In calculating Value for a Domain, it's important to note that we are talking about Value - and not Price.
While the Seller will, or should, attempt to determine a fair and reasonable Value, ultimately... it is the Buyer who will determine the Value that is their best "Investment Price."
Although Value influences Price… ultimately, it is the Market that determines Market Price.
The Market Price of an asset occurs at the intersection of what the Asset Buyer is willing to offer - and what the Asset Seller is willing to accept.
This is a fundamental law of micro economics… and human nature
…but for now, let's talk about Value.
We look at Domain Value from two standpoints…
1. Monetary Value - as noted above, has two components…
- Monetary (Tangible) Value
- Cash Flow, and
- Intangible Value
a. Cash Flow
- Cash Flow, and
- IF... all things being equal, a (search) generic Domain Name (gDN) results in more traffic to a website than a lesser non-Generic Domain… then a monetary benefit accrues equivalent to the increase in revenue (above the 'status quo') over a period of time. The buyer decides what that period of time is and already knows what their conversion rate is. That is typically referred to as the Cash Flow benefit.
2. Intangible Value
- Due to scarcity, premium generic Domain Names (gDN) are a lot like land. In fact, they are frequently referred to as "Digital Real Estate." They are like Real Estate because:
- There is only one - of a kind - in all the world. Ownership is Exclusive - when you own one, you are the "One" of "One and Only"
- As for all things scarce ("one of a kind"), Generic Domains, like land, appreciate in value over time…
- Like land, certain characteristics cause a Domain to have greater value than another Domain. For instance a .COM is more valuable than .net, .org, etc. - much like waterfront land tends to be more valuable than interior land. The Premium Domain Criteria most commonly associated with valuable Domains are:
- Easily Said
- Makes Sense
- Search Term Rich
- Ownership (Title) is maintained by a global registry commonly referred to as the WHOIS database. The WHOIS database is managed by ICANN (Internet Corporation for Assigned Names and Numbers). It is the Public Record - the "Registry" of Domains.
- Title can be transferred, like land
- Although you can't live on a Domain, you can live off of a Domain... and should, by "building (a website) 'on' the Domain" to generate a revenue stream
- Intangible Value - is a less measureable but no less important determinant of overall Domain value. Intangible Value is measured with a number of criteria. Some of the more significant criteria include:
- Recognition - which is twofold in the case of Domains. First; the name has "recognition" as a key search term or phrase being precisely descriptive of the business it represents, and Second; the "Recognition" afforded to a business that holds ownership of "The Domain" that clearly "owns" a product or service space.
- Prestige - Like a Park Avenue address, owning one or more premium .COM (the Gold Standard of...) gDNs delivers an element of prestige to the owner.
- Authority - Owning the best and scarcest gDNs implies longevity and thus an element of expertise and "being an Authority" on the product or service.
- Trust - Recognition, Prestige and Authority all have a tendency to engender Trust. Trust that assures the buyer that they are in safe, knowledgeable hands for any transaction.
- Brand - a good brand creates consistent and reflexive public recognition of a company (or it's Logo) as a leader in the field it represents. Because gDNs are made up of commonly used terms and phrases, branding is automatic. These Domains come "Pre" Branded because the word combinations have been embedded for decades in the English language.
- Sustainable Competitive Advantage - is an ongoing "edge" your business has which gives it a permanent advantage over the competition. In the case of unique descriptive Domain names, that competitive advantage is permanent unless your competition is willing to extend great effort or spend heavily in order to approach the "Brand" recognition delivered by your highly descriptive (gold standard) .COM Domain.
As a prospective investor in a "search generic" .COM Domain from the Registered Premium Domains aftermarket, you have to determine if your investment is going to deliver sufficient value to justify your outlay. Hopefully, the above will help you in arriving at your decision of whether to invest, and if so... by how much.
A few other things to keep in mind:
- Acquiring a premium generic Domain is an Investment. It is NOT an expense. Except for the small annual registration fee (generally less than $15), you will buy this property only once - but may be able to amortize if off against your taxable income. Discuss this with your tax preparer.
- A premium Generic Domain is an Appreciating Asset, a part of the core value of your business... a component of your IP (Intellectual Property) portfolio. This will increase valuation if/when you sell your business - because it represents an Exclusive advantage that can be transferred with the sale.
- With a simple, properly developed and indexed website... it will consistently deliver benefits year after year.
- You are the exclusive owner! When this Domain name is entered into the browser address line, the visitor is brought directly to your website - and nowhere else.
- Your competitors do not have any rights to the use of this Domain.
- You own it. They do not !
- As a unique, one-of-a-kind, Internet "locator" - you and you alone receive all traffic directed to your website at this Domain address.
Aron Meystedt of Heritage Auctions (HA.com) describes what makes a domain name a premium asset. For a brief YouTube video where Aron cites historical sales and other considerations when seeking a top tier domain name for branding or investment - go to YouTube.com and enter the search phrase "Heritage Auctions, Domains". The video will have a splash screen with a hand positioned above the keyboard. The title may be something like "Benefits of premium domain names..."
To discuss how you can acquire and utilize this Domain: BalboaListings.com
Contact: Bill Rhinesmith
Beach front and oceanfront properties, Balboa Peninsula - from The Wedge to the Balboa pier.