How to Correctly Appraise New Generation of Domain Names
Each domain investor should know the value of their domain names. Before 2014, we had 3 main domain extensions in internet space: .com, .net and .org. Domain names in those extensions have more-less the same yearly renewal fee (approximately $10), and as their sales were recorded in public sources for 30 years, it becomes easier and easier to appraise them.
Since 2014, hundreds of new domain extensions (new gTLDs) were introduced into internet space. Now we can register names in extensions like .life, .world, .live, .online, .store, .xyz, .photo, .shop or .global.
In the following text, I will quickly go over appraisal methods for legacy domain names (.com, .net, and .org), and then I will discuss appraisal methods for new gTLDs.
Appraisals for .com, net, and .org domain names.
The main appraisal method for .com, .net, and .org domain names is to check what are the publicly recorded sales of similar domain names and apply those findings on your domain name. Because all renewal fees for those domain names are the same, it is an easy exercise: we are comparing apples to apples.
Of course, one needs to take into consideration the selling venue, which is often included in the reported data: there are selling venues that cater mostly for end-users (business owners, marketing experts), and there are selling venues that cater mostly for domain investors.
So when we check similar names to our name which we are about to appraise, we need to take the selling venue into consideration. Domain investors need to achieve ROI on their domain investments: this ROI can be anywhere between 2x-100x for most cases. This is a very broad range, as ROI expectations are very different among different types of domain names. Let’s say, just for the purpose of this article, that some meaningful ROI is 10x.
This then means, that when we see a domain name which sold at venue catering mostly for domain investors for $1000, using ROI of 10x we can quickly calculate the end-user price the domain investor expects for this domain name is around $10 000.
Now, this method is more valid when we consider domain investors’ venues that are using auctions to sell the domain names. If a group of domain investors bids on the certain name in a category where the usual ROI is 10x, and it achieved $1000 final price, we can say with a pretty good level of certainty that:
wholesale price (price for which domain investors are buying) is $1000
end-user price (price for which businesses are buying from domain investors) is $10 000.
The above is of course an extreme oversimplification of how appraisals work, but those are very basic concepts for domain investors and I just wanted to put the reader’s attention to concepts of end-users, domain investors, wholesale price, end-user prices, selling venues, and the importance of understanding that there are different ROI expectations for different categories of domain names.
Appraisals for the new generation of domain names (new gTLDs).
New gTLDs are here since 2014. Which is only a few years, but there are already numerous sales reported. Some top sales in new gTLDs levitate around half a million-dollar mark and can be found for example here.
When we try to appraise new gTLD domain names, the situation is much more complex and difficult in comparison to legacy domain names appraisal. There are several reasons for it, mainly, different structure of renewal fees, and not enough comparables for some vertical new gTLD extensions.
- Let’s start with the different structures of renewal fees.
The new generation of domain names (new gTLDs) have different yearly renewal fees among extensions, and within extensions as well.
A) Different renewal fees among extensions mean, that yearly renewal fees for .live are different than those for .global, which are again different from those from .online, etc. The range of yearly renewal fees for new gTLDs is very broad: some extensions renew for approximately $10 (basically the same as .com), many of them have renewal fee in the range $20–$40 (most cases), but we have also many extensions which have renewal fees between $50–$100. There are also few new gTLD extensions that renew for as much as $2000 for standard domain names in those extensions.
B) Differences discussed in A) are just differences among various domain extensions. To make the matter even more complicated, new gTLDs have also various price levels for yearly renewal fees within the extension. We always have a STANDARD renewal fee for certain extensions, but new gTLD names designed by the registry as PREMIUM have different, in most cases higher pricing. (I wrote in “most cases”, as there are some cases where domain names marked PREMIUM have actually lower renewal fee compared to STANDARD renewal fee: but this is a 1% exception, so for the purposes of this article, we can consider domain with PREMIUM renewal fees to have higher renewal fees than those with STANDARD renewal fees).
The range of yearly renewal fees for PREMIUM new gTLDs is again very broad: some premium domains renew for approximately $40, many of them have renewal fee in the range $100–$250, but we have also many premium domain names which have yearly renewal fees set by registries between $5000–$60 000. The last figure is not a mistake: it is indeed $60 000 each year to renew a premium domain name.
I will very soon address why this various pricing structure makes appraisals of new gTLDs very complex.
2. Another mentioned problem is not enough comparables for some vertical new gTLD extensions.
As it happens, most new gTLDs are very niche, representing very vertical categories. We have now hundreds of very vertical extensions like .tennis, .law, .bet, .casino, .guide, .accountants, .loans, properties, .garden or .guitars.
