Dear Sahar:
Thanks for keeping it real and being so open to the public.
My husband and I own wanted.com and have paid for several apprasials from some of the top companies and even listed it on eBay to get an idea of what it is worth in todays market. My question is why is there so much difference in these apprasials between different companies? Are they using all the same data and then just adding there own ideas of the market value or what?Thanks again,
Kat
Hi Kat,
I don’t like appraisal services, I think they are all grey-ish at best, and at worst, complete scam operations. There’s nothing real in giving a market value on a domain without knowing the UNIQUE CIRCUMSTANCES SELLER IS FACING IN LIFE.
In regard to real estate, when it comes to valuation, these are not similar at all. Real estate is limited by governments, strict laws, physical space. Domains are only limited by one’s imagination. You can build a small honey shop as well as building the next Google, MS, or something ten times of these companies combined. The sky isn’t the limit, it’s the UNIVERSE!
In my opinion Appraisal companies do nothing but GUESS a price. It has nothing to do with reality. The value of your domain is very much depandant on MANY other factors besides the domain itself, therefore, there really ISN’T a way to value a domain based on the word/extension by itself.
Some of the things that count in terms of valuation that appraisal companies pay no attention to:
1. Most important, CIRCUMSTANCES. IF you MUST SELL then the value drops fast. Must as in you must have X$ tomorrow morning for some urgent need such as illness, rent, travel expenses, etc.
2. BUYER. The value of a domain isn’t the same to different buyers. One can afford more then the other, one has different visions/plans then another.
3. SELLER. Are you bullish about the business? Are you bearish? Do you need to sell? Do you want to develop? Do you HAVE to sell? If you are looking to replace the income you currently make, what price would you need in order to get the same ROI on a different investment, and which differnent investment?
4. Where else can you get the same ROI? If wanted.com makes 1,000$/month, what price you need to get in order to get 1,000$/month from other type of investment, such as CD, stocks, gold? This is really an important question if your motivation is to move to a differnet investment with same or better ROI.
See, all these points are UNIQUE to the situation at hand, not to the property itself, and they are what MAKE the real value of your domain name. Without knowing and understanding the unique circumstances at hand the chances of guessing the value correctly are slim to none. That is why the value between appraisal companies vary so much.
Great Advice. I don’t believe in appraisals for domains. Low appraisals are good for the company appraising them and at this stage in the game no-one really knows what a name would go for. Real Estate in the traditional sense barely has a handle on accurate appraisals. The Domain Name industry (virtual real estate) is so very new in the big scheme of things. Appraisals, seem to just be a gimik at this point without real data to back them up.
Home appraisals actually can be somewhat accurate based on comparable sales data. Using sales data needs to be used when valuing any commodity ; the problem is with domains that each domain is a unique commodity.
Sahar the bullets you gave are spot on though. No matter how you try to appraise a domain the key piece of information missing is the plan and strategy to monetize that domain. In real estate someone may buy a home at a slight premium due to desire to have that property as a revenue producing commodity; the difference to domains though is that there is a ceiling or rent cap to revenues based on location and square feet. With domains, location is worldwide and the square feet is limitless.
Yeah, I don’t believe in domain appraisals also. There are a lot of domain appraisal scams out there. Do a search on “domain appraisal scam” on DomainNameWire.com and you can see some examples.
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Too many to count..
Your letter sender inadvertently answered her own question: using their own ideas. Nothing beats the human touch.
Hey Sahar - Good Answer.
It’s funny how being married to someone can devalue your opinion on things.
I had already told Kat the value range for WANTED.COM when she decided we needed to get some “professional” opinions. I explained (leaning toward the “complete scam operations” view) the problem with domain appraisals today.
I would, however, have to say that of the services out there, Sedo is one that I do have enough confidence in to consider. Not as the gospel, of course, but as a thought-out honest opinion. They’ve been around for quite a while and have been involved in many legitimate sales. They put a lot more thought into it than just counting the letters when they pick their comparable sales. In fact, Sedo is the only company I am aware of that actually lists in the appraisal what comparables they used. Many of the others use formula software that counts vowels or whatever.
Sometimes the company that’s reporting the the highest dollar sales will actually come up with the lowest appraisal. This is a sign that they are using some flakey software for your appraisal, but are reporting sales that are nothing more than marketing tactics. That is, players will sell domains to each other to provide a baseline for customers they are targeting for future sales.
One part of your answer that I take some exception with is the importance of monetization. I believe monetization is a personal consideration for the buyer and should have no influence on a domain name’s value. Once monetization is considered, what you are really selling is a business. A condo in Vail is worth the same amount whether it’s rented or empty, and so is a domain name.
