How To Value Generic Domain Names – with Andrew Rosener

On July 17, 2011, this interview was summarized in article format. To fully understand the equation, inputs and subtle nuances – watch the interview on this page. To quickly read and apply the Rosener equation, read this article:
The Rosener Equation: How to Value Premium Generic Domain Names

Hundreds of millions of domain names have been sold in the past, and millions continue to be sold and resold every year. Yet until today, there has been no standard methodology or formula for valuing a domain name.

Andrew Rosener has taken a brave step forward to share his domain name valuation methodology.

The future of the domain name industry is based on our ability to bring additional services into the industry, such as insurance, titles, initial public offerings or stock exchanges. These are the types of services that will increase the value of domain names by allowing banks and financial institutions to lend money against domains. However, banks can’t lend money against a domain name today because they don’t know how to value a domain name.

Andrew’s methodology is not the final say; it is the start of the discussion. Watch the interview, test his formula and contribute to the conversation by suggesting methodology improvements in the comments.

This interview and The Rosener Equation was revisited 15 months later (starting at 47:13).

Interview (82:46): Watch | Listen/Download Audio | Sponsors | Key Take-Aways | Read Transcript

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About Andrew Rosener

Andrew Rosener, Media Options

Andrew Rosener is the CEO of Media Options, an industry leading domain name brokerage firm. Andrew also consults and develops online media properties, including Spearfishing.com, Jah.com, RH.com, CascoViejo.org, and Pedasi.com.

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DomainTools is the recognized leader in domain name intelligence, providing a powerful set of research and monitoring tools built on the industry’s freshest data. DomainTools offers the most comprehensive collection of domain name ownership records in the world. Over 1 million members rely on DomainTools to protect and grow the value of their web sites, their domain names and their intellectual property on a daily basis.

David E. Weslow, Attorney at Law – provides legal representation for clients ranging from individuals to Fortune 500 companies in relation to domain name transactions and disputes, trademark and copyright claims, and web hosting and content liability issues. A former software and web developer, he regularly assists clients with cutting-edge issues involving law and technology.

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Andrew Rosener Interview Key Take-Aways

  • Use the Google AdWords Keyword Tool to determine exact match search volume and cost per click information.
  • Depending on the search phrase, you may want to use the Global Monthly Searches (world-wide) or Local Monthly Searches (United States, by default, for users in the US). Think about where customers will be coming from to estimate traffic.
  • When determining the viability of a generic domain name, look for domains that have greater than 1,000 exact match searches per month. (Morgan Linton confirmed.)
  • If an advertiser has an unlimited budget with Google and wanted to maintain the top organic position, we can estimate what they might pay — which is the basis of Andrew’s forumula.
  • If in the top organic position in Google, one can estimate that a result might receive 80% of the clicks.
  • Andrew’s domain name valuation formula for calculating the full retail value of a .com domain name: (# Searches) x (% Click-thru) x ($ per Click) x (24 Months), with 24 months being a fair valuation time period for the domain name purchase. For example, (8,500 searches) x (.8, for 80% click-thru) x ($1 cost per click) x (24 months) = full retail value
  • The appraised value listed above is the maximum retail value that might be paid by an end user. If you sell to another domain investor, you might expect 10% of the full retail value.
  • The actual value of the domain will be plus or minus 30%, so an $8,000 domain name may be worth between $5,600 and $10,400.
  • Hyphenated domain names are worth 5-10% of the value of the non-hyphenated domain name, calculated using the formula above.
  • Regardless of the calculations performed, if someone has owned a domain name for years and in selling is getting a phenomenal multiple, they may take much less than the full retail value. Every sale-purchase is unique, and it is difficult to say no to a large transaction value – even if it is much less than the full retail value.
  • If you’re looking to build a brand, the .com may be a better purchase. If you’re looking to garner only traffic through search engine optimization, then a .org or other domain name extension may be a better value.
  • Other domain name extensions, such as .org or .net, are worth about 10% of the .com value, as calculated using the formula above.
  • More and more – in lead generation spaces such as insurance, education, health, medical, mortgages, finance, banking – domain names are not selling to end users but to lead generation companies such as QuinStreet.
  • The subtle nuances of adjusting the formula are exemplified in the video and transcript. Please watch, listen or read for the details.

Excel Spreadsheet Download Download the spreadsheet calculations of the domain names used in this interview


Excel Spreadsheet Download Download the spreadsheet calculations… (Excel .xls format, 1997-2004)

Andrew Rosener Interview Raw Transcript

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Today’s DomainSherpa interview is sponsored by the following companies:

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Here’s your program.

Michael: Hey everyone, my name is Michael Cyger. I’m the publisher of DomainSherpa.com, the Domain Name Authority and the place where successful domain investors come to tell their stories and share their experiences.

Hundreds of millions of domain names have been sold in the past and every year, millions continue to be sold and resold. And I have yet to find a way to accurately and consistently value domain names, but hopefully, that’s going to change today.

Joining me is Andrew Rosener, CEO of Media Options, a premium domain name brokerage and online media consulting firm. Andrew has become one of the domain industry’s top premium domain name brokers in just a few years. And as you’ll hear in this interview, he has a process for valuing generic domain names that he’s going to share with us. Andrew, welcome to the show.

Andrew: Thank you Michael.

Michael: So Andrew, as a newbie to the domain name industry. I’m the newbie, I find it totally frustrating that I can’t get 2 people within the industry to tell me what a domain name is worth and be within 10-20% of each other. And the people who are willing to give evaluation can not or will not justify their reasoning, which is why when we spoke a couple of weeks back, I was so excited to hear that you would share your methodology. So, let’s dive into it. So, from what I understand, there are 2 general types of domain names, brandable domain names and generic keyword domain names. Which does you valuation process apply to?

Andrew: I would say that of my evaluation, my valuation methods definitely only apply to generic domain names, domain names which, you know, let’s say exact match keywords, domain names that have contain keywords in the correct order, which people are typing directly into their search engine whether it’s Google or Yahoo! or what it might be. These are the keywords that people [Audio skip 2:00] and [Audio skip 2:05] important factor in the valuation of domain name is that determines your market. The number of people which are typing in those keywords every month tells you there are that many people that you can potentially capture for what you’re doing, whether it’s a product or service or whether you’re just trying to provide information. Those are the number one people you can get on your website for what you want them for.

Michael: Okay, so we’re not talking about brandable domain names like Flicker or Delicious, the way it used to be spelled, or Google, before they became, you know, megatropolis. We’re talking about words that people type in to their search engine and are looking for some sort of answers about.

Andrew: Yes, no, no, no, brandable domain names are essentially, there is no way to value a brandable domain name. Then it comes back to the old saying of it’s worth when somebody is willing to pay for it. You know, that fits to also if you take a good keyword and you put I or E in front of it. Well, I like those kind of names and I own some, certainly they have value but I don’t think there’s anybody that can tell you that, you know iCloud was worth $4.5 million which is what Apple just paid for it. But obviously it was worth $4.5 million to Apple, you know, it probably would have been worth in the range $5,000-$10,000 for me. But, yes, like exact match keywords, generic domain names, I think that there is a methodology for valuing them. And there certainly is going to be debate about those valuations and my valuation method is not going to apply to everybody and just because that’s what I say it’s worth doesn’t mean that’s what you need to sell it at or that’s what to be buying it at but we need something, right? You know where they expedite…The sales of domain names that people want to sell. We need to have a valuation method.

Michael: Exactly. And as we’ve seen we’ve published an article on Monday or last Monday about online valuation tools and, you know, it just got torn and there was a lot of controversy about how they value and you know it breaks down at the edges when you have domains that have traffic or when you have domains that are premium domains or just generic keyword domains. So, you know, there are a lot of areas where valuation prophecies break down. I appreciate you coming on because we’ll not only get to hear what your process is but then we’ll also get to ask you about those edges. Where do things break down? Where do you need to actually have some intuition and some experience in the industry to be able to add some value to the valuation process? So, let’s actually get into it. Let’s talk initially only about .com domains. I’m going to come back after we get through the process and ask you about other TLDs and ccTLDs, but let’s just only talk about .com domain names. What is your process to value generic keyword domain names?

Andrew: So, the first factor which I take into account, which I just mentioned is the amount of exact match keyword search volume. And the tool that I use for finding that is the Google AdWords keyword tool and you could easily Google that and bring it up and go there. One problem that I find a lot of people have is once you get on to the Google AdWords keyword tool, you can’t just type in the keywords and away you go. Down on the left hand side, if you scroll down, there are three different selections. There’s phrase, broad and exact and broad and phrase for my purpose is have zero purpose, zero use, all I care about is the exact match. And what that means is, it’s, those keywords and only those keywords that people typing in to Google to search for Google and all of their parts for most keywords. Now I want to know how many people are typing those keywords in.

Michael: So, I just went on the Google AdWords keyword tool, Andrew and I typed in your name. And then in the half way down on the left hand column, it says “Match Types” and I unselected broad, which was the default and I selected exact, which puts brackets around it.

Andrew: Exactly.

Michael: So I can see that your name, Andrew Rosener is searched 36 times global monthly searches. So, 36 times—

Andrew: 36 times, I never looked that up, so…

Michael: On the average, you’re being searched.

Andrew: 36, come on, that needs to get up. Maybe after this interview, we’ll get it up to a hundred.

Michael: I’m sure it will. Okay, so that’s the first thing you do. You go to Google AdWords keyword tool. You and I’ll have a link to it in the, on this page when this interview goes live. You type in your keyword phrase. You select exact. You unselect broad. And then what do you do?

