Where does domain value come from today?

It's every domain seller's dream: Bill Gates himself at the other

end of the phone line: "OK, you have 5 minutes," he says. "Tell me

why I should invest in your domain."


Do you know enough about domain value to answer Bill's question?


A proper understanding of what makes a domain name valuable is

essential not only for marketing your domain names to potential

buyers (like Bill Gates), but also for adeptly choosing which domains

to register, lest you end up with a domain portfolio only a mother

could love.


If you're a stodgy Old-Skool Domainer who's been around since the

fabled days of dot-com glory, you may already be familiar with

concepts such as ease of retention, commerce potential, length,

extension value, and avoidance of numbers and hyphens... But it's

not just size and extension that matters.


In today's domain market, the critical concepts are traffic,

brandability, and search engine compatibility. Let's look at each

of these in more depth:


1) Traffic:

On the Internet, more traffic is better. And it's expensive these

days: Yahoo and other directories charge $299 just for listing, banner

ads are all but ignored, and for some keywords the price of a single

click from a paid search listing exceeds $10! Thus, the targeted

traffic that your domain receives may well be the single greatest

driver of value. This is especially true for descriptive generic

domains that attract browser type-ins, and (to a lesser extent) for

expired domains that used to be developed websites. A handy formula

for estimating the value of your traffic is:

Traffic = # visitors x click-through rate x per-click bid amt.

Value (eg. traffic quality) for relevant keyword

If that's too complex, you can always skip the math and get a real-

world estimate of your traffic's value by using a Domain Parking

service designed to monetize traffic (eg, www.sedoparking.com).


2) Brandability:

Do you remember when we all thought the leading online bookstore

would be called Books.com, the #1 computer seller Computers.com,

and the leading online pet store Pets.com? Do you buy your food

from Grocery Store(TM), fill up at Gas Station(TM), and then have

lunch at Fast Food Restaurant(TM)? Thanks to advances in mass

brain-washing, most of us think of brand names when we need to

have these needs met. The Internet will increasingly follow the

real world, and brand names supercede generic domains in importance.

However, the good news for domain investors is that there will

always be new brand names being created, and these new brands will

need an Internet presence. If you have a knack for coming up with

catchy, succinct, and evocative names, you may hit upon "Centrino", "Froogle", or "The Clapper" before the big boys do. Just don't be

too greedy with your asking price: a brandable domain only takes

on its value after somebody has burned a few million promoting it.

Until that point, the company will opt for another name rather than

pay an extortionist price for the .com.


3) Search-Engine Compatibility

The art of Search Engine Optimization has gone from being a chapter

in Web Design books to a multi-million dollar industry. One of the

tools of the trade is a keyword rich domain name, which often takes

the form "Keyword-rich-domain-name.com".

Does this really help? The jury is still out, but try a few searches

for yourself, and you will notice that many of the top results contain

the keywords as part of the domain names. I have a theory for why

this works: It's no secret that Google looks at the text of incoming

links to help determine what a site is really about. The theory is

that people will give their links descriptive text (eg, "Quality

Domain Name Appraisals" instead of "Sedo.us/appraisal.php3"). But

in reality most people link using the domain name. So if your domain

name is "domain-name-appraisals.com", you will benefit from being

described with those keywords each time someone links to you.


So, that should give you a few good arguments to make to ol' Bill.

And while you've got him on the phone, please don't neglect to mention

that he can find more great domain names at www.Sedo.us!


Until next time, happy domain hunting!


Matthew Bentley


P.S. If you'd like a more detailed examination of how these factors

and others affect your domain's value, check out Sedo's Appraisal

Services at https://sedo.com/appraisal.php3