If you haven’t read any of my posts at WebmasterWorld.com, where I moderate the Domain Name Forum, I suggest you start by reading what I’ve written about determining an aftermarket value of domain names based upon the value of the sales, customer or client leads the domain generates.
Basically I’ve called this model (I think I’ve coined the phrase, as applied) the “converted lead valuation model of domain price appraisal”. Shorthand version: converted lead value. (Feel free to disabuse of me the idea that I coined the phrase. The raw concept – that domain names deliver traffic/visitors that have inherent value – has been around since the first person registered a so-called “type-in domain”.)
The basic concept is this: People who type-in domain names are often people very focused on finding “what the domain describes”. Yes there are others who type in domain names, such as those who are “just curious” or those checking to see if a domain is either registered or associated with a live website.
Then there are those who are “in the market” for what the domain describes, by which I mean “generically describes”, i.e., a generic descriptive domain. (NOT a typo of a widely known and/or exclusive trademark.)
Those who are “in the market” tend to be those ready to buy, to consume, to enter into a dialogue about doing business. Ergo, such visitors/typists can be considered to be “read to convert (buy) . . leads”.
So, how does this analysis apply to valuing aftermarket domains or making decisions about how much to pay? The basic math of the model works this way or “has these variables”:
- What is the volume of traffic the domain delivers? More traffic means higher value.
- What is the income generation and profit potential of entering into “a deal” (sale, contract, etc.) with any one of those visitors? High lead values, to enduser consumer of those leads, should mean higher values.
Example: If a domain delivers 50 visitors a year and, of those visitors, 15 are actively looking to tranact business around the subject of their “type-in query/search”, and if such focused visitors are likely to convert – in part, due to your skills/offer – at a 50% rate, and if such converted leads produce a revenue stream of $500 or $5000, then: 15 x 50% = 7.5 x $5000 = $37,500 in revenue value (not saying profit) just from the direct navigation or type-in traffic of the domain.
Forgettting any other benefits derived from simple, meaningful, generic descriptive domains – such as any SEO benefit, memorability benefit, inbound link anchor text benefit, aural/radio benefit, etc.
So, what is a domain worth in the aftermarket if it generates $37,500 A YEAR in added revenue? Revenue that is insulated from the ups and downs of search engine rankings? That depends, in part, on profit margins. However, once you have a handle on a domains revenue potential you should have a better idea of why some domains command far greater prices in the aftermarket.
That “built in revenue stream” of generic descriptive domains is often why a domain will command a value in the tens of thousands, hundreds of thousands or millions of dollars.
Think: Loan.com, Mortgage.com, CreditCards.com and move around from there.
As an attorney I know first hand the converted lead value of generic, descriptinve direct navigation domains.
So, next time you ask yourself “Do I really want to buy RealEstate.com? The seller is asking sooo much!” don’t forget to ask yourself the follow up question: In the evolving and increasingly complex and competitive landscape of online marketing what’s my advantage?
I’d say “owning the generic name of the service” – general (Plumber.com) or geo-targeted (City+Plumber.com) will remain an advantage you can take to the bank, year after year.
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