Another fallacy of most domain name appraisals is an undue focus on traffic. There is no question that traffic can enhance a domain’s value, but it is often - in error - used as the primary consideration. There are also two distinct areas of traffic: (1) natural type-in traffic, and; (2) all other traffic. Natural type-in traffic is the most valuable, as it is re-occurring and best of all, free! Other traffic can fluctuate and even disappear depending on its source.
You also forgot to mention another important factor in a domain name’s value: trademark status. If all or part of the name is already trademarked, the value can actually be a negative number. One could easily spend tens of thousands of dollars unsuccessfully defending a $7 domain. This is why generic names are king - nobody will (usually) challenge them as an infringement. (Although The Motly Fool proved just what fools they are by first trying to use WIPO to take fool.com from Domain Works, Inc. for free)
Finally, there is the all-but-ignored factor of retention. With the exception of added specificity (think cars.com), I believe this is the most important basis for a domain’s value. Domains are, after all, a retention tool. Their very creation was for no other purpose than providing a way to easily remember how to get to a specific website. (IP addresses are to hard to remember.) By understanding a domain’s roots as a retention tool, you have no choice but to consider advertising and marketing when valuating a domain name.
Overlooking this fact is the core reason for the chronic undervaluation of prime domain names today, and one of the primary causes of the dot com bust. In convincing new media investors that the actual domain name was of little importance, old media was intentionally undermining the medium. Thus, we saw billions of dollars spent in television and radio advertising that left consumers saying, “What the heck was that website name I heard about today?” It was clearly a classic case of manipulation that diverted needed resources from domain owners and programmers.
So why did I put WANTED.COM on eBay? Well, I actually placed it on eBay to show Kat how retarded one of her domain appraisals was. Knowing that eBay is about the worst place in the world to sell a prime domain name, when I set the reserve I figured I could save a few bucks by listing with $160K reserve - about five times the appraisal amount she got from Moniker. I figured it would hit $100K or so from some newbie, the auction would end, and I would have made my point.
Of course, as Murphy’s Law would have it, the damn thing hit the reserve in just a few days and now I’ll be lucky to get a third of the million that it’s worth. But, on the bright side, I’ve got one hell of a I-told-you-so about domain appraisals.
Can’t live with ‘em - can’t live without ‘em.
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Hi there,
Many good points, I didn’t touch all possible points to consider of course, but a short sample.
Few comments on this letter.
1. Generic domains are challangeable. This is a game of money and power, not a game of justice. It’s a tough world out there. Motley Fool’s loss of fool.com can be the worst luck for the reigstrant. Sometime UDRP is a blessing in disguise as going to court is costy to say the least.
2. Not Sedo or anyone else can give you a true valuation, but simply a guess. You can sell wanted.com for 100K as well as 10 millions. there are too many factors and strategies that come into play that have nothing to do with the domain. Few years ago we sold a domain for 80K that most likely majority won’t pay 250$ for today. How did we get 80K for it? We named our price and WALKED AWAY from anything less then that. There was a unique need for the domain, buyer had the budget, and we didn’t need the money. Walla.
Now if you looked at the domain itself and asked for appraisal before you would get low range, somewhere between 100$-1K at most. So would selling for 2k means you’ve done well? It would really mean you were selling yourself 78K short because you listened to some appraisal co.
3. Revenue is very important to YOU. You are not selling a business as you do not have to disclose revenue generated but you do have to consider revenue LOSS from your asset. Think about it this way, if wanted.com makes 10k/month from typein traffic, generic, with good upside to the industry it represents, would you sell for 40K because all factors besides revenue make sense? Of course not. Do you have to disclose revenue to buyer? of course not. But you would take it into consideration when pricing, I don’t doubt that.
4. Retention is important but I would not say most important. Most important in my opinion would be circumstances. If you must have some money tomorrow morning it really doesn’t matter if there’s retention or not, if there are buyers around or not.
5. TM Status. Very important of course. Risk ratio. Must be considered as well.
Moderator: Requested edit for previous post
Original: Many of the others formula software that counts vowels or whatever.
Corrected: Many of the others use formula software that counts vowels or whatever.
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Fixed in original post.
I’m going to have to stick with my original post (including the correction that I didn’t expect to be added to the thread). The only thing I might add to it is supply and demand.
Until your reply to my post, I didn’t think you were being literal about CIRCUMSTANCES being the basis for domain’s value. I can’t grasp the concept of skgflfdkgrtyu.com being worth anything just because I’m loaded - or wanted.com becoming worthless if I were starving to death. While there are always going to be motivated buyers and sellers, how motivated a buyer or seller is can’t be used for valuation of a domain (or any other asset for that matter).
