Domain Name Value – The Appraisal Process

Domain names can range in price from just a couple dollars to millions of dollars. But what makes one domain name value a fortune, while others are practically worthless?

What Makes a Domain Name Valuable?

The value of a domain name depends on many different factors. Assessing these key characteristics is crucial for anyone investing in or purchasing a domain name.

In this comprehensive guide, we will walk through all the metrics and qualitative factors domain name experts use to determine a domain’s potential value.

By the end of this guide, you’ll have an in-depth knowledge of what to look for when valuing domain names. Let’s get started.

SLD Characteristics

SLD stands for ‘second level domain’. This refers to the words that come before the dot in a domain name.

For example, in the domain name namesurfy.com, ‘Namesurfy’ is the SLD.

When it comes to domain valuations, the SLD tends to have the biggest influence on the domain value. The words you choose for the SLD can make or break a domain name. In fact, an ultra premium SLD can command a great valuation even with a less popular TLD.

That’s why brainstorming and researching the perfect SLD should be the starting point when investing in or purchasing any domain name.

Along with spelling, the length and memorability of a domain name impacts valuation.

Shorter domain names with fewer syllables are easier for people to remember. This memorability makes marketing and word of mouth growth easier.

Easy to spell and remember domain names have higher valuations and conversion rates for businesses using them.

Here are four key SLD factors that experts look at to value domain names.

1. Word Count

The number of words in the SLD impacts value. One or two word SLDs tend to be ideal for maximizing value. 

For example, Cars.com with just one word, is very valuable, as is KitchenCabinets.com, with two words in the SLC.

On the other hand BestUsedCarsArizona.com, with a 4 word SLD loses most of its appeal and value.

As much as possible you should avoid long SLDs with multiple words and phrases. The more words, the more complex, and the lower the value.

Single dictionary words, short phrases, and brandable one word SLDs (like Google) work best when it comes to domain valuation.

2. Syllable Count

With fewer syllables, a domain SLD becomes easier to remember and spell. This memorability boosts the domain value.

One or two syllable SLDs do best. For example Home.com has one syllable, and Guitar.com has two syllables.

Three syllables tends to be the maximum, unless it’s an established brand name. Anything over three syllables significantly hurts memorability.

3. Character Count

Shorter SLDs with fewer characters have higher potential value. The ideal character count tends to be between 3 and 8 characters (these refer to the number of letters in the word).

So, for example, Jet.com has 3 characters, while Walmart.com has 8 characters.

Very short 1 or 2 letter SLDs can work great as brands, like AT&T. But long 10+ character SLDs reduce memorability unless they are already an established brand.

The higher the number of characters, usually means the lower the value.

4. Keyword Type

Generic keywords (like ‘shoes’, ‘gifts’) and exact-match keywords (like ‘red shoes’, ‘birthday gifts’) are the most valuable domain name types.

Other keyword types like brandables (made-up words) can work but don’t command top dollar. 

Avoid niche long-tails with very narrow utility, like for example, ‘bestrunningshoesforsprints.com’. This goes against all the SLD factors mentioned in this section.

So as we walk through the other valuation factors, keep your focus first and foremost on picking a quality SLD.

TLD Characteristics

The TLD (top-level domain) refers to the domain extension, or in other words the letters after the dot. So, .com, .net, .org, are all TLDs. We have a whole separate guide on TLDs.

In this post we will focus on how TLDs can influence a domain’s value. While the TLD you choose will definitely effect a domain’s value, it’s not as big of a factor as the SLD words you select. 

You can have a killer keyword SLD and pair it with a less desirable TLD to still achieve a great valuation. However, a poor SLD will severely limit valuation regardless of whether you pair it with a .com or a lesser known TLD.

You can maximize domain value by combining a strong SLD with a globally known and desired TLD like .com or .net.

Let’s explore some TLD factors that influence domain valuations.

.com Is King

The .com top level domain remains the clear leader when it comes to domain name valuations. They are able to command on average 75-90% higher sales prices versus other TLDs.

