As a Domain Investor I am constantly looking at lists of domain sales to better understand what price range different domains fall within. It is important to understand which characteristics of a domain lead to its final sale price. In many cases keywords and TLD are the main determinant of sale price – however many domain investors forget to look at traffic and revenue which can lead to false expectations about the “true value” of a domain.
I find researching previous domain sales is a very similar process to a real estate investor looking at previous home sales. Obviously with a house – the most important factors are – “Location, location, location” with a domain the location really is a two-part piece – it is the keywords in the domain, and the TLD. If you have a great keyword on a high-value TLD like .com – then you have a nice piece of property.
Real estate investors also look at what the current structure is on the property though since this will contribute to the value of the property. Suppose there is a piece of property in a mediocre area, but it gets hundreds of people buying thousands of dollars worth of merchandise each weekend – well then it could easily be worth more than a nice house in a good area.
The very same factors are true with domain names but it can be all too easy to focus entirely on keywords and TLD. So how can you better estimate traffic and revenue for a given domain? I use the Google Adwords Keyword Tool, Google PageRank, Alexa Rank, and Compete.com score.
First, I’ll start by saying that this is by no means a flawless system. Instead this is just some very useful tools that can help you to get a good estimate of the type of traffic and revenue a domain might receive. I use these tools to better understand if a domain name sold based purely on the value of the keywords and TLD, or if an existing site with traffic and revenue played a role in the sale price.
So how do I use the data from each of these tools to help determine traffic and revenue? I’ll tell you!
I use the Google Adwords Keyword Tool to determine how frequently the given keyword (used in the domain name itself) is searched on Google each month. If this is a relatively high number then I can assume that with a good website the domain could get a lot of traffic. Next, to understand revenue better I see how much the keywords in the domain cost to advertise with on Google. The more a keywords costs, the higher payout it will provide.
The last step here on the Google side of things is a simple Google search for the keywords used in the domain. If the keywords have a high monthly search volume, and the particular domain is on the first page of Google, I can assume the site is getting a high-level of traffic.
I use Alexa as an indicator of how much traffic the domain receives, particularly for tech-savvy web surfers. An Alexa score below 100,000 usually shows me that a site has a reasonable amount of traffic from tech-savvy surfer. Notice I’m using the term “Tech-Savvy” here – this is because Alexa gets its ranking from people using the Alexa toolbar which tend to be more tech-savvy Internet users.
Compete.com is another tool, like Alexa, to better understand the level of traffic a website receives. I find that while it is nowhere near perfect, you can get a great estimate of how much traffic a site has received, how it has changed over time, as well as who is sending traffic to the site all by using Compete. Coupling this with the Alexa score will definitely give you an idea of the level of traffic a site receives.
By putting all of this data together I can better analyze domain sales lists and help my customers and myself get a better picture of what a particular domain name is really worth. If you aren’t looking at previous sales and taking the time to understand why your domain sold for the price it did, you might not truly understand the price of your own portfolio.
Understanding the price of your domains, or the potential re-sale price of a domain you wish to buy is essential to becoming a better Domain Investor!
Thanks for reading and please – share your thoughts! Do you analyze domain sales using different tools? Have ideas to share? Comment on this post and let your voice be heard!
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