Why Domain Consultant Will Thrive
Uncategorized October 8th, 2008
I’ve been doing a bit of thinking about the economy and how a continued downturn will impact the domain industry. While domain name values have remained consistently strong, I think liquidity may eventually be a major issue. Although domain names will retain value (as witnessed by the TRAFFIC auctions that showed some strength), you can’t expect to pay your hosting, development, equipment, office space…etc. bills with domain names. Some great domain names don’t generate consistent or adequate cashflow, but are still very valuable.
That said, I do foresee some mergers and acquisitions in the domain space. One of the most difficult things to do when mergers occur will be valuing company assets, including domain names. Whenever I see evaluations of major companies in the domain space, they typically lump all of its domain assets together and append a value. Oftentimes, the value of the whole seems well short of the true value of it’s parts. Saying “their 10,000 domain names are worth about $2 million” is like saying a company’s 10 offices in New England are worth $2 million. This doesn’t make sense since each domain name needs to be evaluated based on a multitude of factors, which domain experts can only answer, not stock analysts.
At the moment, there are many domain appraisal services available, but I really haven’t seen one that is consistently accurate. From my own limited experience, Moniker seems to have the most accurate appraisals that I’ve found, although Sedo and Afternic provide reasonable appraisals as well. Judging by the experts who make up Domain Consultant (below), I think this would be the place for a company to get the most accurate gauge of the value of its domain names. The price may be restrictive for domain investors who want to know the value of one or two domain names, but for companies who are in the midst of a merger, using Domain Consultant’s services could be worth millions of dollars.
Certified Appraisers:
Adam Strong
Richard Lau
Mike Mann
Brian Benko
Dan Warner
M. Fiol
Don Ham
Frank Schilling
Slavik Viner
Donna Mahony
October 8th, 2008 at 12:00 pm
Ask twenty different domain experts how much they believe a domain is worth and they will likely each give a different answer. The value of a domain also varies depending on the potential acquirer. How much is pizza.com to Joe’s pizza around the corner? How much is it worth to Dominios? Each negotiation is unique and domain values are very subjective. Of course, stock values seem to be less certain than we thought a couple of years ago! I can’t believe the markets the last several months!
October 8th, 2008 at 12:10 pm
This line made me think, “Some great domain names don’t generate consistent or adequate cash flow, but are still very valuable.”
I replaced “domain names” with “waterfront properties” or even “real estate”. Both domain names and real estate experienced considerable appreciation in the post-Internet bubble and we all see that even real estate prices can drop significantly. Prices for real estate exceeded the future earning potential of the property and as a result equity was destroyed.
I believe you should regularly step back from your focus and constantly reevaluate the risk/reward ratio.
***UPDATED BY ELLIOT***
Similar but not the same. For real estate, considerable money needs to be spent to build. Domain names don’t need the same or equivalent investment to become successful and generate revenue.
I agree that you should always analyze what you have and what you can do with your names.
October 8th, 2008 at 4:26 pm
Appraisals are useless/worthless regarding Internet Real Estate; no person, auction house, registrar, or machine can accurately place a true value on domain names-not now and never will be able too. Folks, just pay what you think it’s worth, have a plan/vision and move forward.
October 10th, 2008 at 5:43 am
Scott, that’s not an inaccurate statement.
Once you’ve bought, sold, and brokered domains for many years, it’s easy to be able to asses the market value of any domain. There’s no magic formula to it, after a while you just “know” what a domain can command.
I personally don’t believe in saying a domain is worth X dollars. I typically indicate to my clients price ranges, based on an end user sale, a domainer sale, or a fast same day sale.
On the “Domain Appraisal Certificates” I do for my high end clients who need valuation documentation for their financial statements, I use a 30 point market component scoring formula and then finalize it with my subjective valuation for 3 levels of sales price ranges, and it works really well that way for everyone.
Kevin
BigTicketDomains.com
October 10th, 2008 at 5:16 pm
Kevin, a valid good point; on the other hand I’ve sold names in the 5-figure range and buyer of the names obtained an evaluation from certain registrars that indicated 3-figures; go figure, there is absolutely no way to give a “true” value on digital assets. Yes, you can give opinions from previous sales, from experience and such, but that’s it. That’s a good approach not indicating what a digital asset is worth in exact dollars but rather using a dollar range. Personally, I will only sell names for the price I dictate; it’s up to the buyer to figure out if it’s fair or not.
scott
http://www.401.me
October 12th, 2008 at 2:27 pm
Scott. What exactly is the definition of “true” value that you are speaking about? How do we get to a “true” value on anything ?
October 13th, 2008 at 8:44 am
Adam, my point is that you are unable to place an accurate value on digital assets. Simply said, if it’s a sophisticated buyer they are aware that no person, registrar, parking company, auction house or machine can place a “true” value on digital real estate. An astute buyer of digital property knows their target market and purchases the digital asset based on a plan/vision and in most cases executes that plan/vision in becoming a multi-million dollar business. If any buyer is purchasing digital assets by way of an valuation, in my humble opinion they are going down the wrong path, moreover if auction houses are using a machine to valuate digital property, they are going down the wrong path as well. “True Value” means you cannot place an “accurate” dollar value on digital assets. Know the target market and its clients, then place a value on the digital asset, that’s it.
scott
http://www.401.me