The .com continues to dominate in value over .net, .org, and new gTLDs because they have global recognition and trust. 

For 30+ years .com has been the default domain extension for most businesses and brands worldwide, and so this TLD is globally synonymous with websites and internet authority.

In other words, when people think domain names, they think .com.

What this means is that billions of internet users have gotten into the habit of typing .com instinctively when looking for a business or brand on the internet. Even when they hear a brand name, their fingers automatically add .com when typing it into the browser address bar.

So for anyone investing in or purchasing domain names, .com remains the first choice for flexibility and long term value appreciation.

With this said, however, we need to acknowledge that almost all dictionary one-word or two-word domain names have been registered as a .com. So, if you’re new to the game, you might not find many options unless you’re creating a new word for your brand.

This scarcity means .com domain commands premium valuations.

By the way, if you’re looking for a place to buy domains, my recommendation is Namecheap. I buy most of my domain from Namecheap because they have a reliable service with domains at very reasonable prices and a big selection of TLDs to choose from.

.net and .org also Have Value

Historically .net and .org held the most value after .com. But with new domain extensions now available, that is changing. 

You can expect .net/.org TLD domain names to sell for around 25 to 50% of the .com value, if the SLD is identical.

New TLDs are Gaining Traction

While .com remains the gold standard, over the past decade hundreds of new generic top level domain extensions (gTLDs) have entered the space.

These new gTLDs like .app, .online, and .tech are slowly gaining traction and value in the domain industry.

Will any new gTLD overtake .com in terms of value? Very unlikely in the foreseeable future.

But many new gTLDs are carving out niches of value when paired with the right keyword SLDs.

For example, domain investor George Hong sold the domain Bold.com for $300,000 in 2019. Yet he was able to sell the domain Bold.app in 2021 for a still impressive $84,000.

The tech-focused .app extension allowed that domain to fetch nearly a third of the .com value, which is great for a new gTLD.

Here are a few key reasons why some new gTLDs can provide solid value:

• The extension relates clearly to the domain name purpose. Fintech.app or Mortgage.loan make total sense.
• They work for brandable one-word SLDs. Brands like Brandpad.io and Flywheel.cloud have leveraged new gTLDs well.
• Startups and younger demographics embrace new gTLDs more. They don’t have a ‘.com or nothing’ mindset.

So, while the new gTLD may not be as universally recognized as .com, pairing a relevant extension with the right keyword SLD can work.

For example, consider if Google launched a new app only product today. Would App.com or Google.app be the better domain?

Google.app aligns perfectly with describing the product in the domain name itself. And it comes from a trusted brand name.

New gTLDs will usually provide lower domain value when they don’t relate or add context to the SLD. Cars.club or Shoes.xyz don’t make intuitive sense, for example.

While new gTLDs open up possibilities, in most cases the .com will continue to be the smart preference for maximum value.

Search Volume

Search volume refers to how often people search for a given keyword, keyword phrase, or domain name per month. 

More searches indicates higher consumer demand and commercial potential.

You can easily get monthly search volume numbers for free from Google Keyword Planner or paid tools like SemRush.

For domain name investing, focus on exact match search volume when valuing potential domains.

A search volume of 1000+ per month is decent for an exact match or phrase domain valuation. 

10,000+ monthly searches is ideal for any domain targeting a single keyword.

The higher the search volume, the more the domain name will tend to hold its value over time even as trends change. Evergreen keyword domains with enduring demand are ideal for investing in.

Cost Per Click & Advertiser Competition

Cost per click (CPC) refers to how much companies are willing to pay when someone clicks their advertisement for a given keyword or domain phrase.

The more advertisers compete to rank highly for a particular keyword, the higher CPC. Keywords and domains with high CPC indicate strong commercial demand.

You can find keyword CPC data in Google Keyword Planner and tools like AHRefs or SEMRush. 

Look for keywords and phrases with a high CPC of $2 or higher, to understand if this keyword in a domain name could be worth alot. 

Along with CPC, look at the advertiser competition for the keyword or phrase. More advertisers bidding indicates higher demand potential for an exact match domain name.