Andrew: So then you, you know, hit search or whatever. And it’ll pull up your keywords and it’ll tell you how many global exact match searches there are and how many local exact match searches are, local meaning US. You can also select it, the default is usually for English only and United States but you can adjust that as well. And of course that depends on your keywords, I mean, if you’re searching for instance, I was looking up the keyword, what was it this morning, Rome, I think. It was the, you know, the city in Italy. And when I’m searching for Rome, I mean, I’m not necessarily interested in only what people within United States are searching for. I’m looking for global. So, in that case I’ll be looking at the global exact match if I’m looking for something in the insurance space or, you know, car insurance, for instance. Then I’m really only concerned with United States because the only, the leads which I can sell to insurance companies are going to be US only. That would only be…

Michael: So, if I was going to buy carinsurance.de. I was going to buy the URL in Germany. I would go type in car insurance as two separate words and then select instead the location United States maybe I’d select the location Germany to see how many searches are being nice?

Andrew: Yes.

Michael: Okay.

Andrew: You’re right.

Michael: I get it.

Andrew: I do that often, like if I’m looking for, you know, sort of short domains like two or three letter .de domains. You know, I don’t care about the people in the US are searching for X Y Z but I do want to see how many people within Germany are searching for X Y Z.

Michael: Right.

Andrew: Yes.

Michael: Okay, makes perfect sense.

Andrew: So, but the defaults are for the USA and for our purposes here let’s talk about local exact match searches within United States English language only.

Michael: Okay.

Andrew: So, we get that number and in general, let’s say that I’m looking to buy a domain, you know, let’s say somebody sends me a list of domains and they say, “Hey, let me know which of these domains you think you might be able to sell.” When I’m judging the viability of a domain name for selling purposes, I’ll go through that list, I’ll check the exact match searches and, you know, basically anything with over a thousand exact match searches, you know, tells me it’s got some worthiness. Now there are people that are interested in names that have 300 or 200 or you know, there are people that are interested in names that have none, but for our purposes here, we’re talking about the generic exact match keyword domains. And I am looking for names, you know, that have at least a thousand people per month typing those keywords in Google.

And then, you know, that number can stretch upwards, I think the highest I’ve seen is somewhere around 11 million exact match. Hold on. Thought this was off. Anyways, so the next factor that we take into account, once we’ve that exact match search volume is the CTC level. What are advertisers paying for you [Audio skip 10:30] you know, in the sponsored links and you know, you can basically formulate what it cost them every month in order to hold that spot, assuming that they have an unlimited budget with Google, I mean, if you want to maintain that top spot throughout the month what would it cost you?

Michael: Okay.

Andrew: And essentially then we take into account, you know, the statistics such as, okay, if you’re in the number 1 spot, how much of the search traffic can you, you know, would you expect to reasonably get? And that comes out to something around 85, people have these variable numbers out there that you’ll find, but somewhere between 75% and 90% of the traffic, if you’re in the number one spot is going to click on your link.

Now if you’re a sponsored link that number goes down dramatically, but for our purposes, we’re talking about exact match keyword domains. And one of the purposes of buying that domain is for strategic advantage in your search engine ranking. And so, for our purposes, the reason we will buy that domain is to become number one in Google. And if we become number 1 in Google, how much traffic can we expect, how much would it cost otherwise to buy that spot.

And we got to do an apples to apples comparison of what does it cost to buy that spot with Google AdWords versus buying the domain name and so we use the CPC level. So, let’s just say it’s a dollar. Let’s say the CPC is $1. And let’s say we’ve chosen a domain name, I have no idea, but let’s say we found that there is 8,000 exact match searches per month.

Michael: And that’s global or local?

Andrew: Local. We’re going to talk local.

Michael: Okay, so United States.

Andrew: Yes, United States.

Michael: Or however you have the setting set on the global on—

Andrew: Just to keep it not confusing let’s just only talk local search, US only, English language, okay?

Michael: Perfect.

Andrew: So, let’s say, 8,500 exact match searches per month. And we can reasonably expect to get, let’s say 80% of that traffic if were the number one spot, okay times .8.

Michael: Okay.

Andrew: So, you can expect 6,800. Now, this doesn’t include repeat traffic. This doesn’t include direct navigation. This is just from the search engines we can expect to get 6,800 unique visitors per month, okay?

If we were paying Google a dollar per click to get that person on our website, that would cost us $6,800 per month in a normal business valuation. You know, let’s look at a 24 to 36 month multiple, you know, I would say that the retail value of that domain name is around $80,000.

Michael: Okay, and you multiply the $6,800 per month times what number to come to the 80,000?

Andrew: That’s 24 months.

Michael: 24, okay.

Andrew: I considered it multiple. So, over a 2 period, it would cost the company around $80,000 to own that spot, to pay Google every month to own that spot.

And I think that a 24 month multiple of what it’s costing them to own that spot is a fair valuation of the domain name which can help them achieve that and it won’t help them achieve that for 24 months, it’ll help them achieve that permanently.

Michael: Yes.

Andrew: [Audio skip 14:15] and that’s essentially an ideal valuation, right?

Michael: Right.

Andrew: So, I always basically state there’s you know, maybe a 30% less, 30% more flexibility and the 30% is just a, it’s an ambiguous number but yes, it’s a third. It’s somewhere in that level.

Michael: Okay, but that’s good. That gives us, you know, a range in some…

Andrew: It gives us a, it gives you a starting point.

Michael: Exactly, exactly.

Andrew: Right? So then there’s so many other smaller variables aside from the, I think that those are the two major factors, those are the two key factors here.

Michael: That defines the magnitude and then…

Andrew: Yes.

Michael: You’re saying that there are some other factors that come into play which may move it up and down?

Andrew: Yes, absolutely.

Michael: And what would those factor be?

Andrew: Such as is it two words or three words. Is it, you know, the shorter, the better. If it’s a really short domain, it sort of increases the brand value. It increases your likelihood of typing to traffic. It increases your likelihood of decreasing typos. It increases your likelihood of you know, word of mouth traffic. So, having a shorter domain name obviously increases the value of that domain name.

You’re talking about one word it’s certainly not in two words that, you know, given the apples to apples statistics, same amount of search volume, same amount of, you know, CPC level is the same.

Okay, other factors are, you know, obviously if it’s got a hyphen, you know, take it way down, you know, maybe 5 to 10% of the non-hyphenated version.

Michael: Wow, 5 to 10% of the non, okay.

Andrew: Yes, yes, that’s what I found, I mean, I, you know in, again, 5 to 10%, I want to say it’s an ambiguous number but based on domains that I’ve sold that’s about what it works out to.

Michael: Okay, and what about cost per click? You used an example of a dollar, what if it was, you know, some legal health issue, like cancer causing carcinogens and people were paying $50 a click through on Google.

Andrew: Yes, I mean, that makes that an incredibly valuable domain name. This is where it gets tricky, is you can’t say, “Alright, well we’ve got that same 88, you know, 8,000 exact match searches per month but now it’s a $50 CPC and so that domain is worth $400,000.” But it’s not far off, I mean, you know we can take into account, I’m trying to think what domain name is it. I’ve got a lot of examples of, you know, lead generation domains that I’ve sold with the higher CPCs, I’m just trying to of a name. Unfortunately most of those sales are under NDA, so I’m trying to think of one that’s not.

Michael: How about Auto Insurance? Auto Insurance is one that you’ve sold before. It’s been on DN Journals—

Andrew: Yes, yes, it’s just, it’s not a .com and you wanted to talk—

Michael: Oh right, you’re right.

Andrew: Auto Insurance is not a .com.

Michael: How about Home Staging?

Andrew: That’s a good example.

Michael: Okay, so let me type it in here, Home Staging. I’m doing an exact search. I’m doing a search and Home Staging has local monthly searches to the United States 5,400 and then the average estimated CPC is $3.48 currently, Andrew.

Andrew: Okay.

Michael: So, let’s run your formula through on this. So you do 5,400 and then you multiple by say .8 or 80% of, it’s just a rough number. You said it could be anywhere from 75 to 90% if—

Andrew: Yes.

Michael: If you’re taking advantage of all that traffic. And then you multiply that by $3.48 and—

Andrew: Yes.

Michael: You have a calculator there, what did you come up with?

Andrew: That comes out about $15,000.

Michael: $15,000. Okay, and then you said, you know, that’s for one month if you were to pay for the top position, you’re able to take advantage of HomeStaging.com—

Andrew: Yes.

Michael: So, you might multiply that by 24 months, you said earlier.

Andrew: Yes.

Michael: So, 15,000 times 24 months and my math isn’t that good. What does it come up to?

Andrew: About $353,000 or $360,000.

Michael: $360,000. Okay now, through the miracle of open disclosure and being very grateful that you have been open, you have told DN Journal or some place that I found that you sold this domain for $36,500.

Andrew: 10% of, and again, when the appraisal that we’re working on right now, that we’re talking about is a retail appraisal. This is what I think the maximum value is to an end user. Most of the sales that are happening in this industry are not to end users, as was the case in this situation where the domain sold to right, I think this is okay to say, but let’s start left of the dot not right of the dot, that’s my convergence in [Inaudible 19:40].

Michael: So, you sold not to an end user but to another domain investor, so you’re saying you didn’t get full retail, which is what your formula calculates, you got some sort of wholesale value?

Andrew: Exactly.

Michael: Okay, and if you would have been able to find a retail, you know an end user who really wanted leads from HomeStaging.com and they were spending, you know a good amount of money on Google every month for this keyword term, you might have been able to get closer to the full retail value.

Andrew: Yes, I mean on this particular name I would have, again, I would probably have said that the—an end user would likely have paid around 150. I would say that’s probably what that name is worth to an end user or more specifically what they would likely pay.

But we did approach quite a few end users in the space, you know, that industry itself is a relatively new industry and it is growing rapidly, but the people were just simply were not open to making such a large expenditure. But somebody like left of the dot who has a model for monetizing those leads in a different way that most people do saw the valued proposition there and luckily for them, they, I think they got a terrific deal. I think they honestly bought that at, you know somewhere between 10 and 25% of what its real value is.

