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:
- How much advertisers are paying in Adwords for the keyword
- How many similar domain names are developed and (and by whom)
- Public and private comparable sales
- Public and private comparable asking prices
- How many companies in that market
- How many companies advertising for that keyword
- How much income the domain name earns
- How much I paid for the domain name
- How my business is doing
- Who wants to buy the domain name
- How many inquiries I’ve received for the domain name
- Past offers for the domain name
- Recency of offers
- Can I use the cash to buy something better
- How quickly will I be paid
- How complicated is the deal
Some of the factors I listed need to be researched considerably, and other factors are immediately known off the top of my head. Obviously some of the factors are more important than others.
I invite you to expound upon the factors I’ve listed as well as share some other factors you consider when valuing one of your domain name assets.