Domain valuation isnt spelled clearly

By | July 27, 2007

These days, go to any site that sells domains and you’ll notice something in common with probably 80% of all the domains on sale – The price usually doesn’t reflect the true value of the domain.

Valuation of domains is a rather lucrative business in itself. In fact, many registrars like Godaddy for example, offer personalized appraisals for a fee. There is nothing more speculative than the domain industry, where the rules are very clearly, NOT fixed at all. It all depends on the type of end user who is willing to spend whatever amount for the domain they want.

The guidelines (only just guidelines) for a domain’s value are usually down to a few factors, such as –

  • Traffic (both current and future potential)
  • Resale value (extension, name, length, etc)
  • Internet factors (what will shape the Web currently, and in the future)

When people talk about traffic potential, it just means how many visitors stop by at a domain on a daily basis, currently, and also taking into account future projections. If you examine a domain and find that it gets next to no visitors, than that will certainly adversely impact its valuation. As a rule of thumb, if parking the domain doesn’t at least cover back most, if not all of the yearly registration fee, the domain is likely to be a dud.

Resale value is also a very important factor that is strongly connected with the traffic factor. The extension plays a very important role with .COM being the king; and then you have all the other pretenders ( a growing number diluting each other out), basically competing for a very crowded market share.

The name and length of the domain are also counted in. You might see seemingly nonsense names such as 3 character names with absolutely no meaning being snapped up like hotcakes, and generic names commanding sterling prices (trademarking them is going to be impossible). All of which adds to the “gray area” which is a large characteristic of the domaining industry.

Internet factors such as politics, trends, and possibly in future -Internet blocs, are the other unseen factors that will impact domains. Web 2.0 is one of those trends that have changed the Web. When talking of blocs, what you would have in mind are distubing proposals by telco groups to zone the Internet into separate zones – something that every Web user ought to oppose, as it does away with the free state of the Web. Will we see elements of these creeping up? I hope not, but you never know.

Factoring these things as guidelines should help in evaluating a domain’s worth. But what happens at the end of the day, is this – domain sellers just append a big figure to the price, and hope someone will be actually interested. One year down the road, the domain ends back up in the available zone. Food for thought if you are considering registering a domain for investment purposes.

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