It’s been only 6 years since 2014, and some extensions were rolled out in 2018 or 2019, while the “second wave” of new gTLD extensions is yet only planned in the future. This means, that for many extensions, particularly those which are very vertical, there are not enough comparable sales in public databases recorded yet.
And this makes the appraisal approach we now have with legacy names, mostly .com (go to sales databases and look for the prices similar names in .com achieved in past), pretty impractical with new gTLDs. For .com, all verticals are under .com and it has been reported for 30 years already, so we have enough comparables. For new gTLDs, we can also use this appraisal method sometimes, but we need to develop also other appraisal approaches.
Three simple suggested methods for appraisals of a new generation of domain names (new gTLDs).
So how we can appraise new gTLDs, considering the two main obstacles described above?
Here are some methods I personally use at the moment:
Method No.1: For broader new gTLD extensions, have a look at publicly recorded sales anyway.
As it happens, there are some new gTLD extensions, which are of broader type, for example, .xyz or .top. By broader, I mean that we can put a lot of keywords or semantic strings in front of those extensions, without altering the meaning of the whole string. For example, we can create the name BestComputers.XYZ or BestComputers.Top and those are ok names. But if I would create BestComputers.Holiday or BestComputers.Tennis, those names would not make much sense, reading the strings across the dot.
Now it is a fact that broader extensions usually have more reported sales, as more keywords can be put in front of them, comparing to vertical extensions.
So for those broader extensions, we can use an appraisal approach similar to .com appraisals: if for example, I have a nice technical English dictionary keyword in .XYZ, I can visit namebio.com, where I will find that such terms are usually sold for XXXX in 2020 using venues catering to end-users, and for low-mid xxx using venus catering for domain investors (again, it is up to the reader to learn which venues are what, as I do not wish to be very specific here, particularly as specific venues also change in time). There are now around 600 publicly reported sales in this extension, so we have enough data to make some gross appraisal estimates.
The same situation is with .top domain extension: there are already more than 2000 reported sales in namebio.com in 2020, so we have enough data to use this method.
Method №2: For very vertical new gTLD extensions, use the concept of “similar new gTLD extensions” and check reported sales.
For example, let’s say you have nice domain names in .photo, something like free.photo. If you check reported sales in this extension, you will see around 13 results, which is not exactly a large data set. This is is because .photo is a very vertical extension. But we have also similar extensions to .photo: there are also .photos, .pics, .pictures and .photography extensions.
So if we do not have enough data for one extension, it is often helpful to look for sales in similar extensions.
Of course, there is a debate on what exactly those similar extensions are (for appraisal purposes). There are so many opinions as there are new gTLD domain investors. I will give you just a few examples, my personal view on this topic:
.live: for me, a similar extension for appraisal purposes is .online (although there is quite a semantic shift for many keywords)
.life: .similar extension for appraisal purposes is .world (although, there is again a semantic shift, as for .life great keywords are usually adjectives, while for .world great keywords can be also nouns in addition to adjectives (prosperous.world and prosperous.life are examples of new gTLDs with the adjective as a keyword, while battery.world is an example of new gTLD with a noun as a keyword).
.agency: similar extension for appraisal purposes can be .company
.best: here, similar extensions for appraisal purposes are .vip &.top
.loans: similar extension for appraisal purposes is .loans (no brainer here, really)
.expert: similar extensions for appraisal purposes (although more playful in a sense) for many good keywords are .ninja &.guru
.law: similar extensions for appraisal purposes are .legal, .attorney and .lawyer
.store: similar extensions for appraisal purposes are .shop and .boutique, and in some cases also .express
Those are just a few examples. There are dozens of groups as described above, as we have hundreds of new gTLD extensions, and many of those groups can be very debatable. But again, if you want to estimate the value of your keyword in let’s say .store, it is always great to check for that (or similar) keyword in databases of publicly reported sales in similar extensions.
Method №3: For very vertical new gTLD extensions, use the concept of “similar new gTLD extensions” and check names offered for sale by registries, or experienced new gTLD domain investors.
This approach is basically identical to Method №2, but instead of checking reported sales (history), we can check what is on offer (future expectations).
Now, just because some domain has some price attached to it by the registry, or by experienced new gTLD domain investor, it does not mean at all that it will sell for this price. Not even close. But it can give at least some rough indication of price ranges those market participants are expecting their domain names to sell for. Particularly registries are getting better and better in pricing their domain names, so I would definitely consider this as a guide, in addition to other methods described in this article.
