Domaining MBA Monday: How Do You Appraise A Brandable Domain Name?

I was going through some emails this morning and came across a great question from a blog reader. As you might have guessed by the title of this week’s article the question was, “How do you appraise a brandable domain name?” It’s a good question and one that I think many of my readers would be interested in so I thought, why discuss this with a broader group? One of the best things about questions like this is that there is no right answer, all I can do is share my opinion and what’s worked for me based on my own experience.

Based on my experience there is no magic formula you can use to appraise a brandable domain name. Sure, with exact-match and dictionary domains you can look at things like search volume and CPC which can give you some valuable insight into possible domain values, with brandables you’ve got nothing. Or at least you think you might have nothing when in fact you have the same thing that all domain owners have, a completely unique asset with very values that vary depending on who you ask.

Confused yet? Don’t worry, you’re not alone. Many domain owners have a hard time determining what their brandable domains are worth and the people buying these names have the same problem. Luckily this shared problem can actually get you closer to the solution and since domain buyers and sellers both read my blog, I thought I’d look at it from both angles. First let’s look at the sellers.

How Domain Owners Appraise Brandable Domains

Domain owners should not look to “similar” sales to determine the price of their name because there really are no similar sales, every brandable really is unique. Building a brand on Cloudly.com or Cloud.ly are two different things and one buyer may want one much more than the other, or both in many cases. However, you cannot look at what Cloud.com sold for and use this as a comparable sale, it’s too different.

What I tell most domain owners who ask me this question is, “The price of the name has more to do with who the buyer is and what they want to do with it than anything else.” If the buyer is some large Fortune 500 company that wants to use your brandable domain as part of a major multi-million dollar branding campaign, $250,000 may be like chump change to them. However, if the buyer is a small bookstrapped startup $2,500 may be the max.

At the end of the day I always like to sell domains to people that are going to put them to good use. Yes, you need to make money and shouldn’t be selling names at a loss, but you should also be selling names to people that see the same value in the domain that you see. In many cases this might just be one or two people in the world, but it is one of these people that will truly value the asset that you have.

How Domain Buyers Appraise Brandable Domains

As a domain buyer you typically want to buy a domain for the lowest price possible. Sure a domain might be worth $500,000 to your business, but if you could get it for less, the money saved could go towards your bottom line. However, miss the name and go with your second choice and you could pay double that in marketing trying to promote a less-than-ideal domain.

Like most things in life it’s all about balance and compromise. Nobody buys a Hyundai because they think it is a better car than a BMW, they’d take the Bimmer if it was priced the same, they buy the Hyundai because it is cheaper and thus their expectations are lowered. The same is true with domain names, but with brandables you get into uncharted territory.

The truth is as a buyer you want to find a domain owner that sees money on a different scale than you do. You can only hope that the brandable you want is owned by someone who still sees it as valuable, but valuable means something very different to them than to you. While you may have a $500,000 budget for the name, if you can get it for $5,000 and make someone very happy then you both win. Think it doesn’t happen? Think again. I’ve heard many stories of buyers with six-figure budgets that ended-up with their top choice domain for under $10,000, it all depends on what is a meaningful amount of money to the owner.

You might not be happy with the answer but like I said above, there is no magic formula for appraising brandable domains, instead it all comes down to the buyer and the seller. If you are selling a domain, do your homework and really understand who the buyer is. If you are the buyer, get to know the seller, see if you can find what range they typically sell in and make a deal that is meaningful to them.

Last but certainly not least, remember, every deal is different just like every domain is different. You aren’t selling houses. You can’t look at what the median price in a particular neighborhood is because every domain is different. The most valuable thing you can do is really take a deep dive and get to know who you are doing a deal with because at the end of the day it’s all about the people, not the domains.