How To Determine A Domain’s Value

How To Determine A Domain’s Value

by Matt Romagnoli - October 24, 2019

While determining a domain’s value can be a difficult step to approach when valuing your business, it is an important one. Both established portfolios with several domains and new buyers looking to grab that ideal domain will have to value their domain names. Parallels and differences run in both situations. First, let’s take a look at an overarching principle to domain valuation. The buyer.

What’s A Domain Worth and To Whom?

You can research and check all you want, and while there’s some common sense applicable here, a domain is going to be as valuable as a buyer deems it to be. This weighs on both selling and searching for your own domain. Entering the digital space with an established brand brings a weighted valuation for getting a matching domain for anticipated common searches. This can absolutely put a new buyer in the situation where that .com can become prohibitive. While .com’s are often the ideal scenario, there is a swath of new top-level domains that may create an edge for your brand over the competition.

Top level domain value changes

Determining your brand’s value against a domain’s face value is an important distinction to make. The value of an established brand in a commercial space may justify a higher purchase price for an otherwise unknown domain. Alternatively, a cheap steal of a domain when the opportunity arises may be an option for a company with a more flexible identity.

A company’s equity in the digital marketplace is directly related to the rest of their brand’s equity. We see this in personal brands, large retail corporations, and local small businesses. Brand equity has permeated our buying decisions; from a word of mouth recommendation for a restaurant to who we entrust with our kids.  When seeking that domain it’s important to not let cost be prohibitive but also to not be naive about the weight your established brand may carry.

What Technically Makes a Domain Valuable?

Buying or selling, both are dictated by some common variables. Directly adjacent to how you value your brand is the technical factors behind the domain and website. The type of top-level domain has a strong influence on the starting prices of most domains. The upwards valuation on some .com sites is in the millions. A .com is always going to garner a higher price than other top-level domain alternatives. A clever approach can create leverage when purchasing a domain with new top-level domains becoming more common. Consequently, for established brands and domains, consider purchasing the alternative top-level domains other than just the.com. Owning the .org, .net, and .brand can limit competition and increase a seller’s position.

Check out my most recent blog post on The Importance of Top-Level Domains.

When researching a domain’s value discovering wildly different prices makes a realistic valuation difficult. Older sites often can be single words and close to matching existing brand names. Combined with high quality and operating website, these are your top end or ideal scenarios. Newer companies though don’t have to face this hurdle. Creative brand names and personal brands allow for navigating around this scenario. When researching, look for appraisal tools that give a more nuanced approach using metrics like relative keywords, Alexa rank, length, age, and the competition.

Domain Valuation as a Competitive Edge

Domain valuation is a unique marketplace unto itself. Digital goods, in general, can have wide swings in valuation and often rise and fall by their own metrics regarding hard valuation. Add brand equity and it starts to feel slightly esoteric. If a domain’s value is dictated by its worth to the buyer, the buyer’s competition naturally will play a major role in determining that. More competition, greater the demand to find an edge to stay ahead. E-commerce enables competition differently than retail location-based sales. With businesses facing more competition from this change, it would make sense that branding does as well. The potential for new competition, whether a brand new or long-established industry is singular within the digital space. Finding an edge is important, buying your domain can be the first step in doing so.

Researching competition isn’t just SEO rank and the standard metrics we attribute to a website. Pivotal to the domain itself is the language it’s based on. Overall several factors weigh in on a good domain name.

  1. Easy to Spell
    1. Length
    2. Simplicity
  2. Descriptive
    1. Keywords
    2. Or Brandable
  3. Accessible
    1. Sounds good spoken out loud
    2. Easy to remember and type
  4. Think Long Term
    1. Matching Brand Name (Or close to it!)
    2. Avoid redirecting to a site with a similar name

Tools to Determine a Domain’s Value

Length of the domain, correct spelling, even one that sounds good when we tell a friend all factor into this. Utilizing a unique tool that can both help create your brand and value the competition can be the decisive factor for valuing your potential domain. Equally, it allows a portfolio holder to research a buyer’s position, potentially purchase competing sites at lower prices, and offers an avenue of leverage.

This is where Arcane’s Brand Generator aids in taking those steps within the e-commerce space. Isolating domains by their top-level domain, with a budget in mind, enables businesses to project realistic expectations for future purchasing decisions. Directly weighing competing domain positions of similar brands is an invaluable tool for navigating domain valuation.

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