It is a bit tricky to value any domain., Domain name investment is just like investment in stock market, bonds, or real estate, but there is a lot of difference when it comes to valuation of the investment. Stocks can be valued by fundamentals of that particular company, present state of that particular segment of industry, and discounted value of expected cash flows in the future. Real Estate prices can be valued by location of the property, quality of construction, status of demand and supply, state of the economy at a particular period etc. Bonds can be valued by their coupon payments and interest rates. Domain names are much more subjective valuation that can be very difficult to assess. There are a lot of domain value appraisers in the market, but most of the so-called experts are well-known for issuing lofty valuations that can be hard to realize.
Broad valuation of a domain name depends on many criteria. A good domain name should be short, catchy, easy to pronounce, easy to remember, and easy to spell. Any domain name, regardless of short or long, should be descriptive of a product or a service, brandable, with no hyphens or numbers. A domain with generic name that describes a product or a service present and future, geographic names such as a country, a city, a tourist location, an upcoming location, generic business names such as Cardiologist or Ophthalmologist are highly valued.
Regarding number of letters, it is a fact that all good three-letter and four-letter dot-com domains are already gone, and five-letter ones are going away as well and will be gone shortly as well. Any new four-letter and five-letter domains available with all characteristics or most of the characteristics described in the above paragraph are immensely valuable.
There is a great gold rush for four-letter and five-letter domains. It may be a good idea to invest in a short domain. But before investing, try to assess it in terms of whether it is easy to remember like AAAA or BBBB or AABB or ABAB. Present value of repeat letters or similar pattern four-letter domains is around $10,000 as per latest sales data available. The future value of such easy to remember four-letter domains is expected to be around $100,000 ten years down the line. Based on this, one can assess the value of other easy to remember and not easy to remember four-letter domains. This gives a fair idea of how much one can invest in four-letter domain names.
As for the number of words, one-word domains that are catchy, easy to pronounce, easy to remember, and easy to spell are diamonds, other one-word domains that describe a product or service are gold, two-word ones that meet the above criteria are silver, three-word domains even with above criteria are average, and any longer domains regardless of the above criteria is worth not much.
If one wants to invest in one-word or two-word domains, first try to assess them in terms of whether it is easy to remember, meaningful, does it make a sense, does it describe a product, a service, or a particular segment of industry or business. For example, Fund.com and Porn.com are valued at several million dollars. The investor should not aim for definite number of characters as long as the domain name meets the above described criteria, and must remember that the shorter the better. The general idea is try for a domain that is below 10 characters, but should not exceed 20 characters.
As for extensions, it is an established fact that dot-com is gold, potential value of other extensions cannot be assessed easily.
The valuation of a domain name depends a lot on who is selling to whom and circumstances. For example, Rick Schwartz sold i-Report.com and iReport.com to CNN for $750,000 in 2008. This is an example of what can happen when a large company realizes the value of a generic domain and a seller is not in a hurry to sell. Schwartz owns many premium domain names and only sells to people who are serious. As Rick Schwartz already earned a lot by selling domain name, he was in a great position to bargain. In the hands of another domainer, this domain could have sold for $25,000 or less.
Finally, a domain name will realize its full value if sold directly to end users. A good domain always holds some inherent value and will appreciate a lot 5 or 10 years down the line.
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