When it comes to collecting domains, do you know what the difference between a hobbyist and an investor is?
Hobbyists make jokes about how many domains they have for failed side projects; investors know the actual domain valuation of their collection and add it to their net worth.
To be clear, there is absolutely no shame in either approach! There is, however, a very clear delineation between people who have dreams of creating an online business and those actually turning a profit buying and selling domains.
Domain names are like real estate on the internet — they represent a location, albeit virtual, and their value fluctuates in a complicated market driven by lots of factors. And just like real estate, your domain portfolio is a part of your net worth that you should be managing, tracking, and growing.
But before you can build a thriving domain-flipping business, you need to answer this question:
How much is my domain worth?
In this post, we’ll discuss the factors that influence domain valuation, how to get an estimate domain value, and tips for growing and managing your domain portfolio so you can scale and track your net worth easily, efficiently, and accurately.
Let’s get started.
What is Domain Valuation?
Domain valuation is how much a specific URL is worth. The price of a domain can range from as little as .99¢ GoDaddy domain, to over seven figures when bought from a reseller. The value of a domain is most relevant during negotiations between a buyer and a seller in the secondary market.
So what causes such a huge range in domain valuation?
Factors That Influence Domain Name Valuation
Domain valuation isn’t a perfect science — it’s not quite as simple as calculating the exchange rate of a currency because it’s a more complicated market. There are several tools that can help you get a quick valuation (see the next section), but it’s super important to understand why domains achieve their valuations if you want to have success in this business.
Here are the primary factors that determine a domain’s value.
This is by far the most important factor in a domain’s value, but also probably the hardest to gauge. One of the simplest questions to ask yourself to figure out the commercial potential of a domain is this:
How much revenue will the business this domain could support earn?
There is a massive difference in the earning potential between a local yarn shop and an international SaaS corporation. The business owner who wants to buy his own domain like sacramentoyarnshop.com (available for $13.99, by the way!) is only going to want to pay about $20 for the domain — she simply can’t afford any more than that, and the business won’t generate enough revenue on the strength of that domain to support a high price.
On the other side of the coin, websitescaler.com (also available for $13.99) sounds like a SaaS tool or tech startup that helps optimize websites. Even a small SaaS business can generate $40,000/month, so the owner might be more willing to spend $1,000 on a top-level domain name with an exact brand match.
Learn more about building and managing a domain portfolio, including a complete domain investing strategy, in a related post.
While a little tricky and nuanced, understanding a domain’s commercial potential is the absolute first thing you should do when considering investing in it.
Another significant valuation factor is the keyword(s) that the domain contains. The popularity of a keyword is something that you can track easily. For instance, the Oxford Dictionary chose “vax” as its Word of the Year in 2021, and with a quick search on Google Trends we can see that its search volume metrics increased dramatically over the last two years:
A domain’s keyword should be considered after you’ve established any type of commercial potential.
A TLD refers to how the domain ends, like dot com. There are actually hundreds of TLDs available.
From .xyz to .beer, there are certainly some peculiar TLDs available these days.
In general, a TLD with a more traditional ending will attain a higher valuation because it’s how people naturally think of URLs. By “traditional” we mean:
This isn’t to say there isn’t value in more obscure TLDs like a .biz, but generally just not as much.
Number of Characters
The shorter the domain name, the more valuable it is. Domains don’t have much value when somebody is online and just clicking a link, but memorable domains have tremendous value because people can type them in later. And nobody can remember a URL that’s more than three words.
Note: Stringing a few letters into a nonsensical “word” is not the solution. See the Branding section below.
Brands have value. For instance, Coca Cola’s brand is worth $87.6 billion. While it’s much harder to assign a monetary value to a new brand, we all know the benefits of a memorable brand. If your domain is able to paint a picture in somebody’s head, causes them to have an emotional response, or reminds them of something, you’re on your way to developing a brand.
So how brandable is your domain name?
Business owners will pay for a domain name they feel has the potential to grow into a brand. Generally, this means choosing a domain with a real word (or more), but businesses like tumblr.com and fiverr.com were able to build a brand off a misspelling, so it is possible.
Part of Speech
Some of the brand value of a domain is based on the actual word itself. Think about it — how many brands do you know that are verbs or adjectives? I bet you can think of a lot more brands that are nouns. Domains follow this same value hierarchy in terms of the part of speech you use:
- Everything else (verb, adjective, adverb, etc.)