Michael: Alright. Hey, you know, I was just watching, listening to an interview with the owner of I think it’s Cat Five Commerce, I could be incorrect. He is the gentleman that just bought Running—

Andrew: That just bought Running Shoes.

Michael: Right, RunningShoes.com, do you mind if we run through that example real fast?

Andrew: Sure.

Michael: Okay, so I’m going to Google AdWords keyword tool, typing in running shoes. I’m going to hit search. We’re going to look at the United States again. I assume that this is going to be a lot bigger than Home Staging.

Andrew: Yes, and I’m guessing it’s a lot more that 5,500—

Michael: Yes, so we’re looking at 60,500, local monthly searches and I have location set to United States.

Andrew: I would really guess it would be more than that but—

Michael: I know, so 60,500 and then it’s got a CPC of $2.22. Now, in this interview it’s interesting because he said he bought it because they, RunningShoes.com was either at the top of Google or was in the number one position. And when I – Right before this interview, I went and checked it out just for my own knowledge and it was I believe in the 4th position. I’m sure it varies and Google’s tweaking their algorithm all the time. So, we would take 60,500 multiply it by .8 or 80% if we were to get the full value. And then multiple that by $2.22 and that would be the one month value of it. 60,500 times .8 times $2.22 and I came up to $170,448. So, $170,000, now if we were to multiply that by 24 months, it comes up to—

Andrew: Two and a half million.

Michael: Two and a half million. And they got it for $700,000.

Andrew: $700,000 I think, right?

Michael: Yes, exactly. So, how would you reason back if we were to you know, do an autopsy on this purchase and work our way backwards to try and figure out if $700,000 was high or low or just right. How would you think about it?

Andrew: So, here’s the tricky thing with our industry, is right, like, I don’t know what the history of RunningShoes.com is. I don’t know if it’s the original owner. I don’t know what the owner paid. But if I paid $10,000 for domain name and somebody comes to me and says I’ll pay you $500,000, regardless of the calculations that we’re doing today, I’m going to turn and I’m going to say, “that sounds pretty good.” So, being that Cat Five’s an end user and from what I’ve read about [Audio skip 23:58], I think they got a great price. I think that far excess of a million dollars and probably is closer to what we just saw, two million, two and a half million dollars.

Michael: I’m sorry, we froze up for just a second there Andrew, you said that you think that the value probably is in excess of a million dollars?

Andrew: Yes.

Michael: And maybe closer to two and a half million but the end user Cat Five got a great deal by buying it for 700,000?

Andrew: I think they got a good deal, I mean, you know, I think in this situation everybody got a good deal. I mean I’m sure the seller was extremely happy with that sale. You know, there’s not that many people in this industry who are able to hold out for the full value of their domain names. I’m sure it was very hard to say no to $200,000. I’m sure it was very hard to say no to $400,000. I’m sure it was really hard to say no to $600,000. And eventually he caved in at $700,000. You know, so, again, we come back to that I think that the foundation for establishing a value for domain name can be done in the way we’re doing it and—

Michael: Okay, and how do you decide 24 months is the right multiple for that formula? You know why not 12 months, if you’re talking about a one year pay backer?

Andrew: Well, [Inaudible 25:31] valuation, if you’re going to buy something, you’re going to buy based on around 24, 36 months. If you’re buying a traffic portfolio or revenue portfolio of domain names, they’re selling anywhere from 18 to 36 months. And so 24 months I think was just, you know a number that somewhere fits in there between the standards valuation and you know domain portfolio valuation.

Michael: Yes. Okay, so, this entire valuation process, Andrew, it assumes that the person buying that domain is going to develop it out, is that correct?

Andrew: Yes, this is based on the ultimate [Audio skip 26:15] of that domain name. Again, remember, we’re basing our traffic numbers based on you being in the number spot in Google. So, if you don’t achieve that, then this domain becomes significantly less valuable to you.

I mean if you look at the top 5 spots in Google, I don’t remember off hand but it’s like, you know, I think you can, let’s say you can get 80% of the traffic if you’re on the number one spot. You can get 60% of the traffic if you’re in the number two spot. You can expect 40% of the traffic if you’re for the number three spot. After that, you know, it goes down into the low four digits and single digits.

Michael: Yes. So, the people that Cat Five that bought RunningShoes.com, they bought from Brick and Mortar Running Shoe Store based in my home state of Washington from what I understand. So, they might have assumed that they wouldn’t ever be able to get to the number one position because they just don’t, you know, for whatever reason. So, they may assign a smaller multiple, instead of 80%, they might have said, you know, 20, 40% something like that.

Andrew: Yes.

Michael: Okay, so that’s how this formula can sort of be adjusted and reasoned through either way.

Andrew: Yes, so I mean, I haven’t even gone about doing this but I mean, let’s say, so I think you said was 60 [Audio skip 27:30] thousand searches a month and let’s use your numbers, then we, again, these are pie in the sky. But it’s just a way of debating this, right? So, let’s say that like, let’s say we use a 20 to 40%. It’s probably the traffic that they were expecting because they weren’t in the first position.

So, let’s look at the value to that company, if you’re getting let’s say 30%, that’s between 20 and 40. And it’s 60,000 – 60,000 exact match searches times 30% times 2.22 times 24 months, which is at $959,000.

Michael: And that’s pretty darn close to 700.

Andrew: Yes.

Michael: Yes. Okay, alright, so, does this formula work for all values of the traffic numbers that we get from the Google AdWords keyword tool for example? Will it work if the searches are a thousand or the searches are a hundred thousand from your experience?

Andrew: Yes, I mean the more searches you have for a domain name, the more value that domain has, I mean that sort of my mantra that I, you know, we operate a domain investment newsletter. You know, we’re, two to three times a week, we feature somewhere between 20 and 40 domains for sale. And for that newsletter, I received somewhere between 5,000, probably around 5,000 domain submissions per week.

Michael: Wow.

Andrew: And out of that, I would honestly say 90% of those submissions are let’s just, the lower end of the value range, to be nice about it. But for me to, you know, my response to people is essentially, I’m looking for domains with exact match keywords, with high amounts of exact match search volume. And people say, well, what are the numbers that you’re looking for and I simple say the more exact match searches, the more value your domain has, and I truly believe that. And there’s people that don’t believe that but I mean, I’ve made a tremendous amount of sales and I could truly say 80 – 90% of the domain sales, the valuation that the buyer paid in the end was overwhelmingly based on the amount of search for that domain name, for those keywords in the domain name. Overwhelming!

And in my opinion, that’s an increasing trend, not one that’s falling off or not one that’s stable. I’m seeing more and more and more buyers are becoming more intelligent about SEO, about how the search engine algorithms work, about the advantages of having the exact match keywords in your domain name be it .com, .net, .org, doesn’t really matter, might affect the value but it doesn’t affect your ability to rank highly in the search engines.

You know, given an apple to apples SEO strategy and more and more the valuations that buyers willing to put on a domain name is based on the search find. And that’s why you’re seeing names like AutoInsurance.org where people are their eyes are popping out going how do you sell a .org domain name for a half a million dollars? Well, look at the search volume for auto insurance. It’s massive. It’s millions per month. And you know, those leads are paying $50-$75-$100, CPC is like, I don’t off hand buy somewhere between $20 and $35. You know, at the end of the day I think it’s cheap to be honest. I think that they are cheap.

Michael: Okay, let’s go, let’s actually talk about Auto Insurance since you just brought it up. If I do a search on Auto Insurance, I can see that there are 110,000 local monthly searches. And so, if I plug in a 110,000 and the CPC is $25.96. And for those viewers that are watching I’m working on a spreadsheet and I’m actually going to give this spreadsheet after, when this interview goes live, so that you will be able to look at the numbers. So, 110,000 Andrew as you said, it’s millions per month, $25.96. The 24 month valuation, if somebody were able to get to the top spot of Auto Insurance with AutoInsurance.org, which is a domain name that you sold just last month, in April 2011, the 24 month value is $54 million.

Andrew: Yes.

Michael: It’s enormous. So—

Andrew: Enormous.

Michael: Now, your actually sale price was $440,000.

Andrew: But remember, we’re talking about the .org and not the .com domain, right?

Michael: So, how do you value a .org instead of a .com when we both know a .org could be in the number one spot, maybe easier than a .com.

Andrew: However, with the .org, you lose some of that brand value, you’re going to lose some of your traffics to the .com, you’re going to lose some of your repeat traffic. You’re going to lose some of that brand equity. So, that’s why the .com is worth so much more, is because the .com is the brand.

Michael: Right.

Andrew: Or the .org the .net are just as good when it comes to search engine optimization. So, if the domain is being used for an SEO strategy then you know—

Michael: The .org might be a better choice or a more cost effective choice.

Andrew: Exactly, exactly, well, if it’s purely an SEO play, you’re much better off to buy a .org or a .net.

Michael: Right.

Andrew: You know, if you’re looking to build a brand around your website, then you know, you may want to consider spending up for the .com, but in the case of Auto Insurance it’s going to cost you.

Michael: Right. So, how do you value the .org? It’s clearly a factor less than the .com, your formula works for the .com but it includes that brand and selling to an end user, full retail value as we said. What’s the factor for a .org, is it 1/10 or—

Andrew: Yes, I mean in general, people tend to say that .net is worth around 10% and the .org is worth around 5 to 10% and I find that to be true. In my personal opinion, I’m a huge fan of .org more so than .net. I think that .org has a home, you know, it’s got its own brand, and .net as well in certain cases. For instance, we’re selling Hosting.net at the moment and I think hosting is probably one of the top two – three keywords you could ever have with the .net extension, it’s what it was made for.

In the case of geo domains, city state names, in the case of health care, in the case of travel in some instances, even in the case of insurance, you know, there’s a trust factor involved with .org and you’re providing people with information about Auto Insurance and I think the .org, you know, plays a strong role there.

Michael: Now, I don’t remember seeing who you sold AutoInsurance.org to, was that made public?

