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August 27, 2012

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Aftermarket Domain Valuation Factors: Dan Warner Details What Motivates Domain Buyers Today

By Dan Warner
COO, Fabulous.com
Consumers purchase domains for a variety of reasons. These unique motivating factors shape the value which is attributed to domains by individual buyers. It logically follows that a domain's true value can only be attributed to a specific buyer at a particular moment in time. Following is a framework of primary factors that buyers commonly attach to each domain purchase.

Brand is the emotional value that a buyer attributes to a domain name. Effectively the brand is how users react to the domain name being used and the feelings it generates. An easy way to discern
whether a domain has a good brand is by applying the radio test. If you were to hear a domain being talked about on the radio - how likely would it be for a consumer to remember that domain and spell it correctly? Strong brands are memorable, are hard to confuse and elicit an emotional response. Examples: OverUnder.com, SeaBreeze.com, Fantastic.com, Zappa.com, CoolJazz.com.



Mindshare is how "familiar" a domain name is in the user's mind. Commonly used words and phrases used in domains offer a description of a website's purpose and act as a preview of what a user can expect when they type-in a domain. The easiest measure of mindshare is by comparing search data on domain phrases. A domain phrase is simply the domain broken into words with spaces between them and no extension, mathgames.com = "Math Games".

Math games would be a frequently searched phrase and therefore would also make a memorable and familiar domain name. Commonly searched phrases in search engines are a clear indication of phrase popularity and usage which directly correlates to domain mindshare value. Examples: GarageDoor.com, BonzaiTree.com, BuildingPlans.com, DownloadGames.com.










Dan Warner discussing the points in this
article at the Domainfest Global Conference
in Los Angeles - February 2007


Commerciality is a general concept attributed to the value of users visiting a domain. Potential consumers (business, non-profit, or personal) all have an inherent value. If a domain attracts users of a commercial variety they have a higher value than other more

general domains. A good measure of commercial value is the bid price that advertisers are willing to pay for a phrase (domain phrase) in pay per click search advertising. As these bid prices are based on a competitive auction system, the bid prices clearly indicate what the market is willing to pay for each phrase relative to other domain phrases. Example: HomeLoans.com, CriminalLawyer.com, BusinessSoftware.com, TowerCraneRental.com,



Although short popular domains are frequently newsworthy, the most valuable domains in practice to a buyer are related to how closely a domain name correlates to their unique needs. If a buyer needed a domain for a sailboat rental company in Seattle,

SeattleSailing.com is more targeted to their specific needs than a domain like Sailing.com. This is particularly true when considering domains for businesses with a strong location bias. It is also common to use qualifiers in domains to specify the business types; these include discount, used, services, consulting, or premium. Examples: UsedBikes.com, HoustonTools.com, DiscountTires.com, MachineryMechanics.com, HouseCleaningServices.com.



The value a buyer can realize through the use of a domain name directly correlates to the price they paid compared to the benefits achieved. This concept is a direct reflection of "fit for purpose". How well does the domain fit with the needs of the buyer? If a business

serves the United States construction industry with supplies - ConstructionSupplies.com may be an appropriate purchase for $100,000. Whereas the same domain may be inappropriate for a local business. Domain value is a direct reflection of what value can be extracted from each domain by the intended buyer. 


Retail domain purchases are generally not opportunistic. Most retail buyers have a specific purpose in mind that they are trying to fulfill and are frequently under short time constraints. Common reasons include: having new business cards printed, building a new website, having a new product to promote, or meeting a strategic objective. These buyers usually do not have the knowledge or experience to "shop around" for the right domain name. The most common buying strategies include simply typing in random domain names to see if they resolve in a browser, or by going to their favorite domain registrar. These buyers usually will only purchase an aftermarket domain if they can find one that aligns with their perceived value in price and purpose within a short period of time. Otherwise they commonly buy a "new registration” domain of less apparent value. 


Domains that use common generic language to communicate clear descriptive ideas are very effective. These domains have higher click-through rates in search engines when users are looking for related phrases, and the language used to construct the domains clearly identifies the type of website represented. However, domains which are confusing, have typographical errors or have legal connotations are not good candidates for aftermarket sales. These non-generic domains create customer service issues and many have significant legal risks.



Retail domain buyers are looking for domains which are immediately available, fit for purpose, and represent real value to their applied use. In order to fulfill these needs the aftermarket domain industry has to make available a wide range of domain stock through a comprehensive distribution network. Buyers need ready access to domains using real time fulfillment with consistent quality and comparative prices.


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