed down this route with caution; no license is required to offer domain appraisal services. Make sure the person you are speaking to has the proven resume to back it up.