How to Appraise a Domain Name with Jeffrey Gabriel

How to Appraise a Domain Name with Jeffrey Gabriel

Watch Jeff Gabriel explain domain appraisals in this Saw.com video.

Video transcript:

My name is Jeff Gabriel I am the CEO and co-founder of Saw.com. In my tenure, I’ve had the opportunity to appraise tens of thousands of domain names and I’m going to share with you today some of the metrics and things that I do to quickly and easily appraise a domain.

I’ve had the opportunity to teach many different salespeople in our industry about appraising domain names. And one of the things I do when I’m teaching people is to create analogies. One of the analogies I use a lot is one with real estate. And a domain appraisal is very similar to that.

There are many metrics that a domain appraiser uses to put a value on a home. Well, that’s very similar in domain names. Instead of square footage, we look at the extension it falls into. Instead of the location of the property, we might look at the industry that that domain name might target. And also, when it comes to real estate, they talk about the highest and best use for the domain name. And most important is comparable sales to that property. Well, the same thing falls into that when it comes to domains.

Some of the metrics that I’m going to look at and go into might be very obvious to some, but I might be pointing out the obvious, you might be saying “wow I didn’t think about that”. And since domain appraisal is not something you have to go to get a license for, there’s a lot of different ways people look at domain names to appraise them. But here’s the way I do it, and I think it’s worked for myself, my customers, and the companies I’ve worked for over the years.

The very first thing that I’m going to look at when I read a domain name, or I see a domain name, is I’m going to look at the extension. What is the domain extension? Well, you can look at the com, the net, or the org. We look at different CCTLDs; co.uk .de .inc for GTLDs .xyz or even .auto. And from there what I try to do, which is the easiest thing to do, is compare whatever those extensions are to a dot com, which I consider the gold standard. You try to make a proportionate value. So if the domain is a dot com, check, that’s a positive. If its a dot not, well, I would probably try to appraise the domain, in my mind, as a dot com because it’s so much easier because there’s such a wealth of information about past sales and other metrics of the dot com and then try to assess value by basing it on the dot net values of the industry. What does that mean? If I have a domain name like cars.net I’m going to pretend I’m appraising cars.com and then I’m going to say ok a .net is worth roughly 10 percent of a .com and that’s how I’m going to come to that value.

So after we get past the extension part, we are going to look at the industry the domain falls into. And one of the questions that people ask me, they say “Jeff, the domain name that I’m looking to appraise falls into different industries”. My suggestion to you is to focus on the industry that has the highest demand and not look at the other industries it might fall into. For example, a very generic domain name that might fall into multiple industries would be card.com. You can think of different uses for the word card, but the one for this purpose is, I would say finance. That’s because there are so many players fighting for that term credit card out there. So the industry that it falls into is very important. Some industries where it’s most competitive are the obvious ones; insurance, credit cards, travel. Any time you turn on your TV you’re going to see advertisements having to do with those industries. That tells me there is a lot of demand for that particular domain.

One of the things we look at next is the length of the domain name. One of those things is looking at the number of characters. Let’s look at one of the most perfect domains in the world, yoga.com, it’s only four letters. That is a very short domain. Now if we start adding in Bikram yoga, or hot yoga, those are all different types of yoga, but it starts to get longer, starts to get harder to spell, starts to get harder to remember. It gets harder to market and for those who walk past a billboard to read it, ingest it, and tell others about it. So, the length has a lot to do with the value of the domain name.

Now what ties into the length of the domain name, it’s kind of an easy high to look at but it’s kind of an opinion call, it takes a lot of common sense to look at. The question is how memorable is it and will it pass the radio test. So the question is, how will it sound on the radio? How will it be perceived by your listeners? And when we are talking about the radio test we are also talking about putting it in a video, putting it on a business card, verbally telling somebody the name of your business at a conference. Will they remember it? Will they go back and spell it? Can a family or people who purchase your goods or services, go out to dinner with friends and say it and remember the name of your business and send you that business?

From there the next question is if you’re looking to become a worldwide brand, how universally is it in many different languages. Going back to my example of yoga.com. Yoga is yoga in Spanish, Yoga is yoga in German, Yoga is yoga in Mandarin. So opening a brand that focuses on many different markets and languages, that domain name is as close to perfect as you are going to get. Looking at an opportunity for purchasing shoes.com, that’s another short perfect domain name. However, when you get into the Spanish speaking market that is zapatos, and if you look at it in German it’s a different word, and there’re many different other ways to look at it, so it limits you comparing that to yoga.

And then tying into how the length and how universal it is, how easy it is to spell. The domain name achieve.com would be wonderful, but would people mix up the “e” and the “i”? How does it sound to somebody who doesn’t speak English as their first language? Are they going to have a hard time spelling it? There’s a lot of people who come to me and ask me to appraise domain names or ask me to help them acquire domain names, where instead of using the letter s at the end they use the letter z and pronounce it as plural. What does that do to your business with the radio test with people making it memorable? It doesn’t help.

So one of the most important parts of the appraisal process is looking at comparable past sales that have happened in the market in a reasonable time of the sale taking place. So looking at sales that happened in 2003 usually isn’t very relevant. One of the things that you have to think about is you can’t just take the term that your domain name or anyone’s domain name falls into for that matter and searching that term. Then, anything that term falls into is now a legitimate comparable sale. That is not the case.

Pizza.com, pizza is something that everybody loves to eat. When you say the word pizza a lot of people smile and say “when are we going to get it?” But if you say Jimmy’s pizza, that is not a relevant comparable sale. If that sold for say 5,000 that is not a relevant comparable sale to the term pizza.com which sold a few years ago for a few million dollars. Not comparable.

If you’d like to learn more about appraising domain names or anything about domain names you can go to Saw.com and click on our resources button and there’s plenty of information there that you can learn about domains or anything having to do with it. If you’d like to suggest what we can talk about next time please go to our Contact Us section and say it or maybe even request a domain you’d like to be appraised that I can do live.