Ask the Right Question: What is Your Domain Worth to You?Posted: December 10, 2011
Most people tend to place a lot of importance on what a domain is worth. We get asked by people all the time to appraise their domains (which we don’t for various reasons). Even people that don’t really have an intent to sell their domain wind up being curious.
What drives curiosity of domain values?
A lot of it stems from news stories about huge domain sales. Some of these stories also indicate what the domain was bought for, showing the potential gains from buying and selling domains. This puts dollar signs into the eyes of nearly every domain owner.
The truth of it is that it’s not easy at all to buy domains and resell them for profit. There’s a lot to understand about domains and the domain market before you can expect to break even let alone make good profits. It’s easy to fall into the trap of assuming you know what domains are good and what would sell.
When buying a domain…
If you’re buying a particular domain, you may have a curiosity as to what it’s worth. After all, you may be worried about overpaying, or possibly getting a poor domain. But is that the right thing to ask?
First off, the question implies that a domain has a set market value that can somehow be determined. Besides the fact that it doesn’t, this is only something that someone selling a domain should be concerned with. If you’re buying a domain to develop a brand/website on it, it’s the wrong question.
You might be asking it out of fear of getting/using a poor domain. If so, we’ve posted many resources here that can help. A new recap post is coming tomorrow, but our last recap links to many of our posts talking about evaluating domains. At the very least, educating yourself more about domains before buying can prevent an egregious mistake.
That said, when it comes down to it, the right thing to ask is: What can this domain be worth to you? Or if you own the domain in question, what is it worth to you?
Market value vs. value to owner
A great example to look at is Apple’s purchase of iCloud.com for $4.5 million. As a comparison, Citrix’s recent purchase of the Cloud.com business evaluated Cloud.com at $18 million of the $200+ million purchase (which is a substantial amount if you think about it). So forgetting for a moment about exact market value, iCloud’s value relative to Cloud should be much less than 25%.
There are many cases of single word .com’s that sell for 5-figures where the “i” version would have a difficulty selling at all. So even if Cloud.com’s valuation was on the low end, iCloud would objectively be worth much less, somewhere in high 5 to low 6-figure range most likely. But Apple paid $4.5 million!
Ignoring for a moment the circumstances to even reach that kind of a sale (i.e. either the seller negotiated to that price or Apple simply offered it), it’s a hefty chunk of change for a domain like that!
It’s all because of how much iCloud.com was worth to Apple. Their intent was to come out with a cloud service in line with their other branding. It was THE name for that – in fact it’s probable that no alternatives existed in their eyes. So they certainly wanted the name a lot. But what’s it worth to them?
Clearly Apple has had huge success with most of their products over the past decade. It’s staggering to figure out how much money they’ve made simply on the hardware sales of iPads for instance, let alone app sales. So they see the domain iCloud.com as an integral part of a service with potential to make billions of dollars.
Objective vs. subjective value of money
Secondly, another question you can ask and which is pertinent for the iCloud.com sale too: What is your money worth to you? Sure, a dollar is a dollar – its value on the market doesn’t change much day by day. Its value to you on the other hand can change drastically depending on circumstances and how much you have.
Case in point: A dollar that helps a starving person eat a couple meals vs. Apple’s stockpile of over $70 billion. The starving person’s dollar helps them survive while Apple simply keeps growing their stockpile which basically just sits there, not necessary for survival.
$4.5 million is such a tiny amount in comparison to help secure their brand that they probably could have paid a lot more. In fact, with how much that domain can help them with their cloud service, it’s probably worth more to them than Cloud.com is to Citrix.
So asking about the market value of iCloud.com and Cloud.com would be silly – their values to their owners are much different than market value.
So keep this in mind when getting your domain. The right domain for you may cost more than other viable alternatives. Those viable alternatives may objectively have a higher market value. Realize that it doesn’t matter – focus on what the right domain gets you and how much that is worth.