Andrew: Yes, yes, it was, that’s sold to 360 quote.

Michael: Okay, so that’s a lead generation company?

Andrew: That’s a lead generation company in the insurance space and among other spaces.

Michael: Okay, and so they’re going to develop out a website on that domain name and then they’re going to build quotes and—

Andrew: Yes, they’ll build out a website, provide information about auto insurance and I mean basically, the ultimate goal is to get people to fill out a form which generates a lead saying, “Hey, I’m looking for auto insurance. This is where I live.” I don’t know what other information goes in there, but maybe there’s a credit score, maybe there’s, you know, some other personal information. Based on the information they put into that form, you know, that can differentiate the value of that lead. And those leads can be sold to various aggregators or directly to insurance companies.

Michael: Okay. So, at Domain Fests back in February, HomeAppraiser.com sold.

Andrew: Yes.

Michael: Now, if I’m actually an end user and I’m contacted by a domain investor such as yourself and you didn’t own Home Appraiser, I assume, but if I was contacted by a domain investor and I’m a home appraiser and I pay a lot of money on Google for the top paid search listing and somebody says, “Would you like to buy Home Appraiser?” I actually then need to change the URL of my website, I maybe don’t need to change the name of my business but at least the URL of my website, right? And then do some rebranding.

Andrew: Yes.

Michael: So, that’s going to have a negative, you know, connotation or a negative impact on me as a small business owner.

Andrew: Yes, I think so.

Michael: Okay. But if you’re a lead generation company and you’re looking to get more leads then AutoInsurance.org would be a great way to bring in more leads and develop that topic.

Andrew: Absolutely, absolutely.

Michael: Okay, alright, so auto insurance—

Andrew: And more and more—

Michael: Yes.

Andrew: Particularly in most these lead generation basis whether it’s insurance or education or health and medical or mortgages, finance, banking, more and more, those names are not selling to end users. Those names are selling to I guess the best equivalent to people, company to people recognize is Quinstery [spelling 37:33] I mean, they’re famous for buying Insurance.com and InsuranceQuotes.com and CarInsurance.com for something to the tune of $36,000,000, this year. These are lead generation companies and more and more, you know, people come in and say, “Oh, sell my name, I’ve got” I don’t know, I’m just going to pull one out of the air MedicalInsurance.org. Okay, and they say, “sell this domain name to Blue Cross Blue Shield, you know their medical insurance company name definitely want to own this,” and I say that, “well, not necessarily,” Blue Cross Blue Shield has a brand but the clients don’t come to them directly, they come through insurance agencies or lead generation companies. And so, it’s really the intermediary’s call it brokers that these names have the real value to. They know how to monetize them properly and so they actually have more value to those guys than they do to a Blue Cross Blue Shield, a progressive, a dyco and State Farm. These guys don’t know how to do the online marketing properly to monetize that domain, to make it most effective for them.

Michael: Right. So, that’s maybe where some domain investors, some maybe newbie or newer domain investors might be making mistakes. They own a domain like house insurance and then they go directly to Geico or to PemCo or somebody to try and sell it, thinking that insurance company would want to have this, but really they’re focused on their brand. They need to go to the intermediaries that whose sole purpose it is to generate leads for those companies.

Andrew: Yes, and you’ll find that those intermediaries understand the value of these domain names for a more, you know, these are SEO experts, that’s what they do, that’s what you know, call it lead generation but they are, they’re search engine optimization experts. And they understand the value of these domains far more than the end user does.

Michael: Alright. So, I’m going to run through a few more examples Andrew of domains that I’ve seen come and go and then see if they were priced correctly —.

Andrew: Oh, I’m going to just grab that sheet that you had—

Michael: Alright, that sounds good. I’m going to do, alright, you know, the first one I’m going to do, I went to Domain Fest. I thought it was a great option, but some of the domains didn’t sell.

Andrew: Yes.

Michael: One of each was comic book. Now, I grew up reading comic books all the time. I used to collect them. In college, I needed beer money so I sold all my comic book collections, which still I’m kicking myself for. So, let’s take a look at ComicBook.com, it’s the singular, not the plural.

Andrew: Yes the hyphened version.

Michael: If I go on the Google AdWords… I’m sorry, say it again?

Andrew: I think I actually own the hyphen version of Comic Book.

Michael: Oh, do you?

Andrew: I think so, I don’t know.

Michael: Alright. So, when would I ever want to look at the global searches versus just the United States searches? Would I ever do that?

Andrew: Who’s your audience? Are you selling comic books to Unites States or are you selling comic books to the, you know, throughout the world.

Michael: Yes.

Andrew: But you also need to take into considerations, it’s not just about who you’re, if you’re the buyer, you’re going to be try to value what is this domain name to you? But if you’re a seller, you’re going to be saying what is the domain name period or what’s the value of that domain name period. And to the seller, it’s probably on a global basis and to the buyer, if he’s selling within United States, his value was based on local search, right?

Michael: Right, right. Okay, so let’s just assume that it’s global. I don’t know if comic books are the same all over the world, but let’s say it is. So, comic books were searched globally 14,800 times and the average cost per click is $0.61. So, it’s gone up a little bit since the spreadsheet.

Andrew: Since you send me the spreadsheet, yes.

Michael: So, I’m going to update it. So, I’m going to tell you Andrew that 14,000 times $0.61 times .8 if you were to get to the top position for the comic book, has a 24 month value of $173,000. Now, at Domain Fest it did not sell because the reserve was $250,000.

Andrew: Yes.

Michael: Was it overpriced?

Andrew: The reserve was too high. The reserve was high.

Michael: Now, If I’ve got a great domain name like comic book. Say that one more time. I’m sorry, I was talking over you.

Andrew: No, it’s okay. As was the case with many of the domain names in the auction I found. And I’ll be honest a big reason of why I wanted to do this interview and why I think it’s important is that it’s important for domain owners to understand what is the value of their domain names and I, you want to be careful here. I don’t want to tell people, “Hey, your domain is not what you think it is, it’s not worth what you think it is”. Because the beauty of capitalism, the beauty of private properties, it’s yours. And it’s worth whatever, you know, if you don’t if it’s not worth selling it for $100,000 then don’t.

And that’s the beauty of it. I’m a capitalist through and through. I love private property. It’s what makes the world what it is today.

Michael: I’m in full agreement, but if you’re going to hold an auction and you don’t want to look like a fool for not selling any domains, you’re going to want to take the domains that are properly valued.

Andrew: Well, yes, and the obis is not only on the auction company although they should be, you know, they need good domains. They need headliner domains. So, you know, it’s not only on them. Well, I guess my – because I run into this with my news letter often and this is something that I help people all the time. And sometimes it causes problems – sometimes people take it the wrong way. But there are two types of domain owners. There are domain owners that want to sell their domains. And there are owners that don’t want to sell their domains. And there’s nothing in the middle, okay? If you want to sell your domain name, then you need to price it at a price, which is reasonable. You need to price it at or below market price.

This is if you want to proactively set out your domain. If you want to enlist my services or any other broker for that matter or put it into an auction, then you need to [Audio skip 44:00] value and price it accordingly, if you want to sell your domain names. If you’re not willing to price your domain name at that level that the market stipulates based on some formula like what we’re talking about here today or if it’s a brandable domain name, you know, there’s other ways of judging the value.

But if you’re not willing to price it somewhere close to that then you fall in the other category of somebody who doesn’t want to sell their domain name. So, then don’t and that’s fine, you know, it’s—if you don’t want to sell your domain name I don’t want to tell you to.

But if you want to sell it then you know, you need to keep our advice, my advice or whoever the other broker is because this is something that all of us got into in the brokerage business is we sell names. I made my money when I sell a domain name. I made no money if I waste my time marketing a domain name which is not going to sell because it’s not priced to sell.

Michael: Right.

Andrew: And listen, once in a while you hit that needle in the hay stack and you hit the home run and it sells for far more than it’s worth and I’m not always right. But I need a system and so does everybody else in order to take, you know, to judge where can your time be best spent, what names are going to sell, what they should be priced at in order to sell and in order to provide good advice, people who’ve come to us wanting to sell their names. And so, yes, again, it, that’s why so many names in the auction didn’t sell because you had people who don’t want to sell their domain names, putting their names in an auction.

Michael: Yes. Okay, another example from Domain Fest was HouseInsurance.com. And I ran some stats a couple of weeks ago, so they may have shifted or, you know, even the numbers that we talked about today are going to shift from the time somebody watches this video, but it was 40,500 global traffic at $10 a click through, which put a 24 month value on the domain HouseInsurance.com using your formula at roughly $7.8 million. The reserve was set at 500,000.

Andrew: Yes.

Michael: Was that—

Andrew: In the case of House Insurance, again, it’s a lead generation name that is only good for the US, so you have to look at the local monthly searches and I don’t know what that is off hand.

Michael: Which will probably bring it down by a factor, so let’s—

Andrew: Yes, fairly significantly.

Michael: Yes.

Andrew: Probably to the tune of something like 40 to 60%, I would guess, the local search would be less.

Michael: Alright, I’m running it, just so we are able to talk more concretely about this. House Insurance has, you’re right, 4,400. So, if we put 4,400 in the 24 month value then becomes $850,000.

Andrew: Yes.

Michael: And the reserve was 500,000. Might that have been properly priced but just not sell?

Andrew: It’s not that far off.

Michael: Yes. If one of those lead generation companies happen to be in the audience and picked it up for 500,000—

Andrew: Exactly.

Michael: Or online for the auction.

Andrew: But you know, yes, again, this is [Audio skip 47:47] is not perfect because, okay, in order to get that domain name to be number one in Google, okay, you would have to probably spend something to the tune of 10,000 to 15,000 maybe even 18,000 to 20,000 dollars per month in SEO. And that would probably be a 6 to 12 month process and you’d be spending somewhere in that $10,000 to $20,000 range every month for those 12 months.

Michael: Okay.