Problem with renewal fees.
3 Methods described so far are somehow tackling the lack of available data for some extensions, which is caused by the fact that some new gTLD extensions are here only for a very short time, and most of them are very vertical, so by definition, they will always have much fewer data available, comparing to a broad extension like .com. Although those methods might sound reasonable, when applied straightforwardly without further considerations, they contain 1 big problem, already described above: various renewal fees, among new gTLD extensions, and also within new gTLD extensions (STANDARD Vs PREMIUM yearly renewals).
The problem we have in 2020 with databases of publicly reported sales is the following: they simply do not consider at all huge differences among new gTLD yearly renewal fees.
I will give you a simple example of why this matter: let’s check reported .bet sales (this is just a randomly selected new gTLD extension, as the following remarks are valid for hundreds of other new gTLD extensions as well).
So, there are now 57 .bet domain sales reported at the moment of writing at namebio.com. To make it easier for us to understand what is the average .bet reported sale price, namebio.com even calculates a nice little statistic for us, saying the Average Price is $3346:
It looks nice, but it is a good example of mixing apples with oranges.
The fact is the following: some .bet sales reported in namebio.com has STANDART yearly renewal for .bet (around $12), while other .bet names which are reported there have a PREMIUM yearly renewal fee (around $3125). You can not tell quickly just by looking at domain names which are which, you need to manually check the renewal fees of those domain names to find it out).
So while technically namebio.com reports correctly the acquisition costs during 1st year of holding, extremely important information for all new gTLD domain investors (what are maintenance costs of owning a domain name) is completely missed out.
It is of course a big difference, if someone initially pays $5000 for a name with a STANDARD renewal fee of $12, or if someone initially pays $5000 for a name with a PREMIUM renewal fee of $3125 and will then continue to pay those $3125 for each year of domain name ownership. In the second case, this makes that domain name MUCH more valuable for appraisal purposes, particularly if you hold a very similar domain name with the STANDARD renewal fee. At the moment, both cases are reported in databases like simple, identical $5000 sales, which is definitely not a case in a real-life when we consider the total financial costs of the buyer.
And that can distort all the appraisal efforts using Methods 1, 2, and 3: in order to compare apples to apples, we need to know also renewal fees for reported new gTLD domain names. This was not needed in the .com era, but now it is needed. Clever new gTLD domain investors are of course already doing this and are taking renewals into consideration, but it takes deep understanding and knowledge, as all extensions are different, have different premium levels and structures, and people who are just beginning to invest in new gTLDs are in most cases not aware of all this.
In addition, I personally saw dozens of examples on domaining forums, where people are trying to get qualified appraisals for their new gTLD domain names, and other domain investors (particularly those who are not investing in new gTLDs, and are with zero first-hand experience) are doing following 2 mistakes again and again (a big problem in my opinion, as it in many cases incorrectly devalue some very good domain names):
- They jump to namebio.com, and particularly when the appraised domain name is in very vertical extension, their conclusion is usually: not enough data reported, therefore domain name in that extension does not have a value. This ignores the concept of similar extensions described above, the fact that most new gTLD extensions are very vertical, and the main fact of new gTLD domain investing, which is that the value of new gTLD domain names is mostly derived from semantic meaning across the .dot (which means most valuable new gTLD domain names are those where the right side of the domain name perfectly matches left side of the domain name from semantic point of view, while in addition, there is a large end-user pool and there is also high intrinsic keyword equity behind keywords involved).
- And if there are enough data, those “appraisers” are still not aware of PREMIUM renewals of some new gTLD names and therefore are in many cases simply comparing $3125 sale of, let’s say .bet domain name with $3125 premium yearly renewal to $3125 sale of .com name, blissfully ignoring the fact that after 10 years the owner of that .bet name will invest $31 250 in total for the privilege to operate their website on that domain, unlike the owner of .com name, who’s costs will be indeed around price tag reported in the database (as $10 renewal fee x 10 years is only $100, which is not much difference in our example).
So the correct valuation of new gTLD domain names needs to take all 3 methods into consideration, together with a correct understanding of new gTLD yearly renewal fees.
The above-written article is a personal opinion of Marek Eckhaus, a private new gTLD domain investor, and Founder and CEO of Brands.International. Although a large effort is made to keep articles up-to-date, it might contain inaccuracies as the internet is developing fastly.