Domain Valuation

Some domain names are valued in the thousands or millions of dollars by virtue of their uniqueness and rarity. However, the valuation of non-premium domain names should be approached with the same rigor as the valuation of a traditional business.

The valuation of a business in any industry starts with CURRENT earnings. Various risk factors and other intangibles may also be considered, and the final valuation will usually be some multiple of current earnings (EBITDA).

The multiple often varies from 1x - 10x earnings, depending on the industry. Of course there are rare exceptions where particular companies have created a dominant market position that cannot be easily challenged (e.g. Microsoft in the 90’s, Google in 2000’s).

Remember, in most cases an experienced buyer will only value actual results to-date. Granted, in many cases they're interested in the company (or domain) because they believe there is future potential to grow or improve the business, but they will NOT assign much value to “future potential” when negotiating.

I understand the potential of the domain business (which is why I’m in it), but it’s unreasonable to expect to be paid on speculation.

In fact, I argue that buying a domain or website based on even a 1x multiple of annual earnings is risky, because the traffic and monetization strategies are volatile and can change much faster than in the brick and mortar world.

Now you might say that using this type of valuation for an undeveloped domain name is like saying a piece of vacant land on the strip in Las Vegas is worth nothing simply because it is generating no income.

Well the problem is that we need to consider time.

I’ll bet that in 1930 there was vacant land on the strip in Las Vegas that they couldn’t give away. Only a few visionary “speculators” saw the value in this land in 1930. The average business person interested in hard numbers just laughed. Seventy (70) some years later and everyone can appreciate the value of property on the Las Vegas strip.

In 2008 we’re the speculators for domain real estate. If we’re inclined to sell today we need to understand the perspective and mindset of the typical buyers at this point in time. We can’t expect the vast majority of people to see the true value of domains for another 5 or 10 years. At that time the “real values” will be obvious and may far surpass traditional business valuation methods.

Unless of course substantial advances in search technology and structure of the internet render “domains” redundant.

Keyword Tool for Registering Great Domain Names

So far we've shown you some of the basics of domain investing at Domain Treasure Map. But, you also need some tools to help you succeed and make money in the domain name game.

Keyword tools help us select the right domain names by finding high traffic, high value keywords. This in turn leads us to the high income domain names that can generate great PPC revenue.

Before you register any domain name you should always perform a thorough keyword analysis. There are some free tools available, but in many cases the results are out of date, and you do not gain the in-depth information that's required to really excel in this business.

That's why we need a tool like WordZe. You can use WordZe to help you find profitable new domain names, as well as determine which expired domain names are worth registering. At one time or another I've used all of the free keyword tools, and I've also had accounts with the other paid keyword tools. But, honestly none of them can hold a candle to WordZe!

It costs a few dollars every month, but you'll make that money and more every time you register a high traffic domain name. Check out these short videos (Keyword Research Video, Dig Tool Video) made by WordZe staff to see how this tool can jumpstart your domain investing business.

Type-In Traffic According to Google

Have you noticed that the latest version of Google's Toolbar does not always take you to the address that you typed into the toolbar.

Under certain conditions the "Address Browse Bar by Name" feature in the Google Toolbar automatically takes you to a random, pre-determined site when you type in a specific url. It does not take you to the address you typed in.

For example, if you type "hockey.com" into the address bar, it takes you to www.nhl.com. You DON"T go to www.hockey.com! The problem is the average person at home won't even know what's happening and they may never get to your www.hockey.com site.

This happens under certain conditions when the user does not type in the preceding "www" AND either:

1.) Your title tag does not match your url

2.) Your site is not indexed (most parked pages)

This can present a problem for domain investors that rely on type-in traffic on parked pages.

Let's hear your opinions.