Thanks Stephen; could you now tell my wife ?

My offering is just a follow on from your excellent post.

Cheers.
Lachlan

WHAT ARE YOU, SOME DOMAINING GENIUS? Your answer is one of the best analysis of domain name values Ive evern seen. Of course, there are a few little changes I’d add to it, but overall,

Right on!

People, read LDA’s post closely, every word.

Revenue has invariably been associated with parking earnings
where page rank, SE traffic etc. are not contributing factors.

It’s often quoted as though ‘revenue’ is an immutable that can’t
be changed without superhuman effort or divine intervention.

Like many others I’ve found this is not so if you choose the right domain. Most times you’ll find gems lurking in your parking portfolio.

I’ve had good generic Dot Coms with moderate natural traffic
produce 25 to 35 times parking rev. with simple well-paying
affiliate sales links. Even better if the affiliate pays on return
purchases for the life of the referral. That’s without buying any
Google traffic.

So what is a rev. valuation ?

10 yrs parking rev. with built-in upper earnings asymptotes ?

Evolving affiliate rev. (+returners kicking in over time) x 10 years ?

Another model that includes rev. + ‘domain’s intrinsic worth’ to a
company that uses the domain as a ‘Flagship’ name.

Obviously a buyer of this type of domain would love to have the
valuation restricted to parking rev. alone, quoting Google’s
culpability. However, Google’s greed is by no means the whole
story on revenue, going forward…if you use the right domain.

Such a great article, and so many correct responses from your readers. This is a blog that noobie domain investors and end users should be reading… ooops, no, not end users, because they are not addressed AT ALL in this article.

I don’t even consider traffic stats on a domain I’m buying. I consider my own interpretation of the following values coming from the domain (darn it, I don’t want to give it away):

1) Domain name generic descriptive qualities
2) How many words in the domain
3) How many characters in the domains (I don’t consider numbers or hyphens in domains unless the hyphenated domains specifically spell out a high yield SE keyword phrase)
4) I look at how the domain name will brand my website, or my products and services (prodservs) that the domain will represent online
5) I look at the domain name for lasting “recognition” power. Will this phrase domain still be around five years from now?
6) Lastly, if the current traffic is good (I ask for a screenshot showing “Last Year” or “Year To Date” results). This part of the value of the domain means very little to me, because if the domain name was a one word natural, I already know it would be getting some serious typeins from name direction searches. And I also know that this type of domain (a one word natural) will cost six figures, at least in the .com version.

So traffic stats mean little to me. Branding, and research on the future of the product, how many websites mention the phrase (in quotes) and how many companies are bidding on that exact phrase (easy way of finding that out), all have a percentage of my overall assessment of the value of the domain.

Ultimately, what is not mentioned yet in this blog or the comments, is:

What can the domain name do for the END USER? This blog article is focused on domainers buying the domain, but what about some company that sells/makes/distributes the prodservs the domain describes? They may ask for “traffic stats”, and that is a mistake for them to focus on, because if a company that sold the prodservs the domain defined, they can quickly increase the value of the domain name by literally promoting their own website and prodservs using the domain.

So, current traffic stats really mean nothing. I have domains that make about $100 a year in PPC right now, but I wouldn’t sell them for less than $25,000. Obviously, if we focus on appraising domains based on multiples, 10 year, 20 year or less, we cheat ourselves.

A Domain name is MORE than a PPC multiple. So appraising a domain based on a multiple is a big mistake for any seller of a domain. Consider the branding, the future growth, the value the domain will bring the end user, or anyone who wants to build the domain out.

hope this helps! If so, support http://www.successclick.com, because I’m trying to beat El-Silver in visitors, and I’m 1/10 of what he gets. Probably because he’s a young stud writing great articles and I’m an old viking building a castle to retire… hmmmm.. lol

Thanks El…great article

1. cash flow
2. appreciation (ultimately dependent on cash flow)
3. amortization (if the investment is levered)
4. tax shelter (note that Rick Latona used his tax credit to register thousands of country code domains)

Looking at prior cash flow is a useful indicator of the potential profit that these four sources might produce. You should always buy based on projected future revenues. Being able to see past cash flows is always an advantage, and you make assumptions on how they may change in the future.

Recently I was offered a domain for $2,200 with annual Adsense of $700. I did not buy it because my future projections of revenue did not meet the historical cash flows. You don’t buy on the income data alone, but it is a useful data point.