Our objective today is to understand:

• What makes up the value of a domain name? (there are 2 components)
• What are the factors affecting each part of a domain name’s value?

What makes up the value of a domain name?

When we talk about value, there are 2 separate components that makes up a domain name’s value. They are the domain name’s:

• Natural Value
• Development Value

Natural value refers to the value that the domain name gives itself. For example, the domain name, ChocolateCoffee.com, was recently sold for US$2500. Its keywords and market demand solely determined its value. In plainer terms, it means that without further development, the domain name’s natural value was $2500.

Development value, however, refers to the value of a domain name after some effort was put in to develop it. In other words, you try to affect the domain name’s value by gaining more relevant traffic. And traffic represents money-earning opportunities to serious buyers.

The chart above shows you how the development value and natural value add up. Basically, Natural Value is the base value that cannot be easily affected. While, Development Value is the added-value on top of a domain name’s natural value. Natural Value + Development Value = Total Value of Domain Name .

So, the question is how can you influence both the natural value and development value of your domain name? Read on.

The Factors of Natural Value

We have covered this briefly on an entry about how to choose a domain name. Nonetheless, let’s recap. Here are the determinants that affect the natural value of a domain name.

• Length of domain name -should ideally be below 20 characters
• Easy to remember
• Keywords or Dictionary Words - should have a ready market or niche (commercial value)
• Easy to pronounce
• Brandability
• Natural Traffic - traffic gained from the keywords alone

How do we appreciate a domain name’s value through  above determinants?

By using the determinants to choose the right domain name in the first place! Because after registering a domain name, next to nothing can be done to appreciate its natural value. (I will dedicate a/some post(s) on some techniques to find a good domain name.)

The Factors of Development Value

These are the determinants of development value.

• Quality Content -do you have content that attracts return-visitors
• Relevant Traffic -is your traffic related to the domain name’s keywords
• Monetisation Potential -can your developed domain name be readily monetised

Whatever I’m trying to say should be clear now. A domain name with a website will naturally be valued more. Because it fulfills the three factors above. With a website of quality content, you gain relevant traffic and with some form of marketing, even more traffic will be gained. And traffic means money!

Through the process there is a high possibility that your site will gain pagerank from google. And many buyers take pagerank as an indicator of your site quality.

The question is, are you willing to spend time to develop a site for your domain name? If not, what can you do. Watch this space.

Logen Lanka

The primary purpose with your domain name should be to make it easy for visitors to find your website. You should therefore choose a domain name that is memorable and/or convenient to type.

For a domain to be memorable, it should reflect the nature or brand of your website. Choose a dot com above all. Most people by habbit type “.com”. Whereas convenient to type, talks about the length of your domain name and the proximity of the keys on the keyboard while typing it. The domain name should preferably be below 13 letters/characters. And avoid awkward names like 1-halqf-207d.com. Not only is it forgetable, but it requires the visitor to move his fingers on different end of the keyboard. Think about the disabled.

How To Buy and Sell Domain Names

You may have noticed I haven’t discussed on the domain trader’s and investor’s point of view. Well, it is prudent for beginning traders and investors to understand how the demand of domain names work. Do not start out like me by putting my money on one speculation.

Hereon,  we shall build on the foundation, which is what a regular person looks for when buying a domain name. On the whole, people prefer short and memorable domain names. After all, we have established that a domain name should be convenient for visitors and beneficial to the website’s brand name.

This is straightforward. Invest in domain names that are:

• Brandable
• One-word dictionary words (e.g. ardor.mobi, love.com)
• Short (below 5 letters preferably)
• Commercially valuable (can be effectively used to target a product/service market)*

      *must be combined with the other factors; it exists separtely

Here’s the not so straightforward part…

While each of the above point can survive on its own, brandabiliy is the weakest. You cannot sell a domain for much if you base it on brandability alone. Why not invest in the other stated points instead?

Well, many one-word dictionary word domain names have been taken. All short domain names that have less than 5 letters are taken.

That leaves us with one factor to bank on -brandability. What then can we do? On top of being brandable, make sure the domain name you choose has commercial value. Keep the domain name short (below 13 characters/letters). And perhaps, have a real word within the domain name.

The result are domains like:

• iAgnostic.com
• MrsBids.com (I sold this already)
• DarkEmo.com (I sold this already)

Be creative, but consider your target market when you plan to buy a domain name for resale. What does the customer demand? Supply the customer with what he/she wants!

Logen Lanka