"How do I appraise a domain's value?"

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Submitted question:
"Rudy,  Hello. I'm new to domaining and really enjoy being involved in domain buying.
One question I can't seem to find an exact answer to is: How do I correctly appraise a domain's value?
Is there an exact formula or method or is everyone simply giving their random feedback?
Thanks, Benji"

Benji,

Thanks for your question. 

I see this question posted in a lot of different domain forums with numerous replies and opinions on exactly how to correctly appraise a domain's worth. To put it simply Benji, there is no exact formula to appraise a domain, but there are a group of things to consider before putting a value to a domain.  A majority of people will base their immediate appraisal on TLD extension, word length and keyword popularity but won't really consider backlinks, brandability or emerging trends part of the equation. There are a few factors that a person must be aware of before they can feel they have thoroughly assessed the domain and attach a valid appraisal amount. The first thing a person can do to is recognize that there are many subtle components that need to be assembled and viewed as a whole to get a comprehensive perspective on the domain.  It seems every domainer has their own method used to appraise a domain so I've listed a few factors that I feel are necessary in being considered before a domain can be appraised.

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TLD Extension

 TLD or Top-Level Domain is the ending extension attached to a domain such as .com, .net or .org.  The .com extension is considered the most sought after even though there are other TLD's that are gaining huge popularity and acceptance. CC's or Country Codes are also seeing their fair share of registrations.

Name Length

Now that all the 2, 3 and 4 letter .com's have been registered, the letter count on a domain is fast becoming a huge factor in a domain's worth.  The desire for a short domain is at an all time high and values are steadily climbing due to the limited supply of shorter length domains. Seems shorter names are easier to remember and with that a value increase.

Characters, Numbers and Hyphens

Hyphens  integrated between letters are often viewed as separators between keywords. Although there is much dispute whether or not the hyphens negatively impact a domain's search engine optimization, there is considerable preference that a domain not include anything extra in it's name. Number digits are beginning to see their popularity rise and can be included with relevant keywords or letters to make a great domain.

Keyword Popularity

Marketable search terms and keyword popularity are extremely relevant in appraising a domain name. The frequency of a given search term helps to indicate the brandability or popularity of the keyword. Generic word domains, such as flowers.com or poker.com are the strongest in their keyword popularity genre.

Traffic and Revenue

Traffic or visitors to a particular domain is one of the most important factors to consider when appraising a domain. More traffic usually means more revenue due to pay-per-click income and possible advertising opportunities, therefore increasing the value of the domain. 

Brandability and Trends

Any domain that is easily memorable, short and non-descript is considered brandable and therefore increases it's value. It would be easier for a person to remember TVrepair.com instead of the longer fix-my-broken-television.com . Not only is the first choice shorter and has better  word flow but also there is less of a chance of someone incorrectly typing in the URL. Also keep tuned in to current trends that may seem to increase an otherwise meaningless domain into a treasure. An example is when Apple Computers began to incorporate the letter i into their products descriptions, such as iPhone, iPod and iLife. 

Automated Domain Appraisals

This is a tricky one. Although I feel automated domain appraisal systems such as Estibot are helpful in assisting to appraise a domain, I don't feel they should be the "end all" decision used to obtain a domain's value. If used more as a reference tool, they can be one of the greatest resources that help determine an appraisal value. Any script/applications can have some bugs, especially ones with complex algorithms as Estibot.  Make automated domain appraisals one of the tools to find an appraisal, not the only tool. 

Future Potential Interest and Overall Appeal

As time goes by, new words, trends and fads explode onto the scene, and with each new word or trend created, a domain is born. Stay up with current events and become a regular visitor to news aggregate sites, such as Digg and domain industry specific DNHour to stay on the cusp of emerging potential interests.

Backlinks 

I like to keep my eye on the number and quality of backlinks to evaluate an domain appraisal. While tons of irrelevant backlinks might negatively effect a domain's search engine optimization, it can still be a positive thing for a domain names' value. With more and more domains being "parked", the links tend to lean towards relevant backlinks and therefore less likely to be bogged down in the SEO nightmare of page rank. And, it's hard to argue that backlinks don't increase traffic. 

Relevance, Region Specific and other Fuzzy Logic

As said earlier, there is no exact formula to appraise a domain name, and therefore the not-so-exact elements must come into play. An example would be that veteran domainers tend to skew their entire method of appraising when it comes to country specific or region specific domain names. Different factors are incorporated to determine non-English domain word values and domainers across the globe are becoming better in detecting future potential interests in foreign markets.  Another example is the continuously growing popularity of "long-string domaining", or stringing multiple words or keywords to achieve a brandable and memorable domain name. TacoBell has ThinkOutsideTheBun.com and Amazon has the domain BuyABook.com.  By definition, these would not be very valuable but that's when the fuzzy logic creeps in. A domain's value can be perceived in multiple ways.

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So keep in mind Benji that even though there isn't one exact correct formula being used by the domain industry to appraise domains, a reasonable appraisal can be determined by anyone if they keep all the factors in mind and how they each interact with each other. 

I'd suggest you monitor the pulse of current domain sales by frequently visiting 

DNJournal's Domain Sales Chart. This will show you weekly and even yearly to-date domain sales for the industry. And don't forget to visit the front page of Sedo to view ongoing live auctions. Each of these great resources will help you in creating your own customized method of domain appraising by seeing what domains are selling and for what amount.  

Good luck in your domain endeavors and thanks again for your question.

Cheers,

Rudy

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