Andrew: Beyond that you’d have to continually spend 5,000 to $10,000 a month to maintain that position, simply because insurance is such a competitive space.

So, you need to discount the value of the domain name purely as it stands alone because of the added expenditure of the SEO in such a competitive vertical. So, I don’t want to retract or go back on the formulation that we’ve been discussing this whole time, but again, this is a situation where there are other variables that come in to play which affect that valuation.

I wouldn’t put the value of house insurance just because I’ve actually worked on this name quite a bit and I can’t go to too much more detail on that. But I put the actual value of, you know, to a lead generation company of house insurance, you know, somewhere around 30% less than what they had to reserve at.

Michael: Okay, alright. I know you have to run to another engagement Andrew, so I’m going to run through a few more examples with you if that’s cool.

Andrew: Terrific.

Michael: Alright. So, let’s see here, a couple of weeks ago was another auction called Domain Madness. It happens every year. I want to pick a domain that doesn’t have as much traffic. We’ve been talking about Auto Insurance and Home Staging and House Insurance, these have, you know, lots of traffic. Let’s look at one that doesn’t have a lot of traffic.

Andrew: To search, that’s of search. You used traffic in search. We’re talking about search.

Michael: Exactly, I’m sorry, I meant searched traffic, searched traffic. So, let’s pick, here’s one that did sell, let’s look at GasDeals.com, with gas, you know, above $4 a gallon now within the Unites States or much of the United States.

Let’s go look at GasDeals.com. So, I’m going to go in, I’m going to type in gas deals just to get an exact search in the United States and some updated information here. And so gas deals local monthly searches so the United States 73, so, I’m going to type in 73 and the estimated CPC is $0.81, which would put a 24 month value at $1,135.

Andrew: Yes.

Michael: The actual sale price was $1,605, pretty darn close to what the estimated value using your formula is.

Andrew: Yes, but again, as much I’d like say, “Oh, wow, that was spot on for my formula,” GasDeals.com is more of what I – it’s a front of mind expression or a phrase. But it’s more of a brandable domain name rather than the exact match keyword domain. And frankly at 1,600 bucks, I think that was a great deal, somebody got a killer deal.

Michael: Yes.

Andrew: The whole daily deal market has heated up, you know, the group on copy cats are exploding daily, there’s tons of, you know, buy outs and acquisitions and frankly we’ve sold a few domain names in that space recently. For numbers far in excess of what I thought those domains were actually worth, simply because this space is hot right not. So, again, I think GasDeals.com it fall into the brandable domain category. I wish I had a formula for saying this is what that name is worth, you know in the brandable space, but I don’t. But I can say that, yes, I mean GasDeals.com 1,600 bucks, no brainer.

Michael: Okay, so you, I actually thought that that was a keyword generic one, but you thought it was brandable, which I can see now. If it was gas discounts, do you think that that would be better as a generic keyword domain name?

Andrew: I mean, I have to use some keyword research—

Michael: Okay.

Andrew: As it applies to that vertical, the gasoline pricing vertical.

Michael: Got you.

Andrew: We’d have to look at some keyword research tools and say what are the keywords that [Audio skip 52:37] Google AdWords keyword tool for that exact purpose. I don’t know if you had it up in front of you, but if you type in gas, you can sort by exact match search. You can sort—

Michael: Yes. So, I’m going to type in gas and then do I want to make it a broad match to look at everything related to gas?

Andrew: You can keep it exact but up in the top under where you type in the keywords—

Michael: Yes.

Andrew: There’s a little checkbox somewhere, again, that says like include related terms or something to that extent, I don’t have it in front of me.

Michael: Yes, I am let’s see here, advanced options, include—

Andrew: I think you go into advanced options, I think it’s right underneath where you type the keywords in, or to the right side of that.

Michael: Yes. I don’t see it, I see include adult ideas.

Andrew: Hang on, wait a second.

Michael: Alright, well, let’s just do the search. And then if I sort it by local monthly searches just on gas, I can see—

Andrew: Well, one of the terms in the highest search.

Michael: Something doesn’t seem to be working here. Let me resubmit this here, Gas Prices.

Andrew: So, yes. GasPrices.com, I would say that is an exact match keyword domain.

Michael: Okay, or Cheap Gas. Gas Prices has a 135,000 searches per month, Cheap Gas has 22,000. So those are good examples of and why GasDeals.com might be more of a brandable.

Andrew: Yes.

Michael: I got it. Alright. How about, let’s look at one called Athletic Clubs, this was one that I was looking at. Because I love gyms and athletic clubs where I can play racquet ball and go swimming and I thought I should buy this one and develop out a directory because then I can get free access to any athletic club I want around the world, because I say I run AthleticClubs.com. So, I did some searching on this, 260 searches per month, $0.57 click through rate, which puts the 24 month value at about $2,800. The reserve at Domain Madness was $5,000. Reserve was overpriced would you say?

Andrew: What was the search again?

Michael: 260.

Andrew: 260 not 260 and something.

Michael: Just 260.

Andrew: Yes, overpriced.

Michael: Yes and I, you know, when I was doing a little bit of research on this, I figured out that gyms is actually a more popular search phrase. People think of the gym or they—

Andrew: What’s this, for athletic club?

Michael: Gyms is searched 74,000 times per month—

Andrew: Yes, what about athletic clubs, the plural?

Michael: The plural athletic clubs, I’m just resorting right here, is oops.

Andrew: Alright, I’m going to throw out a little tidbit and this is actually an extremely valuable, I don’t want to say secret, because most of the guys are in the SEO business or, you know, are well aware of this. But when you’re buying a domain name, always see the, okay, Google [Audio skip 56:01] has changed the landscape of SEO. It’s changed the landscape of what domain names are attractive. Do you want the singular or do you want the plural? It used to be, you wanted the one that had the most search. A good example of that is ReclinerSofas.com, which I recently bought in an expired domain auction. And this is a perfect example because it’s a mistake that some domainers make. I’m going to say, okay, so, both domains expired, ReclinerSofa.com and ReclinerSofas.com.

Okay, I decided that I was going to go after ReclinerSofas.com only. I went after the singular as well because it’s always nice to have both. But only to a certain level where I say, “Okay, this is a nice add on but beyond this price, it’s not worth it to me.” But ReclinerSofas.com, I want it, that’s the one that Google pushes. And when I say Google pushes, when you go to Google and you start typing in Recliner and you put in S, the first thing that’s going to pop up is ReclinerSofas not ReclinerSofa.

And so, you want the exact match keyword domain, then is the first option that Google puts up for the keywords that you’re looking for. So, even though if you go to the Google AdWords keyword tool, there’s actually more search volume not significantly more but there is more search volume for Recliner Sofa and an extremely maybe the most well known domainer in the whole space is the person who I was competing for, for those, both of those domain names. He chose to go after the singular more and my guess is because it has more search volume. I might be wrong in his motivations but my guess would be that he went after ReclinerSofa.com because it had more search. I went after ReclinerSofas.com because that’s the keyword that Google pushes. It doesn’t pushes singular, it pushes the plural and when you are typing in Google recliner sof whatever, you type the S. I don’t know what the statistic is because it keeps changing because more and more people are adapting and adopting Google instant suggestions—

But ultimately all people or much vast majority of people will be using those suggestions, those Google instant suggestions. And you want to be ranking for the one that Google pushes, the one that Google suggest, they keywords that Google suggest. And in this case they suggest the plural, ReclinerSofas, which is why I decided to go after the sofas, even though I could have gone after the singular as well.

And I think that that’s a common mistake that I see often when people are submitting domain to me, they say, “Well, but look,” and I say, “Well, no”. In this case, I think you should have singular or in this case you should have the plural. And it can always differentiate, it’s not that you always want the plural or you always want the singular. It used to be that in ecommerce you only wanted the plural. Well, now, that landscape is changing. And now, you want what Google tells you you want basically.

Michael: Right.

Andrew: You know, unfortunately that’s the case.

Michael: Right. Alright, so Recliner Sofas, thousand searches per month, $2 a search, puts you at $38,000 for a 24 month value. Did you pay anywhere close to 38,000?

Andrew: Thank God, no.

Michael: Can I ask what you ended up paying for it?

Andrew: I don’t remember off hand, but I think it was something to the tune of $2,000 or $3,000.

Michael: Alright. So, a good deal compared to the formulaic valuation where you going to try and sell that domain.

Andrew: I have no idea, I mean, at this point I’m not actively selling the domains. To be honest I’m more of a buyer than I am a seller, in the current market I think, you know, it’s a tough market, it’s a buyers market for sure. You know, I looked at some of these names, ultimately I don’t want to be brokering domains forever. I do it because it creates excellent cash flow for me and make acquisitions for myself. You know, I didn’t get into the domain game in ‘95 or ‘97 or ‘99, so or at least not aggressively. And, you know, so I use domain brokerage as a way to create cash flow to make acquisitions to myself, which I can later develop or sell to, you know, at the highest value I can get. But everybody is in different positions and some people are sitting on portfolios that they use the sales of those domain names as their cash flow and that’s what I’m here to help with.

So, yes, I mean, you know, ReclinerSofas.com is not a name I’m particularly attached to and certainly if an offer came along I’d sell it. And maybe down the road at some point I’ll proactively try to sell it or maybe develop it into, you know, some type of ecommerce, I mean, it doesn’t take a lot of sofa sales to, you know, if you get a 10% commission on selling a $3,000, you sell 10 sofas and you’ve got in your $3,000 back.

Michael: Right, right. Alright, so going back to your example where—

Andrew: Yes.

Michael: The Google instant is actually suggesting it and we’re talking about sofa, reclining sofas, sofa recliners.

Andrew: Reclining sofas.

Michael: Reclining sofas. I typed in, I went to Google, I typed athletic C L U and it comes back with and it realizes that my IP address is in the Seattle area, so it says, athletic club Seattle, athletic club Port Townsend, athletic clubs in Redmond, Washington, athletic club in Stanwood Washington, whole list of them down and then finally—

Andrew: Yes.

