Ever wondered what your domain name is worth or how you people derive fair market values for domain names? Jude Augusta, co-author of the DomainGraduate submitted the following article and we are happy to share it with our readers...
The following is a conversation that took place between Rebecca “Becca” Skane, a respected real estate agent in the NH Seacoast, and yours truly (Jude Augusta):
Becca: Jude – I think I may have just seriously under-priced my domain AdviceDiva.com!
Jude: Why? What Happened?...
Becca: I priced it at $55,000 and it was sold in FIVE MINUTES!
Jude: What?! Rebecca, ok, calm down, there is a LOT of phishing schemes in domains because it’s a purely online industry. Make sure you do NOT give out your checking account number to anyone.
Becca: Oh, no its all legit. Its going through Escrow.com and everything.
Jude: Well, depending on traffic, clicks, revenue, and brandability, domains can sell anywhere from 2x annual revenue to 10x annual revenue.
Becca: It was only one year’s revenue.
Jude: What!? Rebecca, how much did AdviceDiva.com make monthly.
Becca: Only about $5,000 per month.
Jude: I’d have given you $100,00 to $150,000.
Becca: Really? Why!?
Jude: I could pull a loan for say $150,000 at 10% for a ten year loan and the payment would be $1,300 per month. I’d net $3,700. Its easy money.
Becca: Oh. (#*%&!(&@)!)
And so goes the domain to the lucky buyer.
So how do we price these domains? Are we all savvy insiders without need of external opinion? Is everything clicks and revenue and multiples? Are brands for suckers? Well I’m a sucker then! When in the Grand Canyon last week I saw many “Grand Canyon” brand wines – prominently displayed, just as you see Brooklyn Ale, Bar Harbor Ale, and the like wherever you go. I own “www.SeacoastAle.com” and actually registered the trademark as everything where I live (in the New Hampshire Seacoast) is “Seacoast Something” (Seacoast Fence, Seacoast Cellular, Seacoast Landscaping), etc. There is no strategy to monetize those pages – though they will be spruced up a bit. The strategy was to run a survey and see how it compared with Sam Adams “Boston Beer Company”, Shipyard Ale (Portland, Maine), Smuttynose (Portsmouth, NH), and Magic Hat (VT). The results? It TROUNCED EVERYTHING. How can a beer that does not yet exist demolish stiff competition? BRANDING. The end-goal is to partner with a brewer who similarly wants to dominate in distribution due to affinity of vacationers, locals, and people of all “Seacoasts”.
Lets look at another domain: www.Insulation.com. I know the owner of this domain, the FINEST of gentlemen named David Nielsen. What’s your initial gut reaction on this one? Insulation.com? Are you kidding me? What good is that domain? Maybe you’re thinking its $100,000, maybe $50,000, maybe $10,000. It’s a single word generic. You go through the motions: What’s the number of page views? How many searches for “insulation”? (MANY by the way). What are the clicks? What’s the revenue? Those questions are nice and useful, but miss the opportunity.
An appraiser asking just those questions would miss the true opportunity. The insulation industry is absurdly large. We’re talking “pink stuff in walls – right?” Wrong. Think about what’s in your jacket, boots, and gloves. Consider how you seal your windows for winter warmth. Think about heat-retaining and noise-canceling qualities of your auto and home. Ponder ALL new construction going up, triple-expanding foam, blow-in insulation, couch cushions – you name it. We are ENGULFED by it. Now, look at the numbers. This is not just a “billion dollar industry”, but, in fact, NUMEROUS COMPANIES have BILLION DOLLAR BUDGETS! Even better, there are some 37 CEOs (with 37 EGO’s) who will have to live with the fact that “Clayton Underwood may beat me on getting that domain? I don’t THINK SO!”. Now does your valuation change? What if the domain was going to be auctioned off and all parties were made overly aware?
So, how do you value your domains? Don’t discount domain appraisals (BuyDomains, Sedo, and the like). Remember, the criteria they will look at typically will be more from the domain-investor perspective. However, they do sell to plenty of end-buyers such as the buyer of Vodka.com and IReport.com. The appraisals are cheap enough and foolish not to get. Like real estate, a little development goes a long way. The house that has all the paint falling off but is pristine inside will either not sell or will sell for less than its true value. Similarly, the home that is fine all around will not sell at all without promotion. It needs to get into the MLS or otherwise in front of potential buyers through advertising. Similarly with domains a modest amount of development and foot-traffic through user-generated content and/or social networking will go a long way to ramp up valuations.
Traditional good resources:
DNJournal.com: go through the archives and see what similar domains went for.
The forums: DnForum, NamePros, etc.:
Go on Forum 1 and ask: “what’s this domain worth” (not as a buyer or a seller).
On another forum ask: “What’s MY domain worth” (you’ll see how the vultures will tell you its worth nothing).
On a third forum ask: “What’s this domain I’m thinking about buying worth?” Answers will be all over the map with people trying to catch a big (hungry) fish by selling you “similar” domains to the one you seek from their own portfolio.
Establish branding potentials for your domain: “SeacoastAle.com appeals to the New Hampshire Seacoast residents and vacationers who buy the beer even back home to reminisce about vacation, as well as to all “seacoasts” in the world.
PROMOTE THE DOMAIN! Buy “stickies” at DnForum, email lists, buy “showcases” at Sedo, and the like! Remember, you can generally refuse offers.
We hope that’s good fodder for thought for pricing your domains. We wish you the best!
~Yours in domains.
-Jude
Jude Augusta, Esq/Mba: Contributing Editor, DomainGraduate
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Source: Submision to DomainNews.com by Jude Augusta, Esq./mba is the Contributing Editor for DomainGraduate - May 14th, 2008