The biggest mistake any domain name investor can make is buying a domain name without having an understanding of its value. And sadly, we have all done it at some point, and some are still doing it daily.
No one can truly get domain valuation down to the penny as it’s always about the situation, the potential buyer, the sellers needs, and opinion. However, you can learn how to develop your valuation instincts so that you can properly place their value into a potential range. That way, you never overspend, and you always find a way to squeeze out a profit – or at the very least, break even.
So how do you build uncanny valuation instincts? A lot of hard work. If you are not up for the challenge, I suggest you stop reading this post now. But if you dare to proceed, it will change the way you view domain name valuation, and hopefully, make you a profitable investor.
Here is what you will need:
1. Index cards & a pen – or use a detailed spreadsheet. I suggest both.
3. Focus & Determination
Step 1: The Top 100 Sales of Every Year
DNJournal has an archive (don’t worry, I’ll link you soon) of all the top 100 reported sales for every year, dating back to 2004. Your valuation journey will start here.
Bust out a stack of index cards, and get your pen ready. Starting in 2004, you will want to write the domain name on the front of the card, and on the back write the following:
- Sale Price
- Type of Domain: One Word, Two Words, Three Words, Brandable, LLL, LLLL, so on.
- Type of Keyword: Generic Word, Product, Geographic Location, Made-up Word, Acronym, so on.
- Category: Travel, Business, Generic, Shopping, Health, Finance, so on.
- Search Volume / CPC / Age (Use Google Keyword Planner or EstiBot for Search/CPC, and ICANN for Age)
- Length (how many letters/numbers/characters)
- Brand Ability (Could just about any company use this domain? Rate from 1-10, 10 being anyone can use it, 1 being very limited usage)
You can even take it a step further and write down the venue they were sold at, and check to see wether it is developed (end-user sale) or sitting parked somewhere (investor purchase).
Take your time, the more in-depth you get, the better your valuation instincts will become. You will want to do this for all 100 domain names, in every year, one year at a time until you have memorized each card. Use a partner, spouse, or a friend to help you if you need.
Here are the top 100 sales of every year since 2004:
Once finished, you will have a supreme understanding of the valuation of premium domain names. But what about the day to day sales you ask? Well, here is step 2.
Step 2: Weekly Sales Columns
You will likely never quite finish this particular pursuit. But if you do, this is the step that will truly make you a valuation guru.
Dating back to 2003, DNJournal provides a weekly sales column of just about every reported sale that has happened that week. You shouldn’t just look at the sale prices either, read the posts, they are phenomenal and provide some great insight!
This time, you are going to start with the most recent dates so you can better understand the current state of the market. Bust out a fresh stack of index cards, and repeat the steps above for the weekly columns.
Starting in 2014, read all the posts from that year. There are roughly 50 posts per year, so you can read one per day for 60 days, then move on to the next year.
- Weekly Columns from 2015
- Weekly Columns from 2014
- Weekly Columns from 2013
- Weekly Columns from 2012
- Weekly Columns from 2011
- Weekly Columns from 2010
- Weekly Columns from 2009
- Weekly Columns from 2008
- Weekly Columns from 2007
- Weekly Columns from 2006
- Weekly Columns from 2005
- Weekly Columns from 2004
- Weekly Columns from 2003
Now that you have gone through all of the sales, you can truly begin to understand the value of a domain name. This is not intended for you to use to justify your domains value, unless that justification is backed up by data. For instance, just because Drink.com sold for $500,000 doesn’t mean Drinkz.io is worth anything. It doesn’t compare on any level.
Say you were interested in acquiring Beverage.com, then you could begin to run data analysis on both domains to place a proper value on Beverage.com! For instance, difference between search volumes? CPC’s? Age? Length? Brand ability? Usage Potential? Endusers? When did it sell? Has the market gone up since? If you look at the stats, you can see that Beverage.com has roughly 1/3 of the potential of Drink.com, and since you have a baseline valuation of $500k from Drink.com, you can place a hypothetical value range of $150k-$250k on Beverage.com. Sure, it may sell for more, it may sell for less, but if you are buying it as an investment, you could base your purchase offer around those stats and numbers so that you leave room for a profit. Right?
Learning how to place proper valuations on domain names is not an easy task. It’s not a guessing game, nor is it something to be taken lightly. You want to become a profitable investor? Do the work. You want to flip domains for a living? Do the work. You want to be a guru?! DO THE WORK.