How Much Should a Domain Name Sell For?Three Steps to Precise Pricing!

When you own a domain name and want to sell it, how do you assess its value and set a reasonable price? Here is the experience shared by renowned overseas investor Chris Zuiker, who breaks down the domain valuation process into three steps: intrinsic value, brand value, and perceived value.

1. Intrinsic Value

When someone presents me with a domain name, the first thing I consider is the inherent value of the keywords contained within that domain. This includes questions like: How many people search for this keyword every month? What is the volume of broad searches and exact matches?

Broad searches refer to searches that include the keyword with descriptive words. For example, if the keyword is "Quilt," a broad search might be "Quilt Classes" or "High-Quality Quilt."

Exact match searches involve searching only the direct keyword, such as users typing "Quilt.com."

Domains with higher volumes of exact match searches have higher intrinsic value because they indicate that the domain represents a commonly used term. Typically, businesses pay a cost-per-click (CPC) for advertising their brand (keyword). Take "Quilt.com" as an example; it receives 49,500 exact match searches per month, and businesses are willing to pay $1.41 per click. This suggests that "Quilt.com" has intrinsic value.

2. Brand Value

Domain names can gain brand value when they align with existing brand names of certain companies, injecting life into the domain and increasing its worth.

Brand value encompasses user trust, brand loyalty, preference, and the millions of dollars that companies invest in marketing and promoting their brand and keywords. If you happen to own a domain name that corresponds to an existing brand, then that domain holds high brand value.

The following questions can help you determine brand assets and domain value: How many brands in the market align with the domain name? Have these brands secured financing? What are their growth prospects?

For instance, the single-word domain "Carrot.com" is associated with numerous companies in the market. However, in 2019, a U.S. real estate investment website called Carrot acquired the domain "Carrot.com" for $1 million, upgrading from their original domain "OnCarrot.com." With this acquisition, "Carrot.com" became the dominant leader among all brands with the same name globally. The company gained exclusive access to all direct traffic searching for "Carrot.com," significantly improving user accessibility and brand promotion.

In fact, another company named "Carrot.co" had raised $30 million in financing at that time but missed the opportunity to acquire this exceptional brand domain.

3. Perceived Value

Perceived value is the value a company attributes to the future growth of its brand. Assigning a specific figure to the perceived value of a domain name before selling it can be challenging. Some individuals may price their domains exorbitantly because they are targeting a specific buyer.

A great example is the smart doorbell manufacturer Ring.com. Three years after its founding, the company invested $1 million to acquire and utilize the brand domain "Ring.com." This domain perfectly matched their brand name, was a highly recognized generic term, and had natural advantages in the doorbell and jewelry industries. Later, in early 2018, Amazon acquired Ring.com for approximately $1 billion. The CEO estimated that the domain had added around $30 million to $50 million in brand assets to the company, indicating a perceived value of up to $50 million.

Perceived value is a market-driving factor. For domain owners, the challenge lies in identifying and agreeing with the perfect buyer who recognizes the perceived value of the domain, and such opportunities may only arise once.

I once spoke with a domain owner who declined a $3 million offer several years ago but has not received offers exceeding six figures since then.

At times, market trends can also influence perceived value. For example, when the price of Bitcoin was $100, domain names related to Bitcoin garnered little interest. However, when Bitcoin's price surged to nearly $40,000, domain names related to Bitcoin, cryptocurrency, and blockchain became highly valuable.

4. Conclusion

Selling premium domain names requires a comprehensive understanding of their value and accurate pricing. We can discern and define domain value from three different perspectives, each contributing to the domain's price and value range.

The first perspective is determining the domain's intrinsic value. In our daily lives, how is the keyword used? Generally, shorter domain names attract more direct searches, thus increasing their intrinsic value. Additionally, it is essential to ascertain how much businesses are willing to spend on advertising for this keyword (CPC).

The second perspective revolves around the brand value associated with the keyword. Are brands spending millions of dollars on marketing and promotion for this keyword? This momentum and equity inject life into the domain, elevating its value.

The third perspective considers market trends. It is challenging to predict whether a "perfect buyer" willing to pay a high price for a premium domain will emerge. Therefore, pricing a domain reasonably based on prevailing market trends facilitates a smooth sale of the domain.