Similarly, I have a hard time following you on how collecting money from the monetization a domain is somehow part of the value of the underlying domain name. How do you explain that income from a website’s services, advertising and peripheral offerings are classified as business income, while sale of the domain name itself is a matter of capital gain?
When I purchased ebooksecrets.com the owner claimed to be making “pretty good money” on it selling an ebook by the same name (along the typical amount of Google ad spam). But all I bought was the domain name. I assume he still has his ebook business, but since you can’t copyright a title, I could also create an ebook by that title and sell it on the domain’s website if I like. But that would be a business, wouldn’t it?
Oh well, you say tomato - I say tomahto. The important thing now is having a fantastic Memorial Day weekend! May great fortunes - both personal and financial - find their way to you and all your readers!
—-ANSWER—-
Rick Schwartz is a very good friend of mine. After I replied to you I wrote to Rick to join in and add some of his own flavor to this discussion, here’s his reply:
“Your post said it all. I can’t add much. Just confirm what you say.”
In any event, like you said, we just have different opinions here. Have a great weekend!
Sahar
Hey Sahar, had to leave you a quick note when I read this. It looks like folks that value their domain name based on income are about to experience some serious depreciation:
GOOGLE ANNOUNCES PURGE OF AD-HEAVY WEB SITES
http://www.nypost.com/seven/05232007/business/ad__subtract_business_holly_m__sanders.htm
Well gotta go dig the tent out from under the Christmas stuff I chunked into the garage instead of taking it to the attic.
Have a good one!
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Thanks for the note. This is unrelaed to domain traffic..
http://frankschilling.typepad.com/my_weblog/2007/05/oogle_shutting_.html
A good article on the subject by a lead-gen expert and an old friend, David Carter
“Domain name valuations or appraisals, as they are often known, are in our view a complete waste of time and money and serve only to make easy money by the sites offering them.
A domain name valuation or appraisal can never be accurate, because any domain name (like many things in life), are only ever worth what somebody is prepared to pay for them.
Sometimes, you will see sites offering to value a domain name, or even an entire domain name portfolio automatically. Just enter your names into their system and hey presto, they’ll come up with a magic figure that values your names!
If only life were that simple.”
Full article http://www.hollywood-internet.com/domain-name-valuations.htm
FINALLY someone spoke the plain truth - and I really thought it would be Rick Schwartz - he just stopped short of actually saying it!:
“…any domain name (like many things in life), is only ever worth what somebody is prepared to pay for them.”
Words like “value” and “worth” are subjective. And in any transaction, ANY transaction, they have different meanings to the buyer and the seller. Even transactional real estate agents can’t possibly apprehend the meanings of those words to buyers and sellers in RE transactions (although they try).
The point at which the buyer is willing to buy and the seller is willing to sell is what the domain name is “worth.” Period.
Just like my house, except the Broward County property appraiser’s office doesn’t seem to think so. Thank The Divine that the government doesn’t go around appraising domain names and levying taxes based on it’s own assessed value… although I wouldn’t be surprised if entrepreneurial domain appraisers don’t start lobbying their elected officials for this very thing.
Comment on the Accuracy of Traditional Real Estate appraisals by PHIL, Real Estate Appraisals are not accurate. They do not factor in the different commission paid to agents, or the loan fees invovled, also sometimes there is cash back or personal property factored in, Realtors do not always input correct SOLD data on purpose or on accident, and WE have no ONE checking our values to make sure we PUT accurate data into the MLS system. My point was that the Real Estate industry has been around awhile and does not have accuracy in appraisals. No One knows the value of a domain name, for example if you have a domain name that hits very high in the search engines for a search term that is on average $3 a click and it is searched 4000 times a monthy, you would pay aprox. $12,000 a month to be on top of the search engines, so in 5 years you would pay aprox. $720,000 if the search term never raised in value. This means to me I would NEVER sell the name for less than that number. It would be crazy. Just my Opinion.
Here’s an example of an easy way to get less than you should have for a domain. Let’s list all the things done wrong imho
1. Using ebay
a. smaller buyer audience for this type of product
b. commissions are reasonable but many brokers
could have reached a higher # at a 5% commission
c. ebay now hides buyer IDs which creates a reasonable doubt
to potential bidders on high $ transactions
2. Ending the auction on a Saturday night, during a huge travel holiday weekend.
3. Not emailing back past purchase inquirers. I know I’ve emailed about this domain being for sale in the past and I wasn’t told it was going up for auction.
4. Lastly, admitting and “Knowing that eBay is about the worst place in the world to sell a prime domain name” yet you still go ahead and do it