Valuations

Valuation of Domain Names.

I’m going to be brutal here, sorry folks, but I’m not going to sugar coat things to make you feel good. I’m going to give you an honest professional opinion. Should you take my advice is up to you.

I will first state that some domains are ridiculously over priced as people do not know what they are doing and they are just picking random numbers out of hat in the hope that some one will pay for their ridiculous prices.

People need to be aware that domains serve a purpose to help drive traffic to a business and the best way of valuation is through working out the cost of the keywords when paying for PPC Advertising.

I have spoken to many marketing compainies that are only now learning the value of keyword domains whilst others believe that the websites they manage will drive enough traffic therefore the point of purchasing an additional domain would prove worthless.

The internet has overated the value of some domains and people are under the impression they can get rich quick and leave their day jobs to work on beaches or near luxury swimming pools for only a few hours each day.

Some domains are not worth the money that people have spent on them. Unless your domain names are exact match keywords that are prounaceable, the chances of anyone ever buying anything else is a distant unrealistic dream and nothing more.

Your keword domain names have to flow and not be cryptic. Put yourself in the place of the person searching for something on the internet and type in those search terms not accronyms, anagrams or hacks. Think like your average Joe Blogs searching for something. Don’t use hyphens or initals plus a keyword, ONLY use exact match keywords.

I have a service that I offer, ‘Contact Me Before You Buy’, ask me if your domain is worth buying or not and I will tell you straight.

I recently read that someone invented this formula on valuing domain names. This is nothing new!! Ask ‘Google Partners’ who manage ‘Google Ads’ how they work out budgets for campaigns. Phone Google (You must have a Gmail account before you do and set up a Google Ads Campaign).

Yet the article was published on ‘Forbes’ website and they actually made it public is beyond me. The guy the wrote the article was only 50% correct in what he said. His statement said he had invented this formula which finds out how many searches per month your domain generates and then multiplies that by the cost of the keyword, he then goes on to say that you also have to multiply how many years it will take for your domain to be ranked by the search engines.

This is ridiculous in itself as any reputable SEO Marketer who knows what they are doing should be able to get a website ranked under 12 months let alone 10 years as it was mentioned. There would be hardly any point buying the domain in the first palce if it took 10 years to be ranked and I would fire the SEO Marketer for selling me a ‘DUD’ Domain if that was the case.

The naivity of people who actually believe this formula is something new are very much mistaken and to be gullable to believe his formula is accurate.

The correct way of valuing of Domain Names are as follows:

1) See how many searches per month your keyword(s) generate.

2) Multiply that figure my the cost of the keyword.

3) Multiply the figure by 12 months as it may take up to 12 months to get your Domain Ranked for the first page of the main Search Engines. Every year after that is what your buyer will get ROI and save in PPC advertising if they were to buy your Domain Name.

4) Divide that Figure by a click through ratio of 2% as not everyone that searches for your keywords will necessarily click on your website and this is what Search Engines Charge you for when you have PPC advertising.

5) You can also determine that some domains may have been previously developed and have been ranked for many years generating organic traffic in which you would have to analyse the analytics and multiply your PPC adverting figure by the amount of traffic your domain name fetchs.

6) Finally if you have a website that either will be branded into a multi-million business and you know for definate that it is a new product or describes a niche that is unique such as for example www.500ctbluediamond.com (This is not a real domain name and is only used for example purposes).

Now imagine you have a jeweller who owns a 500ct Blue Diamond (which I doubt even one exists, by say for argument sake it did). The jeweller would obviously want to either advertise his diamond or try to sell it, although in the real world something like this would be auctioned in ‘Sothebys’ or ‘Christies’ and would have PR and Media Advertising attention.

But say the jeweller wanted his own website dedicated to this diamond and the searches per month were 1,000 multiplied by the example I made in points 1-4 and the cost was £20 per click this would make a total of £20,000 per month times 12 months of paid advertising would leave a total of £240,000 per annum divided by 2% click through ratio would leave a total of £4,800 but the value of the diamond was £100M and the jeweller ends up selling it for £500M. You could then in theory charge a real estate commission fee of up to 6% of the valuation of that diamond not what it could sell for as there are always uncertanties in every market including auctions.

So your hyperthetical asking price would be 6% of £100 Million equates to £6M in the most extreme cases of having a very unique domain name that a buyer would need in order to market their product. Otherwise stick to points (1-5) when valuing your domain names and although the free bot tools are not 100% accurate they can give you some information which may also be useful when valuing your domain names.

At the end of the day s down to the Buyers Budget and if its out of his/her price range they will not buy from you, so you have to give them incentives such as leasing to still try and get a sale.

*For the people who want to know the most expensive blue diamond ever sold in the world was also the largest blue diamond, known as “The Oppenheimer Blue”, owned originally by ‘Philip Oppenheimmer’ and was sold for $57.5 million at Christie’s Geneva making it the most expensive diamond ever to be sold at auction. The extremely rare sparkling gem sold to a private collector.

But to have a domain that will be the next blue chip brand or product you will have to be there waiting in anticipation of the next innovation, which may take years to develop. But as long as you had secured your domain then you could then be onto a winner and thats taking a gamble as it may never happen.

I personally try to avoid the ‘Free Bot Valuation Online Tools’ as they only give an estimation and are not accurate, furthermore they compare to previous domains sold. Not everyone has the same budget and some domain names that are sold are protected by Non Disclosure Agreements so you cannot compare pricing properly.

I recommend offering interested parties options to pay over a fixed term in monthly installments making it easier for companies to invest in your domain names. Companies are more willing to spread the cost than find 100K in one lump sum.

Before I go, a website not only needs keywords in the Domain Name it need keywords in its content, headers and metatags. Its not as easy as you think to simply buy a keyword domain name and hey presto,……… you have work on it and your SEO to get your domain ranked. Its not magic it takes years of practice and you need to know what your doing.

Furthermore Business’s are reluctant to buy from ordinary folk. I suggest branding yourself as a business and approach them professionally by introducing yourself and explaining why they should buy your domain name, this is the tricky bit and that will be another post I will make some time soon.

If anything I hope I have saved someone money renewing a domain name or considering buying one that has no vaue at all.

Any questions just drop us a line to info@startbrand.co.uk

About the author

UKWD/UKDB

UKWebDesigners/UKDomainBrokers Offers Digital Marketing, Website Creation, SEO, and Domain Brokering.

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