I'd like to take a brief moment before I begin to make an admission. I'm an addict - I'm addicted to buying and selling domain names. I wake up in the morning and think about domain names I could buy; I eat lunch while scanning expiring domains; and after a full day you'll find me on my couch buying domain names. It's a serious addiction... but one I happily live with.
If you're addicted to domains like I am then you probably own too many to count - some will be great and others you'll ask yourself what you were thinking. There will be some you will build out and some you'll wait for the mandatory sixty day holding period before you can go ahead and sell/flip it. But how do you know what a domain name is really worth?
The Real Secret of Domain Valuation
The secret is that the value of a domain name is worth what someone will pay for it - hopefully you weren't looking for something more specific. I could tell you a hundred stories of a domain name I've sold where one of the domain appraisal tools (some of which are listed below) said it was worth ten or twenty dollars when it actually sold for one hundred times that amount.
The secret of selling domain names for profit is selling to someone who values it. For example, I purchased a domain name several months ago in auction for about six dollars, but Valuate.com (a free domain name appraisal service - again, more tools below) said the value was $390. While I may not sell it for the valuation determined by Valuate, I will sell it for at least ten times what I paid for it by selling it to someone that has a need for it. Domainers (those who specialize in the buying and selling of domain names) understand that the secret of profiting from domain names is to sell to those who will want the domain.
If you've got a domain name you want to sell then you should without doubt use the many services online (e.g. SEDO, Bido, GoDaddy Auctions) where professional domainers congregate. While there are fees associated with many of these services they do provide great exposure for domains and increase your chances of making a sale. Another option (and the one I most often recommend) is to go direct - sell to other website owners who own similar domain names in the same market. Sending email, posting messages on Twitter and creating topic specific Facebook pages are all effective ways to generate exposure.
All that being said however, you still want to know what your domain name is worth, right? Let's get to it.
Domain Name Valuation Tools
There are many tools/services online which attempt to assign a value to domain names. Services like Estibot.com, Nameboy and SwiftAppraisal.com take into account a number of variables to determine what an individual domain name is worth. What you'll find using these services is that the estimates will vary wildly. These services can give you a good idea however what is actually valued by a domain prospect.
DIY Domain Name Valuation
I hope you're sitting down for this next little tidbit. Do you know what AreaRugs.com just sold for? $400,000 - that's not a misprint - four-hundred thousand dollars. If I were to personally assign value to that domain it would be about $20-30,000. But someone wanted that domain name so badly that they were willing to pay a premium to attain it. Stories like this abound on the Web and while you, like I, may not have been able to forecast what that one domain would sell for, here are a few tips (from me to you) to help you get a handle on what your own domain names are worth.
1) Is it short, simple, memorable and be spelled easily? It is crucial that you create or buy domain names that are easy to remember.
2) How many words does the domain consist of? The more words or abbreviations the less value it carries.
3) Who has a need for this domain - a small market or a massive one? Determining the potential for marketability weights heavily on domain name valuation. Also determine whether the domain name applies to the whole market or just one segment as this will also influence the valuation.
4) Determine the clarity of the domain name. Does it describe its content appropriately?
5) Finally, the domain's attributes (link popularity, extension, length, presence of hyphens or numerals) all play a role in its value.