Michael: It says, athletic club, so clearly, Google is saying people are searching for athletic clubs in a city, in a local area or a city that they happen to be in, if they’re traveling or what have you and they’re going to recommend that. So, if I were to buy AthleticClubs.com, I’d want to build out some sort of SEO strategy that takes advantage of the city names and list the clubs or and maybe has a dedicated page that talks about the location, so that all of that information is search engine optimized.

Andrew: Mm-hmm.

Michael: Okay.

Andrew: Yes, now, so this is a tricky one, I mean, again, if you were going to buy AthleticClub.com that name blends itself towards an end user, one specific brand of athletic clubs wanting to own the brand and wanting to own the space and so they would buy AthleticClub.com. But the plural version in this case lends itself towards a directory like you said. If you’ve got AthleticClubs.com, you know, that you’re saying, “Hey, we’re going to show you all the athletic clubs.”

So, the plural in the case of directories, it’s pretty much always better to have the plural. You know, more example of name we’re saying right now is Cardiologists, the plural .com, Cardiologists.com. And that makes itself terrifically to a directory of cardiologist, one of the highest paid medical professions out there. But Cardiologist.com lends itself, you know, to a specific cardiologist wanting to own that brand. Being the most famous cardiologist or maybe just an informational page about what a cardiologist does.

Michael: Got it. Alright, so I know we’re pressed for time, Andrew. I’ve got a couple of more follow on questions if you have a couple more minutes.

Alright, so we’ve talked about, we talked about the formula, we talked about how the formula might up or down depending on the factors involved, how long it is, whether it’s singular or plural. We talked .net, .org being 10% for the .net, maybe 5 to 10% for the .org. What about other TLDs like .info or .me or country codes like .ly or .de?

Andrew: Okay, .de I think you could separate out from that, you know Germany has highest entry of internet use worldwide, more so than United States.

Michael: Right.

Andrew: It’s a booming economy online—

Michael: Okay, so let’s separate that out because—

Andrew: I don’t think .de is I mean in the same playing field as the .com, it’s just that it’s a smaller realm, it’s one market, so you know, obviously you need to, you know, your market is smaller. .me, .ly, .info, .biz, these are all are totally different. I think that, I’ll say this, my preference is for .com, .net, .org, I love all three. I buy all three. I sell all three. I have sold a handful of .me names. I personally really like the brandability of a .me domain, if the words, if the keyword fits to the .me extension, like Michael Berkins has recently acquired Love.me, what a brand, fantastic. If it’s, you know, I don’t know, TravelToIndia.me, you know, I see that as being the worthless domain name. .info, I spend a lot of time in Germany. My wife is German. I’m there three months a year. And .info is what I adopted. .biz, .info, you see it in use. In the US, you see it in US although not that commonly. And I think .info has some value but I couldn’t tell you this is what I think the value is based on the .com valuation but it’s considerably less.

Michael: Okay.

Andrew: Let’s say 1 to 5%.

Michael: Alright. So, for example Share Filing is very popular in the United States. I recently saw in the newsletter of yours you had ShareFile.us, listed for $99—

Andrew: Okay.

Michael: Where as using the formula put it around, you know, 8,000, $10,000, I might have used the wrong numbers. Anyway, so put it at thousands of dollars—

Andrew: Yes.

Michael: You got $99 because .us just isn’t as popular.

Andrew: Yes, I mean, again, .us is also different. .us is a country code. Your market is now limited to the Unites States. What I found is that the only end user buyers or let’s the most prominent end user buyers for the .us base and Ron Jackson would be much more of an expert on the .us base than myself. I only own maybe five .us domain names. But predominantly what I’m saying for end user .us buyers is not US companies, not US entities. It’s foreign corporations who are going to establish brand overseas and now want to target a US audience. And because of the way the search algorithms work, because their hosting is probably overseas, because, you know, maybe they’re on a .de or .it extension. Now, they want to target the US market and it’s very hard for them to rank for people searching for their product or service in the Unites States. So, .us extension provides a very good alternative to them, for them. They can buy, let’s say if they’re selling car parts, they could buy CarParts.us. Let’s say it’s an Italian manufacturer of car parts and they’ve got the European market locked down. Now, they want to come into the US market, they buy CarParts.us. They set up a hosting within the Unites States. They do some simple SEO. Ultimately they’re going to start ranking really highly for people within the United States searching for car parts. So, it’s a very effective strategy for localized SEO.

Michael: Makes sense.

Andrew: Yes.

Michael: Alright Andrew, you’ve sold names like AutoInsurance.org for $440,000, Prince.com for $225,000, AgeX.com $125,000, Italy.net for $52,000. Were all of those brokered domain names or did you own any of them out right?

Andrew: The ones that you’ve mentioned were all brokered.

Michael: Okay.

Andrew: I have sold significant number of my own domains but I tend to keep most of my own sales private.

Michael: Got it. And in those cases do you mainly find people buy your newsletter, people are signed up and watching what happens on your newsletter? Is that where you find majority of your leads?

Andrew: We have a, we’re very lucky. We’ve got a lot of followers on our newsletter. We’ve got nearly 5,000 subscribers to our newsletter and we’ve had tremendous success and response to our newsletter. So, yes, a lot of leads have been generated through our newsletter, which led further negotiations and some times months of negotiation to close a deal on some of those domain names. But yes, I mean, a lot of the most of the six figure, seven figure deals that we’ve done did not come from the newsletter. I would say, you know, the majority of our four and five figure sales are for sure through the newsletter. In fact, we don’t really broker names to end users or person, I don’t personally broker any names that I don’t feel comfortable that I could sell that name for at least $50, $75,000 unless it’s a slam dunk, you know, if it’s $25,000 but I think it’s a slam dunk, you know, just wants to get out of it. Then sure, you know, happy to do so. But yes, a lot of the lead, but a lot of leads and a lot of leads do come from our newsletter.

Michael: Got it. Alright, and you’re newsletter comes out a few times a week as you said. You usually got about 40 domain names in there. How many would you say are your own versus people emailing in and asking you to represent them?

Andrew: When we first start I’d say, you know, 30 to 50% of the domains were my own. Now, I rarely include any of my own domain names. I would say, you know, once a month I’ll put in two to five domain names of my own. But rarely do I include any of my own domain names. At this point we actually have a pretty significant back log of domain names. They go into a folder where you send me an email, we decide to include your names in the newsletter. They go into a folder in my inbox. And the next time I’m putting together the newsletter, which is what I’m going to be doing a couple of hours from now, for tomorrow’s newsletter. I’d go in there. I’d look at the last emails which I hadn’t addressed yet. And start pulling those names and I’ve got a pretty big back log at the moment.

Michael: Great. And what’s your commission for helping people sell their domain names?

Andrew: Our standard commission is 15%. And in general we require a 14 day exclusive to sell the domain name if we’re going to run into our newsletter. You know, I used to do it with a written agreement but it just became too much administrative work and frankly I’d rather deal with people that I can do business on a handshake at this point. So, if I, you know, if you give me reason not to be able to do business with you on a handshake, we’ll probably not going to do any more business.

Michael: I think that sounds fair enough.

Andrew: Yes.

Michael: Alright, let’s leave it with this. The phrase leaving money on the table I think is every domain investor’s nightmare, right?

Andrew: Yes.

Michael: You got a domain name. You think it’s a great domain name. You bought it maybe on a drop for a few hundred dollars and you think it’s a $20,000 domain. You sell it to somebody who shows interest. You negotiate them up for $40,000. You sell it to another domain investor, a week later they turn around and sell it for like a hundred thousand dollars, you’re kicking yourself. It happened to people that we know.

Andrew: Unfortunately, it happens to all of us. I mean—

Michael: Yes. What’s the advice that you have to help other domain investors not leave money on the table?

Andrew: Do your research.

Michael: If they follow this formula, are they less likely to leave money on the table and to sell their domain names?

Andrew: Well, again, remember, the formula that we’ve talked about through this interview is for the optimal value, let’s say the maximum value of that domain name to an end user who’s going to use it to its fullest potential, get it ranking, number one in Google for the keyword term. Rarely are you going to see a domain name reach its fullest potential, okay. And this market is in its infancy, so the formula that we presented here is for its maximum value to an end user.

Michael: Got it.

Andrew: So, I think that if you’re selling your domain within the domain community, you need to recognize that and you need to say, “Okay, well, you’re going to have to leave some money on the table for another domainer because”—

Michael: To be able to move it.

Andrew: Yes, yes, yes, yes, I mean I’m not going to buy a domain name from other domainer if I don’t think that I, if I don’t think that there’s room for me to make money. Or even that, you know, if I don’t think that if I need to liquidate that domain name. I can sell it to yet another domainer and at least break even or make a profit.

So, you need to recognize that and, you know, I would say that, you know, the top value of a domain name selling within the domain community is maybe 10% of that valuation and that’s the top end. And I would say most domainers are looking to buy between 3 and 10% of that valuation. And I think that in a market like were in right now, I think maybe even 12 months is probably closer to what that valuation should be, not the 24 months.

Michael: Now, if you did the 12 month valuation, would you apply that factor of, you know, 3 to 10% as well?

Andrew: Yes, absolutely, absolutely.

Michael: Okay.

Andrew: Because we’re all in the same market place. We’re all under the same market conditions. And I think that, you know, money being tight right now. You know the world economy being what it is is what puts which you, is what, tells me that the valuation maybe closer to the 12 month valuation instead of the 24.

And then if I’m a domainer, yes, I want to buying, you know, at the most, 10% of that value, so that there’s money on the table for me to make. Selling it to an end user or if I have to liquidate like I said, I can breakeven or make a little profit, selling it to another domainer who wants to sell it to the end user.

