Yesterday, I blogged about the “Art of Selling a Domain Name,” and I want to take a step back a bit and discuss an important step in the process: Pricing. If you price your name too high, it won’t sell, and it will set a price ceiling for the name. If you price it too generously, you won’t achieve as high of a return as possible. There is an art to pricing a domain name, and I would like to share my own personal process for pricing my domain names when I sell.
For the sake of this blog post, I will use my domain name AlcoholCounseling.com as an example, and I will set a sales price for the name at the conclusion of this.
When I decide to sell a domain name from my portfolio, I look at a variety of factors in order to determine the price, including:
1) Traffic the name receives
2) Revenue the name receives
3) Google listings for the “bracketed term”
4) Advertisers on Google
5) Comps of recent sales
6) Gut feel
Although I don’t buy my names based on traffic or revenue, I know that many of my clients pay close attention to these figures. The amount of natural traffic a domain name receives is important because it shows how many people are looking for something on that domain name without having to incur advertise costs. I also use the Overture search tool to get an idea of how many people are searching for the phrase or keyword of the domain name I am selling. For AlcoholCounseling.com, the traffic is light, only receiving about 1/2 a unique per day.
The revenue is important because a name might receive very little traffic, but the revenue per click may be very strong. Conversely, a domain name might receive a ton of traffic, but the click through rate might be low and the revenue per click might be low as well. This is important because if a name has strong revenue, a developer can build compelling content, increasing search engine traffic, and dramatically the revenue produced by the name. For AlcoholCounseling.com, the CTR is about 25% and the revenue per click is around $1.50. It is important to keep in mind that revenue share and CTR will differ for each parking provider and can be very different. This is one reason I only use this as a guideline.
I use the number of Google listings for the word or term in my domain name as an indicator of how much information is being published about the topic. It is likely that there is a parallel between the amount of information available and the number of people looking to find information. In the case of “alcohol counseling,” there are 154,000 Google searches for the topic. It is important to put the term in brackets, otherwise the results will include all pages that use alcohol or counseling, which is deceptive.
The number of advertisers who are paying per click is also a good indicator of the importance of a keyword or phrase, and thus the value of it. The more advertisers, the more competitive the bidding is, and that may mean a higher revenue per click figure. In the case of “alcohol counseling,” there are 8 sidebar advertisers, and there are 2 top advertisers, which is very strong in my opinion.
In order to get comparisons of other sales (both recent and historical), I like to use DNJournal’s Domain Sales chart or DNSalePrice.com. I also reference personal sales and other sales that might not have been published. For AlcoholCounseling.com, I would compare it to other psychology, rehabilitation and counseling domain sales. I have been fortunate enough to have sold a few similar names, so I have a good internal base. There have also been several public sales ranging from $3,500 – $10,000, which is in line with names I’ve sold.
Just like a real estate broker, I spend countless hours analyzing the domain market. This has given me a good “gut feel” for certain domain names. I also take my clients’ needs into account. I think about their verticals, their needs, and the types of names they buy as well as the price they would consider for this name.
In the case of AlcoholCounseling.com, I will set a price of $5,800 for the domain name with the hopes of a quick sale. Of course, if you are interested in acquiring the name, drop me a note or post a comment.
I just want to add that these are the most important factors I consider when setting my prices. There are plenty of other considerations, including: whether the other extensions are owned and used, registration date of the name, prior sale price/listing of the name, amount of inquiries the name has received in the past….etc.
Hey Elliot, nice posts 😀
I would add the variations of the name, ie. alcoholcounselling.com, alcoholcounsellor.com, alcoholcounselors.com et al into the equation to get a feel for how much of the ‘name space’ the domain covers. In this example it’s one of a potential set of 6.
As you’d know the most valuable names cover the whole space. Also owning the variants can make the sale far more valuable per name.
***UPDATED BY ELLIOT***
I agree that it’s a good sign when other extensions are taken, but I don’t really use it to calculate my selling price.
I notice you don’t factor “brandable.”
Fortune 500 companies typically pay naming consultants from $20k to $1 million to come up with a name for a product, service or brand. Typically these names average $60K which might include some legal research and a focus group or two. But if the name is not available as a domain name what good is it? You only have to start the search all over. Or risk using a name in print and sending traffic to someone else with the same name online.
So looking at the process backwards, some domains have immediate value of $20K or more because they provide an instant solution at a savings.
Then there are the call to action domains that can make advertising response more effective. Again what good are a bunch of substance abuse ads on billboards at a million dollars or more a year for media, if the passerby can’t remember where to go to follow-up in just the blink of an eye?
I didn’t mean other extensions, I meant variants of a keyword with the same or similar meaning. Owens point about branding is excellent too, I have names with no search value or traffic that I consider quite valuable on brand alone.
Thank You Elliot! (And those are great comments as well.)
I get it! I mean, in theory… You know, it’s not that hard to put together the macro of the domain business, especially with more of the pro domainers starting to blog. But the devil’s in the details, which are hard to come by. Thanks for sharing this information! I think this is actually the first post of it’s kind I’ve seen in the domain blog space.
I personally think revenue from parking is less important, knowing what one click/visitor could yield for the end user.
A rehab center makes very good profits on offering their services, and if a domain delivers this type of traffic, people seriously interested in alcohol counselling, then i would say that parking revenue wouldn’t even be a factor i would consider.
For me what is important is – what does the end user get in value?
Some domains when in the hands of the right end user can bring in a TON of revenue, but whilst parked it makes a few bucks.
That is an factor not to be underestimated.
What is your feel on the other extensions – .org and .net versus the .com — when it comes to valuations? While a .org and .net do not get the type-in traffic of the .com but I should imagine the value should be darn close…
Just posted an interesting tidbit about what it CAN cost to name a brand:
FYI, your Overture search tool link here is dead…
Thanks for providing another open view! I absolutely believe this is the way to a brighter domain name investing future and encourage everyone interested in the industry to involve themselves in such thoughtful debate.
For too long now the uninformed have tried to wrestle the domain name into some formula (traffic times click rate times keyword value times years of income divided by whatever). A domain name is SO much more than that. Which reminds me…
kudos and thank yous to Ben Wilks, Owen Frager and Ed for their thoughtful supplements!
Thanks for the nice post Elliot.
Anyone have information/direction on the pros and cons of selling vs auctions?
Which services seem to provide the best opportunities for someone new to selling domains?