It can be incredibly difficult to determine the value of a domain. There is a lot of misunderstanding about how domains are valued. But if you understand the fundamentals of domain valuation you’re more likely to know how to get a good price for your domain.
Domain names are an essential part of branding and marketing in today’s business landscape. When you have a great domain it makes business easier. Business tasks such as marketing, positioning, and branding become simpler when the domain name supports the overall mission and focus of the business. When a business has an easy to remember domain name their sales and website traffic can increase dramatically, making a substantial difference to their bottom line.
The law of supply and demand means that the prices of domain names will continue to increase as the number of businesses crowding into the online space increases.
Understanding how to accurately assess the value of a domain is challenging to most people and businesses in Australia, which is why we have put together 6 factors to help you understand the value of a great domain name.
Supply And Demand
In Australia, there are 2.1 million businesses and a new small business is created every 100 seconds, on average, in this country. Every day, around 1500 .com.au domain names are released back into the public auction domain name system. There is a fixed supply of domain names. Particularly domain names that are short, highly-generic, two or three-letter or have concise names that appeal to many companies.
The law of supply and demand means that the prices of domain names will continue to increase as the number of businesses crowding into the online space increases. As more and more new Australian businesses enter the online space each year, each needing to stake their claim, concise, clear, and definitive domains increase in value. This means that domain names with a potential high-value increase through time.
Who Acquires The Domain
The value of your domain will be radically different depending on the type and size of the company that’s attempting to acquire your domain. This is why domains that are short, highly-generic, two or three-letter, are valued higher because more businesses will be interested in acquiring them.
What’s more is that the larger the business, the more ability it has to leverage a key domain name. For example, your local pub would never be able to leverage beer.com.au, but a large mega-brewery would.
Both large and established companies and startups that are looking for venture capital investment will look to buy definitive, short, and descriptive domain names that make them stand out in a crowded marketplace.
Large companies will want to further establish their domains. While startups will want to gain credibility with potential investors. So if your domain appeals to one of these two key types of purchasers it will drive up the value of your domain name. The more buyers there are for a scalable domain, the higher the valuation.
The Size of the Market
Does the domain name appeal to multiple markets?
Does the name appeal to one key market with a lot of big potential buyers?
Or is the name in a narrow niche with fewer potential interested buyers?
The larger the market and the more competition there is within it, the higher the potential price you’ll get for the domain.
For example, when the crypto market price surges in value, key domains in this category can likely get a very high price at the same time. When you understand how many markets your domain appeals to, and the potential size of that market, you’ll better understand the value of your domain.
How The Domain is Used
How a domain is used will directly determine it’s valuation. A simple domain like amazon.com would have a much different valuation if it was promoting saving the Amazon Rainforest than as a huge online retailer.
Furthermore, when a domain touches all aspects of a brand it will demand a higher price. An example of this would be the domain for amazon.com versus one for amazonbooks.com. The first domain could have all links to the company’s products and services. Whereas the second would be a much narrower usage.
There are two key ways a domain is used.
One is for branding. A business may, in fact, purchase several brandable domains that all point to the brand. For example, a big health and beauty brand might want to own the domains beauty.com.au, hair.com.au, and makeup.com.au(.)
The other reason a brand may purchase a domain is for marketing and lead generation. When used this way the domain points to a specific marketing campaign for the brand. This might include something like holidaymakeover.com.au or 2020beauty.com.au for a marketing campaign that is focused on harnessing the new year and holiday markets involved with the above business.
There are 3 factors involved in the name of the domain that contributes to its value. Whether a domain is a keyword, the number of words in the domain, and the length of the domain.
Domains that describe a market’s main keywords will be of very high value. Whereas domains that describe peripheral or nonexistent keywords will potentially have a lower value.
The number of words in a domain and the domain’s length also contribute to its value. When you add more words to a domain name it makes it harder for consumers to use and find the domain. House.com.au would have a high value. Whereas thehouse.com.au would have a lower value as it would be easily confused with house.com.au and lose a lot of internet and email traffic to it. Same with myhouse.com.au or ahouse.com.au(.)
This is also why one or two-word domains which are category-defining or “category-killers” fetch very high prices because they are easy to remember and are the default that people think about, as seen above. The closer a domain is to what a brand does, the higher its valuation.
Cost Per Click and Search Volume
When researching a domain in google you can discover the search volume and cost per click. These metrics can help you determine the value of a domain as it helps you understand the interest level in the keywords involved and the demand for those keywords.
With these factors in mind, you can begin to understand the value of a domain better. However, it’s always best to get professional advice when valuing a domain through a domain brokerage firm, whether you’re buying or selling a domain name.