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Method of Valuation of Exact Match Domain Name

Labeled as analysis in General Domain Discussion started by MetBob, Aug 10, 2018.

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  1. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    NamesCon recently tweeted a link to an article on Forbes by Michael Gargiulo (he is the CEO off VPN.com, so has been through the buying a great domain name!). Anyway, he suggests the following formula for estimating the value of an exact match com domain name. Article link:
    https://www.forbes.com/sites/forbes...o-price-these-high-value-assets/#5463ab627437

    Present Domain Value = Number Of Global Monthly Average Searches x $1 Cost Per Click (CPC) / Number Of Years Required To Be No. 1 In Search Engines From Today

    e.g. if Google indicates that currently the exact name has 3 million searches, and if you thought it would take 4 years to get to number 1 in search with that name, the domain name is worth about $750,000. The global monthly searches is, of course, easily obtained (he suggests a 12 month average).

    He provides a link for the range of search and for different areas for both search and display situations, which are themselves interesting reading, and generally are above his $1 figure. For example in legal the range is $0.72 for display and $6.75 for search, whereas for an exact match word in education the range is $0.47 to $2.40. Link below:
    https://www.wordstream.com/blog/ws/2016/02/29/google-adwords-industry-benchmarks

    He does not provide much detail on how he estimates years to get to number one, but says it usually falls in the 3 to 6 year range (depending on how much competition).

    I am not sure if I totally agree with his approach, which seems to be assuming that once you get to top of Google the value is equal to what you would pay for clicks if every searcher clicked on your name. Nevertheless, using some combination of searches, how competitive to get to top, and what it would have cost you to do CPC in that area, seems logical.

    Welcome what you think, and links to alternative ways to evaluate the worth of a domain to an end user.

    (ps he says this formula is for .com and suggests 1/10 or less for ngTLD exact match)
     
    Last edited: Aug 10, 2018
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  2. Hypersot

    Hypersot Active Member VIP

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    Nice, thank you.

    One way to insert the competition factor in the formula could be to set 6 years (the max.) when comp is 100% and 3 years or less (the min.) when competition is <10% (rough examples).

    Also, 1/10 for one word exact-match ngtlds is probably ok but anything else should drop down to 1/200 or less imo (unless it's an .org but those are exceptions).

    Lastly,
    those formulas are best used when comparing domains in one's portfolio... I'm not sure if they can apply to a real-life situation unless -maybe- we are talking about highly premium .coms.

    Thanks again for sharing.
     
  3. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    Thanks for thoughts re competition especially, @Hypersot.

    Yes, he says 1/10 or less and does not go into the situation outside com beyond that. I agree it is probably less, unless a really excellent match. I was thinking of trying to apply the formula to the big ngTLD sales like home.loans, vacation.rentals, the.club, casino.online to see how it matched.

    I am going to do some more research to find other proposed valuations, but I did like this as a starting place.
     
  4. Hypersot

    Hypersot Active Member VIP

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    You could always have a look at Rosener's equation but I don't think it's valid anymore due to the EMDs don't necessarily mean that they will get top ranks anymore (that equation was based in that assumption).
    Here, have a look:
    https://www.domainsherpa.com/rosener-equation-value-domain-names/
     
  5. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    Thank you so much, @Hypersot! That looks superb and with the examples. I am not so clear, even with the notes at the bottom, about the payback period. The examples given all had 12 months, but he says you could adjust, but not sure how to know what is reasonable.

    I found this one on a LinkedIn from Samuel Allcock although the formula (well down in the third part) seems pretty similar to the other ones except he puts the numbers directly in, or some of them.

    https://www.linkedin.com/pulse/how-value-your-domain-name-samuel-allcock
     
  6. poweredbyme

    poweredbyme Established Member

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    1- A website can never be #1

    2- A website consists of more than 1 page, each page will have different rank on SERP's and page authority affects each other.

    3- Number of years needed to be #1 depends mostly on competition and how much money and efforts you will invest.

    I mean it's very difficult to guess the number of years needed to be #1. It usually took longer than 4 years for me. 6 would be a safer choice if you are about to purchase based on that equation.

    * number of searches changes based on exact or broad searches, must be clarified in the formula.
    ** CPC depends on CTR. CTR factor is disregarded in the formula.
    *** Being #1 on SERP's will never bring you 100% of that number of searches. Some people click on #2, some people click on #10 even #20 without clicking on #1
     
  7. garptrader

    garptrader Top Member VIP ★★★★★★★★★★

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    With multiple paid results appearing above organic results, Google shows it does not really believe it's own B.S. About putting the best sites at the top. The third or fourth organic result might now appear below the fold. Note as well the number of $xXxX domain sales every week with zero search volume. How do you explain that?
     
  8. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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    Agree 100% that the suggested formulae are at best only part of valuation story. I'm still searching for an elevation scheme that is more broad, and more sophisticated. Hope someone will suggest one.
     
  9. Jurgen Wolf

    Jurgen Wolf Top Member VIP ★★★★★★★★★★

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    You should distinguish the "search terms" (various type-in generics) and names which can be branded/used as company name...
    And that's why such sales.
     
  10. Jurgen Wolf

    Jurgen Wolf Top Member VIP ★★★★★★★★★★

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    So if we are talking about generic .COM sales - the buyers are paying for traffic... de facto.
     
  11. myfavorite

    myfavorite Established Member

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    Thanks for the info. Especially the idea of using it as a starting point. Half bread is better than none.

    Some of us are still learning this trade and will always appreciate good ideas as we research further.
     
  12. vravis9

    vravis9 Established Member

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    Very informative and deep stats...

    Thanks for sharing @MetBob ...
     
  13. Jurgen Wolf

    Jurgen Wolf Top Member VIP ★★★★★★★★★★

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    Regarding this archaic Google AdWords...
    CPC is trending down from year to year...

    And more and more advertisers are using ZeroClick and other models...
     
  14. Bob Hawkes

    Bob Hawkes formerly MetBob NameTalent VIP

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  15. john888

    john888 Established Member

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    Google Keyword Planner keyword=VPN US search for the month of September is

    Clicks

    50K
    Impressions
    780K
    Cost
    $51K
    CTR
    6.4%
    Avg. CPC
    $1.03

    Where does he get exact name Global 13.6 million searches per month??
     
  16. Hypersot

    Hypersot Active Member VIP

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    I guess Global is not US?
     
  17. john888

    john888 Established Member

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    Google Keyword Planner does not give you global. Where does he come up with this number.
     
  18. BoomingNames.com

    BoomingNames.com Established Member

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    Interesting and well-crafted statistics that can give us an estimation before buying a domain name to calculate the potential in the long run.

    Even a rough estimation will be of great use.

    Stay Blessed!
     

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