Categorized | Selling Domains

How Much Is a Domain Worth… to an End User?

Posted on 14 April 2011 by Andrei

I always find the comments posted on Mike’s blog whenever he mentions an offer he rejected quite funny and can’t believe that people still don’t understand one simple concept: you can say things like “a domain is worth this much” when referring to the reseller market but NOT when it comes to end users! Why?

“Domainer to Domainer” Sales and End User Sales = Two COMPLETELY Different Things

Yeah, I know: comparable sales, search volumes, domain age, price trends, whatever. These are all common sense metrics… but only when selling to another domainer.

Why? Because we need to make the distinction between end user sales and domainer to domainer sales since these two types of buyers have completely different goals.

On the one hand, domainers want to ultimately sell the domain for more than what they paid for it, great. For this reason, metrics such as comparable sales and search volumes make sense.

What about End Users?

When it comes to end users, all of the previously mentioned metrics become irrelevant because you can’t just put a price tag on a domain and say that it is accurate for all potential end users.

The domain BestToys.com might be worth considerably more to end user A than to end user B or the other way around, let me explain why.

If end user A is a small local toy store owner who simply wants a domain people can remember and does not want to expand, then paying let’s say $200k doesn’t make sense. In other words, the domain just isn’t worth $200k to that specific end user.

On the other hand, if end user B is a well funded toy company owner who wants to spend $100 million on TV ads, the domain in question is easily worth $200k to him/her.

Why?

Let’s take things one step further and assume that end user B spends $100 million on lots of TV ads and imagine two scenarios.

Scanario1) He uses a hard to remember hand regged domain

The result: 50 million visitors ($2 per visitor)

Scenario2) He buys BestToys.com for $200,000

The result: 100 million visitors (just $1 per visitor) because more people remembered the domain and, of course, because a good domain gives you an instant credibility boost

Worth It or Not?

What do you think? Is spending $200k on a domain that gets you twice as much traffic for your effort and helps you save tens of millions of dollars worth it if you’re working with a huge budget? Of course it is!

Now the above example is obviously extremely simplistic but I’m sure you get the point. The bottom line is that as a domainer, trying to find a “one size fits all” end user pricing solution is just plain wrong. Yes, you can definitely say things like “this domain is worth $x” when selling to or buying from a domainer (especially liquid domains such as three letter domains or CVCV dot coms, for example) but NOT when selling to an end user.

13 Comments For This Post

  1. Tony Says:

    How do you go from buying a domain name for $200,000 to getting 100 million visitors?

    Your math isn’t completely obvious to me, but I want to understand it.

  2. Andrei Says:

    @Tony: the main thing I wanted to make clear is that while paying $200,000 for a domain such as BestToys.com does not make sense for a business such as a local toy store with no expansion plans, it definitely does make sense for let’s say a large well-funded toy company which plans to spend huge amounts of money on TV ads.

    I obviously can’t guarantee that a company which owns a domain like BestToys.com and spends $100 million on TV ads will receive 100 million visitors, while a company that spends the same amount on TV ads but owns a low quality domain will only receive 50 million visitors, those are just two scenarios.

    What I can guarantee is that a company which owns a domain like BestToys.com will experience considerably better results from any type of advertising than a company which settled for a hand reg in most cases and that the more money you have to spend on advertising, the more sense it makes to buy a kick-ass domain 🙂

  3. Tony Says:

    Ah, so you’re saying that if a large toy company were to spend $200,000 on a domain name and then $800,000 to advertise USING that domain name in the advertisements, they’ll have better results than spending $0 on a domain name and $1 million on advertising using their current domain name, like KaybeeToys.com or MattelToys.com.

    Is that what you’re saying?

  4. Andrei Says:

    @Tony: yep, the message I want to get across is that in most cases (the overwhelming majority), buying a great domain if you know you’ll be working with a huge advertising budget is the smart thing to do.

  5. Trev Says:

    I don’t agree, Andrei. I think MattelToys.com would do better spending all one million on a CPC campaign or better yet on a CPA campaign.

  6. Andrei Says:

    @Trev: a great domain increases the CTR of your ad and what this means to you from a CPC perspective is that you will pay less per click. To be perfectly honest, I wouldn’t call $1 million a huge advertising budget and it’s debatable whether or not spending 20% of your entire budget on a domain if you’re planning to limit yourself to a CPC (or CPA) campaign is worth it.

    But what about the $100 million example I gave in my article? Now that’s what I call a huge budget and while spending 20% of your budget on a great domain if you’re planning to focus on let’s say CPC campaigns exclusively may or may not be worth it, I’m sure you’ll agree with me that spending 0.2% of your budget (in other words buying a $200k domain if you have a $100m budget) on a great domain is more than worth it even strictly when it comes to CPC because you’d definitely save more than 0.2% in advertising costs thanks to a domain which helps you obtain a better CTR.

    When it comes to TV or radio ads, the benefits are considerably greater because people actually have to head on over to their computer and type in the URL they’ve seen on TV or heard about on the radio.

  7. Jeremy L. Knauff Says:

    I agree. The right domain name has a huge impact on traffic driven by other marketing channels like radio, tv and print. In many cases, it can have a huge impact on organic search traffic as well.

    It’s a lot like real estate; the location of your business affects how much you have to spend on advertising. A poor location means more expenditures for advertising, while a great location means you can get the same or better effects with a smaller advertising budget.

  8. Damir Says:

    The monetary value of a domain name is determined by the buyer (what value they place on it – want to buy it for) and the seller (what monetary value they place on it to sell it).
    Forget about manual or automatic domain name valuation – it is a waste of time (and money)

  9. Severine Ordinateur Says:

    Je cherche régulièrement sur Google sur ce thème et je ne comprends pas comment j’ai pu louper votre blog. Je ne comprends pas que ce blog ne soit pas plus mis en valeur par Bing !. Je vais probablement repasser le lire régulièrement. Continuez !

  10. DOBBINS Says:

    Create your LONG URL!! with the easy to go by instructions, we now have the greatest set of url/domain scripts on the web.

  11. best free apps for android 2.2 Says:

    Something more important is that when you are evaluating a good online electronics retail outlet, look for web shops that are constantly updated, preserving up-to-date with the most current products, the best deals, and helpful information on goods and services. This will ensure you are getting through a shop that really stays ahead of the competition and provides you what you should need to make knowledgeable, well-informed electronics buys. Thanks for the crucial tips I have really learned through your blog.

  12. handbagirl Says:

    nice website, i like it
    do you know how to make blog? tell me, thanks1

  13. Hoorteajole Says:

    I just identified your site post along with quickly scanned coupled. We seen many odd remarks, nevertheless generally I just accept what the additional commenters assert. Because of so many greatgreat reviews of this blog, I believed i should also start along with let you know that I truly appreciated reading this your articles. So i consider this could be my personal very first review: “I can see you have built a number of interesting points. Manufactured individuals would certainly truly contemplate it how you merely would. Now i’m actually amazed that there’s so much about it topic that is discovered and also you did it so nicely, with a lot class!”

 
 
Domaining blog recommended by Domaining.comRecommended by DomainState.com  Recommended by NamePros.com

 
 
 
 
  • Top Commentators (Resets Weekly)