Choosing Optimal Keyword Variations

Not all keyword variations carry equal value as domain names. Two key factors impact potential valuation; Root Variation and Present Tense. Let’s take a look at these in more detail, with examples.

Root Variation of a Keyword

The root variation of a keyword is the simplest, most basic form of the word. For example, ‘auto’ is the root of ‘automobile’ or ‘automotive.’

In most cases, the root variation of a keyword makes the optimal domain name choice for maximum value.

Let’s look at some real-life examples of this. Auto.com was sold for $872,500, while Automotive.com had a sale price of $418,500.

You can see the root variation sold for over double compared to the extended keyword form.

Why does the root word tend to be more valuable? 

There are two distinct reasons for this. 

1. Broader Appeal – A root word like ‘software’ appeals to more potential buyers than a niche variation like ‘accounting software’. You can cast the widest net with a root word domain.
2. Simplicity – Root keywords are short and memorable. This makes marketing easier across channels. ‘Software.com’ is easier to share and remember than ‘CustomAccountingSoftwareSolutions.com.’

Present Tense

Verb keywords in the present tense tend to be the most valuable as domain names. 

For example, Chat.com which sold for $125,000 was more valuable than Chatted.com which was worth $3,295 at auction.

The core present tense verb draws the most consistent ongoing search volume and commercial interest.

While you can find exceptions, stick to root words and present tense for the most valuable keyword variations.

This keeps your domain name choice simple, memorable, and compelling to the widest range of potential buyers.

Easy To Spell and Remember

A domain name becomes significantly harder to market and monetize online if people struggle to spell it correctly or remember it.

For a domain name to be easy to spell, avoid odd spellings, hyphens, double letters, and homonyms (like ‘brain’ and ‘brane’). Use common dictionary words instead.

To confirm if a domain is easy to remember use the radio test. 

A domain fails the radio test if you can’t say the domain name over the phone and have someone recall it perfectly.

Ideally, domain names should be intuitive to spell and remember. This makes marketing and SEO much easier. Short and simple beats clever every time.

If you look at the price that domain names are sold for you will easily see that these factors contribute to larger valuations.

Avoid Limiting the Domain Name Too Much

Sometimes appending additional words or terms to a domain can limit its usefulness and value.

The key is to start with a domain name that casts the widest net possible. Then get more specific only if needed.

For example, if we take again the example of the keyword ‘auto’, we can categorize the derivatives form these keyword as follows: 

Generic: Auto.com

This appeals to every automotive related company imaginable, be it manufacturers, dealerships, repair shops, part suppliers, and more.

Therefore it has more value.

With Location: MiamiAuto.com

Adding the location shrinks the appeal dramatically. Now only companies in Miami may be interested. 

Even though it still is applicable to any niche within the auto industry, it’s use is now limited to a specific locations

With Niche: ElectricAuto.com

Narrowing to the electric vehicle niche cuts the potential buyers even further.

You went from a massive global pool of companies to a small local niche. This seriously limits valuation.

Here are some other examples of keywords that limit their usage on expansion:

• Ecommerce.com vs ChicagoEcommerce.com
• Software.com vs AccountingSoftware.com

As you can see, tacking on additional terms quickly diminishes the flexibility and value.

So, try and start with a single generic word domain names when possible, as these have the broadest appeal to the widest range of potential buyers.

Then get descriptive only if absolutely needed for your business model or due to unavailability. But know that over-describing the domain name upfront limits its valuation.

If your goal is to invest in or acquire domains with high future value potential, keep the name flexible.

Let the buyer get specific later on based on their niche needs. Don’t pre-limit domains too much in advance.

Leverage Rhyme and Alliteration for Memorable Domain Names

The sounds and patterns of words can enhance memorability. Two examples that work well in domains are rhyme and alliteration.

Rhyming Domain Names

Rhyming uses repetition of similar sounds, often the same sound placed at the end of words. For example ‘bee’ and ‘knee’ rhyme because they end with the ‘ee’ sound.

