Value
of your domain name
How much is it worth ?
There are three broad categories of reasons to
buy a domain-name: business and communication
address, investment, and vanity. For some
domain-names all three reasons can apply.
1. Business & Communication: buy vs. lease
An online business has two sources of value: its
Domain Name and its content (developed Web site).
It is safe to assume that businesses exist to
make money. Thus, a business should compare the
following two sources of value creation: (1)
profit from buying an already registered
"good" domain-name, say, for $25,000 in
addition to the domain registration fees; and (2)
creating their own domain-name for the
registration fees, and, say, spending $25,000 in
advertising. If profit from the former is
expected to be greater, the company should choose
that option. Thus, to value a name, think about
how much additional profits a company can
generate as a result of using the name. Other
things being equal, this should be the maximum
price a company would be willing to pay to
acquire the name.
Therefore, when you are selling a domain-name to
be used as a business address, think in terms of
how much value it can potentially create for a
buyer.
An alternative to buying a domain-name is
leasing. One advantage of a lease, similar to
that on a car, is that you do not need to come up
with a large sum of up front cash. The terms,
amount, and length of the lease is negotiable.
Moreover, your lease can also stipulate your
right, but not your obligation, to buy the
domain-name at some point in the future.
Some domain-names are being used primarily as
personalized e-mail addresses. Thus, the value of
such a domain name would depend on the value of
its lease and the number of people interested in
having such domain name in their email address.
2. Investment
As an investment vehicle, it becomes harder to
estimate how much someone else would be willing
to pay for an Internet domain-name. But that's
one of the reasons why markets exist: to provide
information about what a domain name might be
worth to different people.
3. Vanity
Estimating the value of a vanity domain name is
like estimating the value of "art." It
is in the eyes of the beholder. Once again, the
existence of markets become very important in
determining "fair" values.
Unlike a business address, for a name under this
category its value depends on how much you are
willing to give it up for, as it is impossible to
determine how much someone else would be willing
to pay for it. Auctions are probably the best
mechanism to sell such assets.
Current Status of the Market
There are many domain appraisal and auction
companies that provide a mechanism to bring
buyers and sellers together and facilitates the
transfer of ownership. However, you should keep
in mind that the market is still in its infancy.
Thus, it is not surprising to see it currently
composed mostly of sellers who have and are still
acquiring domain names as an investment
instrument. However, there is great value
potential in this market for all parties
involved.
Bill Gates, CEO & Chairman of Microsoft, has
confirmed that domain names can be valuable.
According to him, "it's not uncommon for
really good names to fetch $5,000 or more. A
media company paid $7,000 for search.com and
$15,000 for tv.com. Every once in a while, a name
sells for much more; business.com reportedly sold
for $150,000."
What factors influence the selling price?
You should keep in mind that how much you can get
for it at any given point in time depends on its
worth, your negotiation skills, and how deep the
buyer's pockets are.
Accepting an offer depends on how much you need
the offered money immediately, and whether you
are willing to wait for someone to whom the name
might be more valuable.
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