Michael: Makes perfect sense. Andrew, this has been a fantastic tutorial. I am very grateful for you sharing this information so that other people can look at it, can try it out, can discuss it, can talk about how they’re modifying it or using it differently in other industries or verticals or niches. But at least having a discussion about what the maximum value somebody should expect in. What the factors that might reduce that value. And then what another domain investor might want to purchase it for, starts the ball rolling and has, you know, allows people to have a discussion and think more openly about it. So I appreciate all the time that you spent today and I know a lot of our watcher will as well.

Andrew: Absolutely yes, I mean, I do want to just emphasize it again, this is not a perfect formula, and I’m not trying to dictate that this is what domain names are worth because I’ve said so. But it is important like I said to have some system for establishing a mark, establishing a foundation for what is a domain name worth. And you know, I think that the future of this industry is really based on domain valuations, our ability to bring other services in this industry such as insurance, such as titles, such as you know some form of initial public authoring or stock exchange for domain names. These types of services are the future of domain names. These are the types of services that will increase, you know, exponentially, the value of domains by allowing banks to lend money against domain names. If you can bring credit into this market, you know, the sky is the limit for the value of these domain names. However, banks can’t lend money against a domain because banks don’t know how to value a domain.

So, we need to create building blocks for you know, establishing the foundation of how to value a domain name and I think that it’s critical for the future of this industry and, you know, it is tough and there’s a lot of gut feeling that goes into it and experience that goes into it from prior sales and looking at comps. They may not always align up with formula that we gone through but I really do think that Number One: The amount of exact match search volume for the keywords in your domain name is critical. I really, truly believe that that is the foundation of the value of a domain name, a generic, exact match keyword domain name. And then you know, the higher your CPC or the lead value for that, those keywords, you know of course the value is only going to go up from there.

Michael: Fantastic. Where can people go if they want to learn more about your business, Andrew?

Andrew: Visit us at MediaOptions.com, sign up for our newsletter; you will not be disappointed, I hope.

Michael: I get your newsletter and I enjoy looking through the domains every single time I get it, so I’ll vouch for that.

Andrew: Yes, I mean, I consider myself a value investor for domain names. And I think most of my readers are as well. And so we really try to focus on high quality domains names that we perceive value in. That we think if you believe, you know, if you, if this domain name is in a vertical that you’re interested in, I’m trying to bring it to you at a price that I think is fair. I think that this is the fair value. And my readers should never be afraid to make an offer. Again, I think it’s the buyer’s market and I’m happy to fight for you and try to get a deal done. So, always feel free to make an offer even if it’s low.

Michael: Okay.

Andrew: That’s where negotiation starts.

Michael: Exactly.

Andrew: And the last thing is I do want to plug my new site, they were about launch, which is SpearFishing.com. It’s going to be an enthusiast site, a social networking, ecommerce, news, events, everything related to the sport of spear fishing, which is a hobby of mine. And I’m very, very excited about the launch. Hopefully, it’ll be launching within the next two to three weeks. And thanks to Tim Davids. I was just able to acquire the domain SpearGuns.com to go along with it to assist us in our ecommerce component to spear fishing. So, if you guys have any interest in fishing or spear fishing or free diving, I highly encourage you to visit SpearFishing.com and sign up, so we’ll notify you when we launch.

Michael: Awesome. Yes, and I’ve seen the logo. I’ve seen you promoting it. It looks fantastic. I can’t wait to see the site when it goes live and see how you’re going to develop it out. And when you get that up and running I hope you’ll come back and tell us about how you did that.

Andrew: Absolutely. Look forward to, pretty excited.

Michael: Alright. Andrew, thank you so much for your time. We really appreciate it.

Andrew: Thanks Michael. Take care.

Michael: Thank you all for watching. Bye.

Watch the full video at:
http://www.domainsherpa.com/andrew-rosener-mediaoptions-interview

[Photo credits: Andrew Rosener]

Escrow.com for Domain Names

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84 Responses to “How To Value Generic Domain Names – with Andrew Rosener”

  1. Joey says:

    Here’s the problem. People STILL don’t know how to use adsense or the internet.

    Take my domain WhiplashSymptoms.com. After metrics are said and done, 1 year of ad space on the keyword would cost $77k. In fact that is part of my pitch. What’s it going to sell for?

    $4k – $5k max.

    When I speak to perspective customers I get the sense that no matter how much i walk them through it, they just don’t get the internet. And these are DOMAIN owning potential clients.

  2. Has any calculation been made now to allow for the exact domain match penalty introduced in 2012? Surely this has made a significant difference to the value generic domain names? I’d like to see this subject revisited.

  3. Oh snap! Now I have a better idea on how to valuate domains. This was eye opening.

    Thanks so much Andrew!

  4. Howard says:

    Very interesting Mr. Bond.
    DomainSherpa is my favorite site on domains – great and thank you.

    QUESTION to Andrew, just an observation, I note that you are selling StemCellTreatments.net at $500. Under calculation as per video, at 3,600 exact matches, I estimate a value at (5%/10% of .com) $1,728 – $3,456. So is the $500 an executive decision or am I way out?

    Also, would you suggest the pricing of lower end extensions such as .So .Be in a calculation that takes it down to x0.001 i.e. Storage.So with “storage” getting 135,000 exact matches therefore pricing at $130 (135000 x.8 x12 x0.0001=)

    Thank you for your time, Howard.

    • As for StemCellTreatments.net – we actually made a mistake in the newsletter and it should have been the singular which actually has even more search volume. But yes, I think your valuation is about correct.

      We just made a decision to sell that one as we do often.

      I can not speak about alternative extensions as I really don’t see the value in any of them except in rare cases like .me where the keyword is a perfect fit for the extension (i.e. Help.me).

      Thanks

  5. Ricc says:

    question: have you ever ran into a 2 word phrase that had a ton of exact match searches and good competition + high cpc — yet when you google that phrase, you don’t see any advertisements? I don’t have an example off hand, but I’ve run into these on occassion and wonder if they’re worth purchasing. I tend to shy away from any domains that don’t show a lot of advertisements when I google the phrase.

  6. Michael, I like the interview tips too and added in my favorite bookmark selection.

    Thanks

  7. Its really interesting. 50 more minutes to listen.

  8. Christian says:

    If anyone is interested in testing our formula I have very basic tool with unbelievable power.
    http://bulkdomainbuilder.com/evaluate.php

    Please go easy on this. If anyone tries to scrap it etc. I will just take it down.

    Here is a sample result from entering
    reclinersofa.com
    reclinersofas.com
    reclinerssofas.com
    reclinerscouch.com
    The last number that is the point total is the critical value.
    We then take pricing rules like
    4000-4500 points = $1200
    I have taken a crack at what point totals equals what pricing which we use for our main site. I am open to suggestions for pricing rules.
    Feel free to value your domains with this tool. I picked recliner and sofa as keywords as that was a domain Andrew recently bought.

    keyword domain length cpc avg cpc high cpc local global point total
    recliner sofa reclinersofa.com 12 1.45 1.19 1.23 1000 4428 4349
    recliner sofas reclinersofas.com 13 1.43 1.15 1.15 1000 2900 3611
    recliners sofas reclinerssofas.com 14 1.33 1.21 1.27 91 170 307
    recliners couch reclinerscouch.com 14 0.05 1.335 1.40 0 0 29

  9. Christian says:

    I want to throw my hat in the ring on this conversation.

    We have a valuation method for domain names that takes what Andrew does and takes it a step farther.

    First we have a full set of exact match data (exact local, exact global, cpc) from google keyword tool that is accurate within 1 month. Using this data I created cpc averages for specific keywords. For instance the keyword ‘yorkie’ appears in googles data with a cpc over .10 2040 times in our data and averages 0.91 cpc.

    The reason calculating an average cpc is needed is because google has been directing buyers towards certain keywords raising the bid price on specific keywords.

    So, this is how we would calculate a value for the keyword ‘yorkie puppies for adoption’

    yorkie puppies for adoption
    cpc =0.95
    exact local = 2400
    exact global = 2900

    Then I break down individual words to get an average_cpc variable.
    yorkie = .91
    puppies = .63
    for = word is blocked as average of this word is not relevant.
    adoption = 3.10
    average_cpc = (.91 + .63 + 3.10) / 3
    average_cpc = 1.54

    Next I get the keyword with the highest cpc in the word.
    high_cpc = 3.10

    I average these 3 values.
    (cpc + average_cpc + high_cpc / 3) = 1.86

    I now get a point total based on (cpc * local) * 24
    $point_total = ((((($average_cpc + $cpc + $cpc)/3) * .8)* $local) * 24);

    I then do a few things to help adjust the value for short domains.
    I give a point total bump for very short domains.
    if($domain_length == “2″){$point_total=$point_total+800000;}
    if($domain_length == “3″){$point_total=$point_total+100000;}
    if($domain_length == “4″){$point_total=$point_total+6000;}
    if($domain_length == “5″){$point_total=$point_total+2000;}
    if($domain_length == “6″){$point_total=$point_total+750;}
    if($domain_length == “7″){$point_total=$point_total+500;}
    if($domain_length == “8″){$point_total=$point_total+250;}

    Then I divide the point total by the domain length.
    $point_total = $point_total / $domain_length;

    We then get a point total. I don’t think this is a dollar amount but it allows us to say one domain is worth more than another.

    So we then take pricing rules and apply them.
    if $point_total is between 0 and 100 price = x
    if $point_total is between 100 and 200 price = x

    This is how we do it and it does a great job for us.
    FYI our system would price yorkie puppies for adoption at $959

    I am thinking about putting a form up that will allow people to use our system to evaluate domain names. The advantages that our system has is:
    1. We have a local set of google exact match data.
    2. We have average cpc’s for all individual words

    We use the google data to properly break down a keyword.
    Example would be mensvnecktshirts.com
    keyword | cpc | local | global
    mens vneck tshirts | 1.74 | 22 | 28
    mens v neck t shirts | 1.47 | 720 | 1,000
    mens v neck tshirts | 1.23 | 16 | 22
    mens vneck t shirts | 0.00 | 0 | 10
    From our data you can see that the best breakdown is mens v neck t shirts as this is searched the most.