Existing Traffic, Age, and SEO
So far, we’ve only discussed the valuation of domains as a standalone entity. But when a domain is paired with a website — and possibly even an entire business — it can increase its value dramatically compared to a new domain. This is mostly because of search engine optimization (SEO), or more accurately, how much organic traffic the website has generated over time via its search rankings. This is a result of what keywords the site uses, but also how many backlinks it has acquired over time.
Websites that demonstrate consistent growth of organic traffic over time (good SEO) will command a lot more value than sites with declining or no organic traffic.
Domains do not generate traffic without a website, however, so don’t forget that this one is actually a package deal in terms of the domain’s value.
Availability of Alternative TLDs
Lastly, you’ll want to check if your domain has alternatives available that use standard TLD. For instance, if you’re doing a domain price check on yourdomain.com, but yourdomain.net is still available, that will lower the value a bit. On the flip side, if there are no alternative TLDs that are of the standard variety (.org, .net, etc.) that will increase the value of your domain.
How to Find and Track Domain Valuation
Now that you understand all the factors that go into domain valuation, here are some tips on how you can find out just how much money is in your collection.
Use a Domain Appraiser
There are several domain appraisal tools available online that can provide a domain price estimate. Here are a few of our favorites:
- GoDaddy - The popular domain registrar will provide an estimated value of your domain for free with no account. They’ll also give you options for renewing, protecting, or selling the domain through a GoDaddy auction.
- EstiBot - Estibot.com will give you a free estimate of your domain valuation without an account, but the paid version provides a more exact price. Notably, the tool also lists the factors that go into their valuation (which will seem similarly to what we’ve written above).
- Sedo.com - This service offers paid domain appraisals (starting at $99) which undergo a more thorough (and manual) process than other services on this list.
Any of these domain appraisal services is a great place to start when looking to understand how much your domain is worth. You will notice a lot of variance, especially in the free valuators, so use caution when getting a free domain appraisal.
This is because they use an algorithm (with the exception of Sedo.com) to estimate the value of your domains, and the marketplace is actually more fluid than that.
There are other ways to get the market value of a domain name than with one of these domain valuation tools, however.
Just like real estate, one of the most reliable ways to find out your asset’s value in a real, live market is to review the sale of comparable domains. The website DN Journal updates its list of premium domain sales regularly, so you can check there for URLs similar to what you have. Not an exact science, but the sales data is real, as opposed to the theoretical output of an algorithm. This will give you an idea of what makes up a valuable domain.
Put it Up For Sale
If you really want to know how much somebody would pay for your domain, put it up for sale! You might get actual offers that you may or may not want to accept. While this is the most labor-intensive way to find domain valuation, it may be the most accurate — no algorithms, no comps, just potential buyers that will give you a pretty clear indication of the final sale price.
If you plan to use this method with no actual intention to make a sale, make sure you take precautions to ensure you don’t sell your domain by mistake. Some marketplaces allow you to set a ‘reserve’ on your listing, which will prevent an actual transaction from taking place.
Use Kubera to Evaluate Your Domain Portfolio
If you’re looking for a more comprehensive view of how your domain portfolio fits into your total net worth, you might want to check out Kubera.
With Kubera, you can track your domain valuations — both individually and in aggregate — the same way you would track your other investments. After all, domains are like any other asset — their value shifts according to the market and may grow or decline over time. Kubera has built-in domain valuation through an integration with Estibot so you can track your domains as assets right alongside any other asset or investment.
In this way, you can stack up your domain valuations right next to your other assets and see what’s actually working to increase your net worth. Kubera is the only personal balance sheet software that is built to support a modern and diversified portfolio that includes nearly every type of digital asset.
In addition to getting an accurate value of your domains, Kubera also has a built-in calculator to track your internal rate of return (IRR). This applies to assets in your portfolio beyond domains, of course. Pair that with the recap view to see how your assets have performed over time so you can quickly analyze how your investment decisions have affected your net worth.
A huge part of managing your assets and your wealth is having a simple and intuitive system for tracking everything — that's why you need Kubera.
Sign up for Kubera today to track your domain portfolio and other investments in one place!