/ Is my domain "worth its weight in gold"?

Apr 16

/ nic.at News - 16.04.2020 07:13
Is my domain "worth its weight in gold"?

The price at which a domain is traded on the market depends on several factors. There are numerous tools that can help with a valuation. However, the results should be treated with caution.

A domain is like a piece of land, in some cases it is worth a lot of money. Even if internet addresses are virtual, they have a real value. But determining this value is not easy. Compared to valuations of real estate or used cars, there are no measurable criteria for the valuation of domains. As an experiment with the available domain uhronline.at shows, the results vary enormously. For the domain evaluator adresso.de, a quick evaluation for uhronline.at indicates a value of between 2400 to 2800 Euros. However, the next rating tool suggests something very different - at domainbewertung24.net the value is only 11 euros. At adressio.de it is about 6000 Euro, and registrar godaddy.com estimates the domain value to be under 100 US dollars. So the example domain has a range of valuations between 11 Euro and 6,000 Euro. How do these differences come about? And what factors influence the value of a domain? Here are the most important questions and answers.

Why are the results of the valuation tools different?
The different results are related to the different methods, explains Negar Hajikhani, a broker from the Sedo trading platform. "Domain analysis and domain evaluation are often subjective processes that can lead to different results depending on the method used and the criteria evaluated." This is understandable because, compared to used cars, each domain is unique. "This is exactly what makes automated valuation difficult," says the broker. domainbewertung24.net also emphasizes that the indicated domain value is only a guideline, and can vary depending on the degree of popularity and the number of visitors. To determine the value of a domain is and remains difficult. "A domain that is worth a fortune to one person means nothing to another. Domain valuation offers should therefore be treated with caution," writes Daniel Dingeldey on the blog domain-recht.de.

How do you rate a domain?
At Sedo, international experts analyse and evaluate the domain and a chargeable value assessment is prepared. "In our valuation method, we take into account eleven factors that are decisive for a value assessment," says broker Negar Hajikhani. For example, Sedo not only considers classic factors such as the length of the domain name, domain extension and traffic, but also aspects such as the legal situation, internet affinity, and sales and market opportunities. "In addition, we have over 400,000 domain sales in our database, which we can use as a reference to compare similar domains already sold and to obtain information about the market value of the domain". As a broker with over ten years’ experience, Hajikhani can estimate an approximate price range at first glance. With free valuation tools such as godaddy.com, the world's largest domain registrar, an algorithm is involved in the valuation process. "The algorithm combines machine learning with sales data," say the operators.

What determines the value of a domain?
The basic rule is: the domain is worth as much as the buyer is willing to pay. However, there are various factors that can be used to measure the value of a domain name. One model that is often used is the so-called RICC formula: (Risk, Image, Commerce, Conciseness).

  • Risk: The higher the risk of a legal dispute, the lower the value.
  • Image: This is all about the top-level domain. "As always, .com is the preferred TLD for domain investors. Domains with this suffix achieve higher prices," says domain expert Daniel Dingeldey. International projects prefer .com, Austrian projects .at.
  • Commerce: How does the domain fit into the project?  The more the domain is commercially usable, the higher its value.
  • Conciseness: Short terms or one-word domains are usually more memorable for people and can be retrieved more quickly. However, these days such short domains are often taken - this drives up the price.

Are there other factors?
Various rating portals and domain experts also look at other aspects to estimate the value:

  • The type of name: Generic domains usually have a higher value than company names, for example.
  • Trends: Current terms related to new political or economic topics quickly gain value.
  • The age: The longer the domain has existed, the more frequently it is visited and the more valuable it becomes for buyers.
  • Traffic: The importance of backlinks is emphasised by domainbewertung24.net: "The number of backlinks is decisive for the degree of awareness of the domain, and the number of visitors to the website. Therefore it is important that the domain has as many high-quality backlinks as possible.

Why is traffic so important for the value?
Traffic is the number of visitors to a website and the amount of data they generate. "The higher the traffic, the higher the number of visitors, which in turn affects the value of the domain," says Sedo broker Negar Hajikhani. The comparison with a plot of land helps: if you open a business in a well-frequented pedestrian zone, you automatically have streams of visitors. This has an effect on the level of shop rents. But if you open a shop in a side street, you have to do a lot of advertising to attract customers. The shop rent will be lower there. "The same is true for domains: those with a lot of traffic are more valuable than those with little traffic," says the broker. In addition to the amount of traffic, the quality of the traffic is an important factor that significantly affects the value of the domain. "If a travel company wants to buy the domain wellness.de, and this domain is well known and already has traffic from the desired target group, this has an effect on the price. One pays for existing customers, so to speak.

  Tip: Parking instead of selling

A domain can increase in value over time. Many dealers earn money from domain parking. The investors are waiting to be able to sell the parked domains later at a higher price. Meanwhile, the site works for them. The principle is simple: advertisements thematically matching the domain name are displayed on the unused website. If a visitor to the parked page clicks on an advertising link, the advertising company pays for it. (What is important for these pages are matching keywords. Providers such as the domain platform Sedo specialise in this service.)