Valuing a Domain Name

Elliot Silver
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Determining the value and sale price of a domain name may seem fairly simple, but there are quite a few factors that need to be considered. Frequently, domain names are priced based on a gut feel, and that gut feel takes many factors into consideration.

In the comment section of my article yesterday about the difficulty in getting market prices on domain flips, Leonard Britt made a suggestion to me: “Perhaps your readers might find it useful to learn how you determine a reasonable end user price for a particular domain.” I shared some of the factors I consider when valuing a domain name, and I thought it would be a good topic to discuss in its own blog post since many domain investors struggle with this issue.

When a domain name is priced too high, prospective buyers may look elsewhere. They may purchase a better priced domain name on Sedo or Afternic, or they may hand register a domain name. When a domain name is priced too low, the seller will end up leaving money on the table. My philosophy is generally to price domain names on the higher side but negotiate a fairer deal with qualified prospects because there are plenty of deals to be had and cash flow is king to the growth of my business.

Listed below (in no particular order) are some of the factors I consider when valuing a domain name:

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Beware of This Phishing Threat

Elliot Silver
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Gizmodo did a solid job of covering a scam that seems to target Netflix account holders. If you haven’t read the article and seen the videos, I urge you to do so. Although this scam is targeting Netflix customers, I could see the potential to target domain registrants as well.

If someone is able to get access to your domain registrar account password and log in name or account number, stealing your domain names could be fairly easy for them. Obviously the key is to not let that happen, and falling for a scam like the one covered by Gizmodo could do jus that.

Here are a few tips to avoid falling for a phishing attempt:

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Make Sure the Seller is Authorized to Sell

Elliot Silver
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For many of us who actively inquire about domain names, we use the Whois registrant email to contact the owner. I was inquiring about a domain name the other day, and something happened that I wanted to discuss and warn you about.

The domain name I was inquiring about is not currently being used. The company that owns the domain name operates on a different domain name, and their .com domain name is not being used. I sent an email to the Whois registrant (a privacy protected email address), and I also copied another email address I thought might be able to help because I didn’t know if the privacy email would work.

Within a couple of hours, I received an email response to let me know the company would consider selling the domain name and I could submit an offer. Shortly after that, I

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Suggest a New gTLD Domain Name to a Domain Owner

Elliot Silver
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I’ll preface this article by saying that this suggestion probably won’t work. That being said, even if there is a very small chance it works, it’s worth using it as a last ditch effort to acquire a domain name. Let me explain further.

For the majority of my domain acquisition efforts, I try to purchase domain names that have been registered for many years. Oftentimes, I contact the owners of domain names that are either underutilized or the websites haven’t been updated for a long time. I figure that a neglected website may mean the owner has thrown in the towel, and if I can strike a good deal, I can re-sell the domain name to someone who may not have bothered to inquire because of the existing website.

The trouble I have found is that many people and companies are reluctant to sell the domain name attached to their business, even if the offer is reasonable. Some people are concerned about

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Monitor Domain Names You Sell

Elliot Silver
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A friend told me a story about a domain name he sold for quite a bit of money that was later dropped by the buyer. It doesn’t make sense that someone would pay for a domain name in the aftermarket only to let it expire, but it happens, and that’s why you should monitor domain names you sell.

There are many reasons why a domain name might drop after someone pays for it. Perhaps they decided they didn’t want to move forward with their project or the person leading the project no longer works for the company. There are a multitude of reasons for why it could have expired.

I can give you three reasons for why you may want to monitor your domain name sales:

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Check All Aftermarkets for Domain Prices

Elliot Silver
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I was doing some research on a domain name I am interested in buying, and I saw that it was listed for sale on the domain owner’s website for $2,500. I continued my searching, and I noticed that it was also listed for sale on Sedo with a buy it now price of $6,000. To get the best deal on a domain name, you should check all aftermarket websites for that domain name listing.

I don’t have the best system of tracking domain names and prices. I might list names for sale on one aftermarket and then go back a few weeks or months later to list them for sale elsewhere. Usually, I look up the price at one venue to price a domain name the same at another venue. Sometimes I don’t always do this, and the pricing is different. Sometimes I will also update a price at one venue and not another. As a result, the price of a domain name may be different depending on the aftermarket.

When you are buying a domain name, I recommend looking up the listing at different aftermarket websites, even if the acquisition is being made in private. If you see a better price for the domain name, you may be able to purchase it cheaper elsewhere. If you are dealing directly with the owner, make sure you reference the lower price.

The domain market is dynamic. There are a number of factors that contribute to the price of a domain name. Sometimes domain owners are forgetful or neglectful, and their prices aren’t updated across the board. When you are buying a domain name, you should see if you can find the name listed for sale for less because you may score yourself a better deal. At the very least, you’ll learn the domain owner’s previous price expectations, and that information may help you negotiate a better deal.

As a domain owner, you should keep your prices updated across the board to prevent this from happening. Backing out of a deal because the buyer saw it priced less elsewhere might end up being harmful to your reputation.

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