Rhyming domain names leverage this sound repetition, which can make them more memorable and catchy.

For example, a closing mechanism for chip bags could use a rhyming domain like ChipClip.com, or ChipGrip.com.

The rhyme makes those stick in your mind better than non-rhymes like ChipBag.com or ChipSeal.com. The rhyme packs more recall value.

Alliteration in Domain Names

Alliteration is the repetition of the same first letter or sound in closely connected words. For example, ‘big blue boat’ uses alliteration with the ‘B’ sound.

Domain names using alliteration can enhance memorability through this repetition.

For example, an electronics retailer could brand with BestBuy.com or BrightBulbs.com

The alliteration repeats the ‘B’ and ‘Br’ sounds. This makes the domains more memorable and catchier.

Here are some tips to follow for when you want to use rhyme or alliterations: 

• Don’t force it unnaturally. It should flow well.
• Shorter domains work best to highlight the repetition.
• Make sure it aligns with the brand identity you want.

Remember, the goal is to incorporate rhyme and alliteration to make your domain name stick in people’s minds better. 

However, you must balance catchiness with clear communication. Don’t use rhyming or alliteration domains if they will confuse customers or misrepresent your brand.

When used properly, leveraging the sounds and patterns of words through rhyme and alliteration can boost memorability and engagement. Your domain name becomes far ‘stickier’ in people’s minds.

Avoid Hyphens as these Reduce Domain Value

In general, hyphens in domain names drastically reduce their value potential.

Except for a few specific cases, hyphenated domains are not good investments or purchases.

Hyphens Disrupt Flow

Hyphens break up the natural flow and recall of a domain name. This makes them less catchy, memorable, and brandable.

For example, compare CarReview.com (catchy) to Car-Review.com (disjointed). The hyphen disrupts the Domain’s stickiness.

Data Shows Low Demand

Analyzing sales data corroborates the low demand for hyphenated domains. Very few sell for decent prices.

For example, NameBio data shows only 13 to 15 hyphenated .com domains sell for over $5K yearly. Meanwhile, thousands of non-hyphenated domains sell in that price range.

Buyer perception is that hyphens reduce brandability and hurt value, and the data confirms this view.

So, unless you have a clear reason where a hyphen adds substantial value, avoid hyphenated domains.

While exceptions exist, in most cases hyphens severely reduce domain name investability and valuation.

Stick with clean, single word, non-hyphenated domains for maximum value. They have broader appeal and better built-in equity.

Domain Name Hacks

A domain name ‘hack’ combines part of a keyword with a TLD to create a pronounceable word.

For example, the domain Investo.rs hacks ‘Investors.com’. And Sto.re hacks ‘Store.com’.

While clever, hacking mangles domain value for three key reasons.

1. Limited Buyer Appeal

Hacks appeal to almost no serious end user buyers. Big brands want clean .coms, not tricks. 

So, hacks will not attract many potential buyers.

Major brands want authoritative .com names. Startups want clean brandables. A tiny sliver of companies would consider a hacked domain.

That tiny buyer pool kills demand. Low demand = low prices.

2. Lack of Data for Valuation

No sales data exists to properly value hacks. Values are pure guesswork. Most sellers over-estimate what hacks are worth.

With no comparable sales data, sellers tend to make up inflated valuations for hacks. On the other hand, buyers can’t validate fair value, so they won’t pay crazy asks.

3. Fail The Radio Test

Hacks make advertising and sharing verbally confusing. 

Imagine saying ‘Visit Ameri.ca’ on the radio; it’s unintelligible.

Your website identity hinges on people hearing and understanding your domain name. Hacks garble this communication, harming growth.

The only time hacks work is for personal use, when you appreciate the cleverness more than valuation. For investing, give domain hacks a pass.

How Domain Name Age Impacts Value

In the domain industry, older domain names are generally viewed as potentially more valuable assets.

The thinking goes that all the good generic dictionary word domains were registered in the early 1990s and 2000s. So those aged domains seem like prized commodities.

