This article continues directly on from How to Price Your Domains for any Market
One possible way to derive the mid-point number is to examine the average advertising spend by market vertical. We can then pin the mid-point for this data as being worth $2,000.
The below chart shows the “drink” category as being at the approximate mid-point in spend. This would suggest that domains above this category would have a higher mid-point value and domains less than this category a lower mid-point value.
Once again, with a little bit of Excel wizardry we can calculate the financial sector average domain spend being at $1543, which little less than the $2,000. Once again, we have a problem where the methodology being used is linear where in fact it may not be the case. Nevertheless, the financial services industry is a little above the mean point for the market verticals so our numbers shouldn’t be too far out.
We can now update our financial demand curve chart from the previous article so that now looks like the one below.
So where does this entire analysis go wrong? Domain investors are less concerned about the left-hand part of the demand curve but argue incessantly about the right side of the graph. They should rightly do so.
Since we know the mid-point we can plot a reasonable price for each domain. On a keyword by keyword basis we can allocate the level of demand divided by the total demand for all those keywords above the mid-point. We can then multiply this ratio by the $1543 we calculated earlier. And presto! This will mean that “homerefinance.com” is valued at $613,475!
We essentially then do the reverse process for those domains worth less than the mid-point. By using this method, we have the following valuations for the suite of “second mortgage” domains we looked at earlier.
Secondmortgagerates.com - $1,157
Secondmortgageloans.com - $1,548
Secondmortgage.com - $1,683
Refinancesecondmortgage.com - $3,669
The question needs to be asked, do these values look sensible? Yes and also no…..and here’s the double conundrum for the domain investor.
For a motivated buyer, these valuations can be out by a factor of ten. The pricing will be influenced by the what you glean from the conversation and this is the “art of the deal”. It’s one of the reasons why some domain investors work exclusively with select brokers.
The second issue, is how long do you want to hold your domain assets? If you’re prepared to hold your domains for ten years, then start dividing the prices by an increasing value of 10% per year. This means the first year the domains will be worth ten times the above and the second year 10% less etc.
BUT if you are wanting to sell the domains with some science behind the pricing then these don’t feel absurd. A component that I have not taken into account is the excess in supply for the volume of searches conducted on each keyword. This can potentially influence the pricing discussion.
Now before you jump up and down claiming your domains are worth far more than what I’m suggesting then ask yourself these simple questions.
Am I looking at a domain that is close to the right-hand asymptote? If you are then the methodology will likely be a little shaky.
How many offers have I received in the last 12 months for this domain? In other words, are you pricing your domain outside of the market's expectations.
What is the average offer size? If you have received offers, what are they?
Over the years ahead I plan on continuing to refine the model to dig into what else that can be influencing a domain sale’s price. What I don’t want to do is get into market comparables. In my opinion discussion comparables completely undermines the uniqueness of a domain and potentially pushes a buyer to look for other options.
I hope you have found these couple of articles an interesting read. Please leave any questions and comments below.....I'd love to receive some :-)