How Do You Value a Domain Name?

This morning, I wrote a post about the launch of Valuate.com, an automated domain valuation website. Over the years, people have discussed the process of placing a value on domain names, and I tend to say (as well as others), “a domain name is worth what someone will pay for it.”

Perhaps this isn’t entirely accurate, because it’s impossible to gauge what anyone would or could pay for a particular domain name. There are many things to consider, and perhaps my statement is too much of a generalization?

It’s known that I don’t trust or generally believe professional appraisals, as they are almost always biased. When someone tells me they have a professional appraisal for a domain name that I am trying to buy, I generally reply by saying something like this:

“I don’t believe that appraisals can be accurate for a number of reasons. It’s in the appraisal company’s best interest to make the appraisal very high, as they hope to have repeat business.  If they gave you an appraisal of $200 and you had 50 other names that needed appraisals, would you return to that company? It’s much more likely that you would return if they told you that your name was worth $15,000.

I think it’s impossible to say what a name is worth officially, because you might be able to get much more than I am offering for the domain name eventually, but that isn’t a given and that day could also never come.”

The point I try to make by stating this is that the value of the domain name should be what I am willing to pay for it, and if they are still talking to me, they obviously have never had a higher offer. They can either take the opinion of a company that is making 100% margin on a domain appraisal and wants more business, or accept the cash offer I made.

In any case, the real question here is how do you place a value on a domain name?