Few topics generate as much heat as discussion of automated domain name appraisals. The value of human appraisals can also be controversial. This week I decided to take a look at appraisal options and limitations. Should we even be doing domain name appraisals? Why Do You Want An Appraisal? The first question to ask is why do you want an appraisal? The following are some possible answers. I am new to domain investing, and want to know if I am on the right track. I need help deciding which names I should keep or liquidate. I am unsure about pricing this domain name. I hope to learn new ideas about possible uses for this domain name. I want an appraisal that I can eventually use to make my case when negotiating with a buyer. I am looking for confirmation that what I think is right. I want to know appraisal data that may be in the hands of potential buyers. The reason(s) you want a domain name appraisal will influence the type of appraisal that might be helpful. Types Of Appraisals There are several types of domain name appraisals possible. You can post your domain name for appraisal right here on NamePros, and others will respond with appraisals. This is an example of a crowd-sourced domain name appraisals. Social media, and domain name investor gatherings, offer additional appraisal opportunities. Some marketplaces, as well as certain podcasts and dedicated appraisal services, will produce an expert domain name appraisal, often for a fee. I call these appraisals expert, not meaning they are necessarily better than crowd-sourced, or even automated, appraisals, but because the appraiser is claiming to have particular expertise. The appraisal may be the view of one expert, or from a panel. Several of the brandable marketplaces suggest a price for accepted domain names. This is not unlike the expert appraisals mentioned above, except that the appraisal cost is usually minimal. Another option is an automated appraisal, in which an algorithm, or possibly artificial intelligence, is used to produce both a suggested valuation, as well as other information such as comparator sales or advertiser statistics. The best known of these are Estibot, the GoDaddy appraisal, and NameWorth. Other valuation products are mainly geared to evaluating website worth, as opposed to just the domain name, looking at SEO aspects. Another option is a personal domain appraisal. For example, you and another domain investor might agree to privately appraise each other’s domain names. While this is just one person’s view, it has the advantage that there is not a direct cost, and the results are private, unlike crowd-sourced appraisals. Last, but not least, a rigorous domain name self-appraisal, using some valuation metric or checklist, could be done by the owner. This has the advantage that you know exactly what went into the appraisal, including any assumptions. These free research tools can help you get started. Probably many of us have used one or more of these types of appraisals, perhaps without thinking of it as an appraisal. Avoid The Domain Appraisal Scam A common scam that has been present for many years is to tell a domain investor that a domain name has sold for a large amount, but the buyer requires you to provide a domain certificate before the sale can complete. That process requires the investor to first buy an appraisal to prove the worth of the domain name. After the investor pays for the certificate, the buyer disappears, as the goal was always just to get money from the investor. While independent appraisals are, in principle, not unreasonable, and widely used in the real estate world, don’t fall for this scam. Estibot The oldest of the popular automated domain appraisal options is Estibot, which is used for about 2 million valuations per day. Estibot provides appraisals for all extensions, although the valuations will be nominal for newly released extensions. One can do 2 free Estibot appraisals per day without an account, or sign up for an Estibot account to increase that limit and also get additional features. The Novice Plan allow you to do up to 150 lookups per day, and also adds Domain Flipping and Portfolio Monitoring tools. There is no contract or requirement for a minimum commitment at Estibot. Portfolio Monitoring, one service with the Estibot plans, can be valuable. It monitors similar registrations, trademarks or domain names that have gone into development, among other things such as changes in algorithm valuation for the domain name. The Estibot lead generator helps to identify potential end-user buyers for the domain name. You can get a rundown of the many Estibot tools on this page. The Intermediate Plan adds expiring domain data, while the Advanced Plan includes API access. You can do 5000 lookups per day on the Advanced Plan, and 500 on the Intermediate Plan. Even the free Estibot appraisals provide analytics information. For example, you can see exact and broad search data including volume and and cost-per-click (CPC). The output shows how the CPC data has changed over the past year. While there are other ways to access such data, I find Estibot an easy to use presentation. While Estibot does list comparable domain sales, I personally don’t find Estibot comparator sale data very helpful most of the time. It seems to list sales very similar in price to the appraised value, independent of whether the name was in a similar sector. The free version of Estbot shows whether the term is registered in the major legacy extensions plus .info, .biz and .us. One can, of course, get more complete information on this using tools like dotDB. One thing to watch with Estibot is how the term was broken down, and whether for new extensions they included the extension in the search. Fortunately this is shown in the display. Estibot, in my opinion, does not handle made-up brandable domain names well, usually suggesting low values. This is because such names will not have advertiser search data or registrations in other extensions. Some registrars and marketplaces give Estibot valuations in listings, so I think it is important as an investor to know the Estibot value, even if you do not plan to directly use the appraisal information. GoDaddy Valuation Tool A few years ago GoDaddy introduced a free domain name valuation tool, which will evaluate any domain name, and it is free to use. They seem to have some limit if you do many valuations in a short time, but after refreshing the site it will let you do more. Because of their huge user base, and the visibility of the domain appraisal service, many millions of valuations are done each day. After they started the service, GoDaddy reported that there was an uptick on leads becoming sales on their platforms. A GoDaddy appraisal is free and easy to do - just enter the name and press return. As well as suggesting a valuation for the domain name, it has a statement regarding the value of the individual terms in a multiple word domain name. In my experience, GoDaddy does a superb job splitting up multiple word domain names. It also, in my opinion, is excellent at suggesting comparator sales. Since they have the huge dataset of Afternic and GoDaddy sales, there are numerous comparator sales that are not in the