Do You Really Understand Domain Value?

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!

Want to learn more about Domain Investing – don’t forget to read my book!

{ 12 comments… add one }

  • Jamie Parks August 16, 2009, 9:16 pm

    Straightforward, no nonsense advice. Explore the three tools that Morgan has outlined here and watch your level of success gradually elevate.

    Better understanding your domain investments will enable you to minimize risk and make more profitable returns.

    Excellent piece Mr. Linton!

    Reply
  • joel August 17, 2009, 2:09 am

    Thanks for this article.
    Have a try at http://domainappraisal.pro which provide generic domain appraisal based on keyword popularity, tld and many more factore like sector concurrency.
    Regards

    Reply
  • marko August 17, 2009, 2:31 am

    dear linton
    very good info as normal.
    .why do you not develop a software package using these parameters/metrics ,as myself with a few hundred .coms, all parked- i feel im to lazy and time consuming to develop or even use the tools available, analyse the metrics and come to any useful conclusion.
    i really find your .tv tutorials very informative and important ,but once again i have other interests os domains., family etc and developing hundreds of sites is not practical
    ps..i feel the cctld dot. in has much to expand and lots of potential in the next few years.
    regards
    marko

    Reply
  • Chris Desouza August 17, 2009, 8:32 am

    Seriously, this is limited inference. None of my names get any traffic or PPC and I make $100k in annual sales.

    Analysis is one thing and what an end user wants another. Factor in what the market wants. Moreover, no one knows what the traffic is made up of. most times it is other domainers scanning your wares.

    Reply
  • Mr. Joe DOMAINS Saladino August 17, 2009, 8:34 am

    WE should ALL UNDERSTAND that selling domains cheap UNDERCUTS and UNDERMINDS the entire business where in like a cheap prostitute!!! Everyone should network together and shoot beyond the stars concering our asking price and stand firm to raise the stakes!

    Joe “DOMAINS” Saladino

    Reply
  • Tony Smith August 18, 2009, 2:30 am

    Thanks for sharing these important informations about domain names. I would suggest another website that is worth trying, called http://www.aafter.com which is a private search engine. As you type the domain name in the search box of this website and press enter, this search engine provides information about the domain name, including Whois record and a whole lot of other informations about the domain name.

    Tony Smith

    Reply
  • Mark Ford August 20, 2009, 8:55 pm

    Please don’t misunderstand me when I say this as you clearly make a valid post… However, I am beginning to get frustrated with this virus going around whereby everyone likens domain names to real estate. They’re not.

    Domain names, indeed DNS in general, runs a very real risk of evolving or even supplanted wholesale by superior systems. I have an article coming out later this week about this but in the meantime think, if domain names are really like real estate, what is a domain’s neighbourhood? Can we honestly say “shoes.com” and “toys.com” are in the same neighbourhood simply because of visitor stats and sales price? What if one of those were to plummet in value or rocket in value, did they thus move neighbourhood?

    Real estate and neighbourhoods are relatively fixed objects. We can think of certain areas as affluent or slums or renowned for celebrities.

    The nearest I can get to thinking of domain names as real estate is to think of the TLD, much more so that we are on the verge of being flooded with them. That .tv lives in an areas heavily associated with video… but I wouldn’t call it elite. That .com lives in a highly popular, average residential, area.

    So let’s wait for the designer TLDs huh. Anyone up for a google TLD “.g”? Or a French Connection “.fcuk”? Going to pay the price for one of those? – YES, that’s what I call something approaching a neighbourhood. Just wondering why Calvin Klein hasn’t sued the Cook Islands, “.ck” :-p

    Reply
  • g.a October 1, 2009, 2:20 am

    My personal favourite traffic estimation website is
    http://www.estimix.com . It seems to generate very accurate traffic information.

    Reply
    • mlinton October 1, 2009, 6:01 am

      Hmmm, I’m not too sure about this site – it says that Zg69.info is worth $1,200 and CyberFlute.com is worth $5,300. Estibot says that CyberFlute.com is worth around $40 which is far more realistic. I definitely would not use estimix to get estimates of what a domain is worth…

      Reply
  • Roman April 28, 2011, 9:29 am

    Thanks Morgan! Hmmm… value of the domain varies from different websites… same as this website.

    Reply
  • rosewell May 25, 2011, 8:34 pm

    Hi, I own this domain, http://www.jk500.com, I search on google for the domain value check sites and check this site, the result are different so much, some site give a high price to $7000, some give $0, I don’t know which one is the more close to its actual value. can you tell me? Thanks!

    Reply
  • Igor Mironyuk January 5, 2013, 8:59 am

    Estibot more suitable for Ebay domain sales but no more.
    Such my domain like travelcountryclub.com it appraise in $ 0 USD while other appraise service DomainEstimator.com in $12,257

    Reply

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