advice Formula or Matrix For Domain Value and Return on Investment?

[Want2learn]

I feel funny starting a thread like this and not asking @Rick Schwartz to opine on the topic!


@Bigesta and I found ourselves together in another thread! I mentioned that if there were no formula or matrix for this concept, I would like to find one! When making a purchase of a domain we want to know its value. Sometimes we have a good idea and other times we are surprised. Is there an industry standard that says if you would buy a domain for X, in this case lets say $100, if you would not pay Y for it, then do not buy it? If I hand reg a domain for 10, but wouldnt pay 15 for it then I probably ought not buy it.

But where is that tension point? We all have budgets. There is a cap for what we might pay for a domain. I have to think that there is a guiding principle though. If I am in auction for domain abcd.com and would pay 10000, but wouldnt pay 11000, at that dollar amount I think I should skip it at 10k.

Am I making sense?

I know I may be willing to pay 1k for a domain, but can't bc of cash flow. I don't mean that.
I know i would pay 10k for abc.com today, but wouldnt pay 20k bc I couldn't.
I may not like a domain to pay anything for it, but might pay a few bucks to try and flip it.

 

[London555]

This isn't like the Black Scholes method of stock option pricing where you have a formula to look back at and there - in my opinion- never will be. The reason is that when you have a CEO pay $1Million for a name like dudu.com or a Chinese car dealer pay $2.5 million for mingche.com ( probably worth it-a great pinyin name) how can there ever possibly be a formula? It's simply what the end user will pay and the market conditions at the time. Would you pay $1Million for dudu.com?

 

[Want2learn]

This isn't like the Black Scholes method of stock option pricing where you have a formula to look back at and there - in my opinion- never will be. The reason is that when you have a CEO pay $1Million for a name like dudu.com or a Chinese car dealer pay $2.5 million for mingche.com ( probably worth it-a great pinyin name) how can there ever possibly be a formula? It's simply what the end user will pay and the market conditions at the time. Would you pay $1Million for dudu.com?

I am not familiar with the method you mentioned. What you say does make sense though. I do think that there has to be guiding principles, and I guess that is market conditions as you say. Would I pay a million for dudu.com if i had the money? No! Would you?

 

[ultradog]

I think the problem is that domain sales are not completely comparable to any other type of market. It is somewhat like sales of antiques or unusual items; it is somewhat like sales of real estate; it is somewhat like finding a gold nugget in the stream... But it is not completely like any of these. So I don't think you can find a matching formula that can hold up except perhaps for a very restricted section of domain names. And then there will still be exceptions.

 

[Eric Lyon]

@Want2learn -

Here are a few threads that may help you:

• What is the real value of your domain name?
  
• Calculating domain name value
  
• Determining asking price for a domain

Hope that helps,

 

[Ategy]

You really weren't very clear with what you're actually asking ... lol .. but I think what you're asking is if there is a relationship between what you should buy a domain at and it's actual end user value?

The first thing that needs to be clearly stated here is that every end user is different in what they'd actually be willing to pay. That being said .. there is a very very fuzzy progression of value as the quality of a domain goes up .. also keeping in mind that everyone also has a different opinion on what attributes count towards quality and at what levels of inportance.

At the end of the day though .. once you get past those huge disclaimers .. I'd think if you took the opinion of 1000 domainers, the following is what you'd see as a rough average.

Under $500 end users price = Holding costs are not worth risk
- - - - - - - - - - - - - - - (maybe $8 or at NP auction or handreg coupon or DDC)
$500 end user price = Do not pay more than $15 (hand registration)
$1000 end user price = Do not pay more than $40
$2500 end user price = Do not pay more than $200
$5000 end user price = Do not pay more than $500
- - - - - - - - - - - - - - - (around here is where you'll see the classic 10 to 1 ratio)
Above $5000 end user price = At this point the ratio can vary considerably more depending on the domain and the domainer .. but it's safe to say that the ratio lowers as price increases.


Again .. stress that these are completely fuzzy averages and every individual domain has other attributes that can change the ratio considerably as the likelihood of sale increases.


Also note that I put "Do not pay more than", as biggest part of becoming a profitable domainer depends directly on your ability to find undervalued domains .. ideally even below what I posted.


Final notice: The ratio matrix also differs considerably if you take the blue pill!