Domain age can add prestige and trust for users. But don’t assume an aged domain automatically equals a valuable domain. Plenty of worthless, forgotten domains have existed for 20+ years without interested buyers.

For premium valuations the other key factors that we are mentioning in this article need to be present. Age alone doesn’t make a domain premium.

Like with wine, domains get better with age. But the other domain factors we covered are the real value drivers.

Backlinks & SEO Value

The backlink profile of a domain name can significantly influence its valuation. Backlinks are incoming links from external websites pointing at your domain name.

High quality backlinks pass SEO authority and social signals. This allows buyers to boost their search engine rankings faster by using an existing domain name with a strong backlink profile.

Use a backlink analysis tool like Ahrefs or Majestic to evaluate a domain’s existing backlink profile.

Quality beats quantity when it comes to valuing backlinks. Relevant links from high authority websites are extremely valuable. 

If you are a domain investor, look for expired domains with quality profiles, as buyers love authoritative domains that give them a huge SEO head start and the possibility of fast search engine rankings.

Head over to our SEO Domains guide for more details on where to find expired domains and how to value them.

Existing Traffic

One of the best indicators of inherent demand and value for a domain name is any existing type-in traffic.

Type-in traffic refers to people manually typing the exact domain name into their internet browser to visit a specific site because they want to go there.

Use website analytics software like Google Analytics or domain parking services like Sedo to check the monthly type-in traffic for domains you’re evaluating.

Consistent direct type-in traffic numbers validate that real people actively seek out that specific domain name. Buyers pay big premiums for pre-validated domain names that already attract targeted visitors.

Trademarks

It’s very risky from a legal perspective to buy or develop domain names that infringe on existing trademarks or brands. Doing so can open you up to lawsuits or cybersquatting claims.

Always search the USPTO and European trademark databases to make sure your domain does not match a registered trademark.

Multiple trademarks around a generic word or phrase usually indicate a safe domain. But single trademarks matching the exact domain warrant caution.

When in doubt, consult a domain name lawyer about any trademark concerns before investing in or developing an infringing domain name.

I have made this mistake myself in the past. If you launch a website on a trademarked domain name, you will probably receive a cease and desist letter from their lawyers. Usually you will have to give the domain name to the person or company who registered the trademark.

In my case, the WordPress CMS I use to create websites did not allow me to even use the domain name to create a website. This was actually better for me, since I didn’t waste time and resources creating a website that would have to be shut down later. 

Estibot Domain Valuation Tool

Estibot is a domain name valuation and appraisal tool used widely within the domain investing industry. The company was founded in 2005 and provides both free and paid services for valuing domain names.

Estibot uses an algorithm that analyzes multiple factors to estimate the monetary value of a domain name, including the key criteria we have gone through in this guide.

By looking at these various attributes, Estibot generates an automated appraisal designed to reflect a domain’s market value.

Their valuation estimates are a useful data point when buying, selling, or investing in domain names.

In addition to valuations, Estibot provides other free domain research tools such as domain name search, domain name ideas, and domain comparisons. It also offers paid memberships that provide more detailed data and analysis capabilities.

Over the past decade, Estibot has earned a solid reputation among domain investors and brokers for offering valuations, research tools, and insights into analyzing domain names. It is a live tool that keeps refining and updating its valuation algorithms to align with actual domain sale prices, and current trends.

Try out Estibot here.

Conclusion

In this guide, we’ve covered the key factors that make up a domain name’s valuation, and while appraising a domain name will always involve some subjectivity, you now have an in-depth knowledge of how experts objectively assess valuation.

With this guide, you can better determine fair value when buying or selling domains. Over time and with practice, your domain valuation skills will become sharper.

Of course, there’s still much more to learn about the domain name investing game. For the full list of knowledge articles head on to our Domains Investment Hub.

In the next three guides we will dive in deeper into some of the valuation factors mentioned here, starting with how to research the search volume around a domain’s keywords.

You’ll learn tools and tactics to analyze search volume data, so you can set better valuations to your domain.