I guess I am the 'odd one'... I think appraisals are pretty cool (I don't have the experience to know if they are very accurate). But maybe because I had a few done and got some prices that I liked or maybe I am mentally "attached" and just tied up in the tech/statistical aspect of it.
For those that don't understand the statistics of the process please let me attempt to explain what i have learned, maybe this will help sway you. For those that know i apologize for taking up space on this thread, however, any feed back would be awesome.
So from my understanding, an appraisal is really just a massive correlation matrix done between your domain name and hundreds, if not thousands or tens of thousands, of domains that have been sold recently.
What a good appraiser would/should do is create a database of these domains that sold recently (like in the last three months). This database would include as many variables as possible, including: domain length, use of hyphen, TLD, number of words in domain, frequency of words used in language, backlinks, dmoz listings, Page Rank, etc. This database is used for a base to rank new domains off of.
There are also of course variables that don't even matter so there is a balance that must be met with the number of variables tested on. An example would be: how many of the letter "e" is in the name... (maybe this is a good variable.. i don't know..)
So when a new domain comes in to be appraised the appraiser will look at those variables and start matching them up. So it (human or computer) will look at all the domains that have sold recently that have the same number of characters and start averaging a price for ones that matched up, then they will move to the next variable, such as use of a hyphen. They then see where the selling prices of the previous domain compare to the domain being appraised.
If the domain doesn't have a hyphen then it will get another value associated with it that will most likely be higher then any domain with a hyphen. If the domain had two hyphens then it would be compared against domains that have sold that also had two hyphens. So this process goes until each variable is found and compared with variables of sold domains to come up with a bunch of average prices.
Depending on the domain there may be domains that were sold that are similar in a number of variables (instead of just one) so the selling price of domains with a number or matching variables has more weight on the average selling price than the averages that just compare one variable.
Finally, according to the appraiser's proprietary design, each of the averages of the variable are added up. Some appraisers may think that TLD is the biggest factor (for example only) and give the dollar figure that was averaged off that the most weight. Page Rank might get the least... Its totally up the to appraiser on this one. This is where they come up with a price. The range is usually their "p" value. This determines how much error there is in their analysis/correlation so they give a spread to take that into account.
Real Estate uses practically the same process but geography is primary variable on that one. Because a "Market Analysis" (an appraisal for real estate) is used for the buying and selling of pretty much every piece of real estate it proves that the system works for valuing something, as billions of dollars of real estate are sold weekly based off these numbers. (okay can't back up this fact on $ sold/week...
).
You can check this process out at
Zillow.com. You can take a house and add bedrooms and bathrooms (both variables) and see where you end up in the market analysis as far as price is concerned for a home. Its really cool.
So statistically I think appraisals are pretty accurate and one of the best ways to assign a value to a domain. However, it all depends on how good and mathematically correct the appraisal companies process of computing this is and of course their sample size. (a company with 1,000 sold domains for a sample size is going to suck compared to someone with 10,000 sold domains.)
So that is why I think godaddy appraisals (6 variables) are horrible but zetetic appraisals (28 variables) rock.
I hope this post wasn't a total waste of time to read and someone got something out of it.
I have attached a page out of Keith Pieper's Handbook that has some cool info on it but it is a bit out of date. I included the copyright info so i hope i am not breaking any laws or pissing any one off. (Keith Pieper = Zetetic and i very much respect the guy/company, sorry for any biase that might be in there.)