NameBio database. Note that there are additional comparator sales further down the results page, not just the several shown at the top. The one weakness, though, is they do not provide the year of the sale. An exact match name that sold 15 years ago might not be very relevant now, due to changes in brand choices and Google search over the years. When the GoDaddy appraisal tool was in beta development, they seemed to be making significant changes almost every week. It was not unusual to see huge fluctuations, sometimes by a factor of 2, in the appraised prices. Lately, however, the prices seem more stable. Clearly valuations should change with time, but slowly. While the GoDaddy appraisal will handle any extension, even those that GoDaddy the registrar does not handle, with new extensions they do not seem to give proper attention to the match across the dot. For example, just now I checked and investment.fund and investment.dog each have identical valuations of $2155. I think most investors would consider the former more valuable than the latter. For two-word domain names in legacy extensions, I think Go Daddy appraisal is strong as a technique for ordering probable value. That is, if I check 4 domain names, and the appraisals come back at $500, $1200, $1400, and $4500, most of the times I agree that the $4500 name has highest worth. A number of Requests on NamePros specify some minimum GoDaddy appraisal value. It seems to me that increasing numbers of potential end users are checking GoDaddy appraisal values before a purchase. This can help if you are pricing below the valuation, or even near it, but obviously can be an obstacle if your pricing is much higher. In any case, it is important to know the value in case it does come up. NameWorth There is now a third significant automated appraisal system, NameWorth. While you need to sign up for a NameWorth account to do valuations, you can conduct up to 5 valuations per day on the free account, up to a maximum of 20 per month. They also have paid plans that include bulk upload and API access, in addition to more lookups. NameWorth currently only evaluate .com domain names, although there is mention of adding .net at some point. Generally, but not always, you will find valuations higher on NameWorth than on GoDaddy valuator and Estibot. One of the things I really like about NameWorth is they give 6 prices for each domain name, with corresponding probability of sale within a defined period for each. The top price, their trademarked Retail Level, is the price if the buyer approaches you to acquire this specific name for immediate business use with few or no alternative names. The Market Level (trademarked term) might correspond to a user browsing a marketplace for a name, and considering this name as one of several options. There is an Auction Level corresponding to the wholesale price if the name was placed in a 7 day auction. For each price, they state the probability of sale. NameWorth also gives a demand rating for the domain name, looking at similar names that are developed or used in blogs, along with registrations of similar names. If you use their associated marketplace, BIIX, the NameWorth valuation can show on your lander. Domain Appraisal Is Hard While it is natural to be critical of both automated and human appraisals, and indeed sometimes they are very wrong, we should acknowledge that domain appraisal is not easy. The retail price depends on more than the name itself. An investor who does not need funding from domain investing, and is willing to wait many years, and is an expert negotiator, will secure a much higher price than an investor who needs to draw living expenses from a steady stream of domain sales. Some types of names, such as 4 letter or short numeric, are easier to appraise because there is a wealth of sales data available and the structure is relatively straightforward. On the other hand, an appraisal of a newly released extension, or a thinly-traded country code, does not have that information. Appraisal of single word domain names should be easy, but because the elite names trade so infrequently, and the role of the negotiator may be crucial in these sales, in practice this is not always the case. Made-up brandable terms are among the most challenging to appraise, as each is unique and it is not easy to establish close comparators. Those who have sold many brandable names, such as the brandable marketplaces and highly successful investors in that niche, are probably in the best position to evaluate these. Treat An Appraisal As A Second Opinion There is little doubt that over-dependance on automated appraisals has hurt some early-stage domain investors. I think there is danger in depending too much on any one measure, whether that is number of extensions, age of domain, or automated appraisal. Therefore, view automated appraisals, or I would argue any appraisals, as a second opinion. First do a detailed analysis, looking at things like business use, comparator sales, and alternative names, and decide on your own a price range for the domain name. If the appraised value is much higher, or lower, perhaps take a second look, but don’t give it more importance than that. Consider getting a fellow investor, or a site like NamePros, to give you a additional opinions as well. It’s Not Only About The Price Interpreting an automated appraisal should not be mainly about the price. Use Estibot as an easy way to get SEO statistics, or GoDaddy valuator as a source of additional comparator sales. Use a NamePros appraisal, or one from a friend, to help you with relative worth, and to suggest possible users for a name. I think it is unfortunate that the automated appraisals, except for NameWorth, do not give a price range. If GoDaddy valuator, instead of saying that the worth was $1411, said it was in the range $500 to $2500, the appraisal would be sounder. The model NameWorth use, of different prices corresponding to different potential buyers, makes a lot of sense to me. When using an automated appraisal keep in mind the approach and biases inherent in the appraisal. For example, Estibot take into account search volume and costs per click, which is not relevant for a made-up brandable term. Remember that GoDaddy appraisal for new extensions takes little account of match across the dot, so you must interpret results with that in mind. I think ultimately automated appraisals could get much better through more sophisticated artificial intelligence, and in particular machine learning. It is human nature that many people think their own domain names are more valuable than they really are. An appraisal can be a valuable reality check on the true worth of domains in our portfolio. That said, keep in mind appraisals can sometimes be very wrong. Stay Tuned Originally, I had planned this article to also cover how to optimize appraisals here on NamePros, with recommendations both for those requesting appraisals and those responding to the request. Given the length of this article, I decided to split that topic, and will be publishing it in a week or two on the NamePros Blog. Update: Published Getting More Out Of NamePros Domain Name Appraisals I welcome your comments on domain appraisals.