This metric is predicated on supply and demand. If the domain contains and was registered in the 90s (Fish.com, Dogs.com), it’s likely to be a highly desired domain. If it were registered today on the other hand, it’s not likely to be worth much at all.
How Universal is it?
You need to think about the domain in different languages, cultures, and spellings. For example, think about appraising Shoes.com. “Shoe” is an English word, and only relevant in the English language. On the flip side, “yoga” is universal in many languages. Universal domains allow owners to roll out services and products worldwide and have a larger market, so they are worth more than less universal domains.
How Memorable is it?
If you’re having a conversation with someone and tell them your domain name and they forget it after your conversation, it’s probably too long. One good example of this is domains that contain acronyms. I see this a lot with local car dealers. (insert bad domains that are not memorable here).
Is it hard to spell? If it’s hard to spell, your target audience will have a harder time accessing your site. The goal is to make it as easy as possible for people to find you, remember you, and tell their friends about you.
This is one of my favorite parts of the valuation process. When appraising, you can look at trends for many different situations. One easy way to find trends is to visit trends.google.com. It’s a search tool that shows you the number of google searches for any term over time. From this data, you can discern the interest or demand for a domain name you might be looking to purchase. For example, for the domain Suntanlotion.com, you will likely see that it has a seasonal demand. The searches will spike in mid-February, a couple of weeks in April, and it will quickly climb in May and June, stay high during the summer, and start to fall in Autumn.
One of my favorite examples is the Harlem Shake dance. This was a very popular dance done by all kinds of celebrities, athletes, and people all over the world. Then, all the sudden, its popularity fell off a cliff. If you search for the Harlem Shake dance in Google trends, you’d see a flatline, then you’d see the demand or searches go through the roof, then fall off a cliff.
From an appraisal point of view, one strategy is to compare different keywords. For example, if you compare the terms “app” and “software,” you’ll see some interesting trends. For five or ten years, “software” has been dying a long, slow death, whereas “app” grew quickly and is now more popular than software. If you’re purchasing a domain that is a product or service, you might want to look at trends like this.
On the other hand, if you’re looking to purchase a brand name, the trends of the word might not be relevant for appraisal. For example, trends for the word “shout” would not be helpful when looking at trends for the cleaning brand Shout. If I owned a PR firm, I might want to by shout.com. But the people looking for shout are probably looking for the detergent brand. Those search results could artificially prop up the value of the domain name shout. This is something that I’ve learned from years in the industry.
The value of a domain can be limited if it contains a locality or region in its name. For example, if your domain name is BostonCatering.com or BostonTutoring.com, people will think you’re only serving markets within the Boston area. There are exceptions to the rule, like Boston Market or Kentucky Fried Chicken., but for the most part, if a domain is regional, it will have less value than a universal domain like Market.com, FriedChicken.com, or Tutoring.com.
This metric is very similar to appraising a home. You look for domains that are far superior and far inferior to the value of the domain. For example, if you were appraising BostonTutoring.com, you’d compare it to Tutoring.com or other universal domains in the education market. A common mistake is to type “tutor” or “tutoring” into websites that show past domain sales. To compare to appraising homes, that would be like only looking at ranch houses in a neighborhood to appraise a ranch house.
If I had to appraise BostonTutoring.com, I would look for other regional domain names that serve a similar-sized market. It doesn’t necessarily have to be education, but it needs to be some sort of service industry. For example, BostonDentis.com or BostonDentists.com (professional providing a service in a specific regional area). I’d then look at the date of when the domain sold and adjust from there.
I would then look at superior sales. I’d see how Tutor.com or Tutors.com sold and make my valuation of BostonTutoring.com from there.