  10. James says:

    Michael

    Account now set up thanks.

    In the video Andrew was saying that if the market was worldwide to use the global search for exact phrase so for generic worldwide keywords wouldnt it be more accurate to use the global figures?
    Somehting I dont really get is how the formula has changed so much now compared with the information in the video. If Andrew was using the formula as per his video in his valuations in his brokerage service and they were working out why has it now changed to be a completely different formula. The percentage has gone from 80% to 35%, 24 months to 12 months, Global to local. Is the wholesale still 10% of the end result based on this new formula?

    Thanks

    James

  11. James G says:

    Hi Michael and Andrew

    Firstly I tried to sign up for an actual account on Domain Sherpa but didn’t get a confirm back email through so thought I would let you know.

    I have been absolutely hooked on your video interviews and find your site well designed and a great resource. It is refreshing that all the people you have interviewed have been so open as I expected people to be guarded about their dealings especially over valuations.

    Just a couple of questions regarding this interview and the formula

    From your script:

    If we were paying Google a dollar per click to get that person on our website, that would cost us $6,800 per month in a normal business valuation. You know, let’s look at a 24 to 36 month multiple, you know, I would say that the retail value of that domain name is around $80,000.

    Michael: Okay, and you multiply the $6,800 per month times what number to come to the 80,000?

    Andrew: That’s 24 months.

    Michael: 24, okay.

    Sorry but is the above a mistake as 6800 x 24 is 163200 not 80000 or am missing something?

    Also I have seen Andrew now say that the 80% for the traffic share should be reduced to 35-40%.
    This makes quite a difference to the calculation so should any of the other figures be adjusted accordingly or are we saying that 35-40% brings the more accurate valuation and that 80% was wrong?
    I realise this is never going to be an exact science but I think the calculation could do with some clarification.
    I have set up up my own spreadsheet with 40% as the percentage and will start on following some drops and testing out the valuations against sales.

    On a separate topic Michael I think it would be great if someone were to interview you soon as it would be interesting to see how the Domain Sherpa concept came to fruition

    Thanks

    James

    • Hi James G,

      Thanks for letting me know about the signup process issue. It could have been a transient issue on the web server. I apologize for your trouble. Please try it one more time and if you have another problem, I’ll personally call you and we’ll get it straightened out.

      I’m glad you are finding benefit from the interviews. You words are very kind. It feels great to get a comment like yours. :)

      Regarding the quote you pulled out from the script, I have reviewed it and, yes, I think it is in error. If my memory serves me correctly, I didn’t have a hand calculator on me and didn’t want to use the computer’s calculator since I was recording the show, so I didn’t check the math.

      Andrew has since standardized on the 1) local exact match search volume, 2) estimated CPC, 3) 35% and 4) a 12-month horizon for evaluation.

      I’d love to hear how some of your drop tests worked out. Please either post it here, or email me at michael [at] the domain name above.

      Best,
      Michael

  12. Greg says:

    While this can be a useful way to value a domain it is becoming more and more outdated…

    This approach takes search volume/CPC and puts a value on ranking #1 for that phrase or keyword.

    The big assumption is that having the exact match domain gives you an advantage when ranking for your main keyword. Something that Matt Cutts already addressed several months ago about that could soon be changing
    http://www.youtube.com/watch?v=rAWFv43qubI

    Also, search is constantly in flux, with local results, product ads, category results on top of adwords, organic listings continue to be pushed down and down. This is the intent I think G has, you have to pay to play.

    Further, it is clear that Google is favoring more and more the big brands as well as social signals becoming more and more popular.

    Something to think about, why not register a ‘brandable domain’ for $8 or pick 1 up for a few hundred/thousand instead of spending 6-figures on that exact match domain. Use that money you saved to actually build a brand and get established in your market….

    • Great points, Greg.

      Your statement of this valuation method is correct. Just like valuing a business, there are multiple formulas (e.g., cash flow, capital equipment value, etc.). This is just one. And, yes, search volume and CPC is in flux. But it’s a formula that’s defensible.

      I don’t think your depiction of the value of keywords in the domain name is valid. Here’s what Matt said: Google is “thinking about adjusting that mix a little bit, and sort of turning the knob down within the algorithm so that given two different domains it wouldn’t necessarily help you as much to have a domain with a bunch of keywords in it.” (watch the video: http://www.domainsherpa.com/matt-cutts-keyword-domain-names/) This is the exact quote. “Thinking…a little bit.”

      With respect to your statement, “why not register a ‘brandable domain’ for $8 or pick 1 up for a few hundred/thousand instead of spending 6-figures on that exact match domain. Use that money you saved to actually build a brand and get established in your market” I’ll offer a contrary view for discussion purposes. In the best of cases, you match the value of a generic keyword domain name with little upfront cost for the domain and a lot of money spent over time to build the value. In the worst of cases, the business fails and if you owned the generic keyword domain name, odds are that it will still have value that can be liquidated whereas the brandable domain name you build value into will probably not be as valuable to a buyer unless they want to start another business in the same industry with the same product/service set.

      Great discussion. Thanks for sharing your thoughts.

  13. Huw says:

    Interesting valuation method and great video!

    How about creating a calculator “or valuation badge” users can place on their sales pages etc..

    And what about branding this method “Rosener Equation” – a good start in securing a future bank load maybe – you never know :)

    • Great ideas, Huw. We’ll probably write up a summary article on the topic so it’s easier for people to reference. Keep the ideas coming! :)

    • Howie Crosby says:

      Love the idea of that, the ‘Rosener Equation!’ Protrada have a similar tool don’t they. I have sold to clients recently that have not been interested in figures and stats, but I guess it’s there if you need it.

  14. @Angus,

    Thanks for the great comment. I appreciate it.

    JAG

  15. Angus says:

    Jason, now that is an intelligent response worth of its own blog post. Kudos.

  16. The 80% is accurate. I recently had a generic coin domain that was pulling down 16K unique per month until Google Panda decided to deindex the site for no apparent reason. I was getting good traffic and many ad clicks. This was my top performing domain.

    If you own a good keyword domain, you can rank for other keywords. You can sell a domain for whatever you feel it’s worth. However, you have to attach a fair price to the domain to entice the buyer. You can’t ask $10K for a $100 domain with no apprarent value. You can a high price for a domain that can make the buyer substantial revenue. in my opinion, I believe insurance, debt consolidation, law, education and loan domains are revenue generators with high CPC.

  17. Great work Mike! Clever domain valuation formula Andrew. Thanks for sharing some good tips.

    @Chris,

    The 10% is correct. Unless you have a stellar domain that highly sought after, then most domainers are only looking to pay 10%, excluding various domains with major demand. There are many end-users that have declined on paying 10% of value to acquire a domain that targets their top service. I have proof to support it.

    However, end-users will also pay high prices on domains which represent their top two products and services. If you want to maximize your revenue, you have to sell to the right end-user who has a need. Nonetheless, if you’re looking for a quick flip and need quick money, you will probably have to accept 10%.

    Never show you need money to any potential buyer. They can use that as leverage to negotiate the price down. Stay firm on your price unless the buyer seems to be losing interest. You’ll realize the value of the domainn to the buyer.

    If you don’t need to make a sale, hold onto the domain. Let the buyer contact you. Frank Schilling receives multiple offers on the same domains. This demonstrates the end-user has a need for the domain. Otherwise, they won’t keep coming back to make offers.

  18. Sorry I haven’t had more time to make comments or respond to questions, but it’s been a crazy lately.

    @ SDM

    Your point is well taken, but the fact of the matter is that it is “so”. Domainers generally do pay about 75% – 90% less than what an end user might pay for the same domain. But the reasoning is simple – WE ARE NOT DEALING WITH A LIQUID COMMODITY!

    Domain names are not readily liquid (with the exception of 2 & 3 letter .com domains which are more commodities than the rest). At the end of the day, domain names are a numbers game for the most part. You need to focus on quality, however, it’s really all about how many domains do you own. The more you own, the more likely you are to consistently make sales. The more sales you consistently make, the easier it is to say “no” and hold out for the highest possible price.

    But because it’s a numbers game you need to keep your averages down (cost per domain). If you sell 1 in every 20 domains that you own in a given period of time, then that 1 domain needs to not only pay for those other 19, but it needs to make you a profit as well (otherwise you are just spinning your wheels).

    When you buy a domain for pure speculation you are taking a risk. Much higher risk (according to the markets) than say buying a house. The market is not efficient and so you need to hedge your risk by making sure you buy low. And in order to reward that risk you need to be able to sell high.

    Hope this addressed your question.

  19. SDM says:

    RE: “Something doesn’t ad up on domainer “wholesale” pricing.”

    Sorry, I forgot that domain industry outsiders, like me, don’t rate when it comes to having reasonable questions responded to. My apologies for not having a seat at the iconic domainers’ table.

    Here’s my take on appraisals:

    Without a third party, deep pockets, independent MARKET MAKER to bring liquidity to the domain market place by actually making domain purchases that bear some relation to appraised values, this industry will continue to overcharge for “expert” appraisals all day long, that, for the most part, are absolutely meaningless. Otherwise, why would a domain name, appraised by a seasoned industry expert be expected to sell “wholesale” at a 90% discount to the actual appraised price?

    I wonder how that strategy will play with end users who are expected to pay full fare at premium domain auction events while the domain investors sitting in the same room (or on the internet) will wait for the opportunity to pay only ten cents on the dollar for the same domains?

    Maybe this is rocket science after all, because I just don’t get it.

  20. [...] VIDEO: How To Value Generic Domain Names – with Andrew Rosener [...]

  21. Ken says:

    I’m sick and yet I can’t let the sight of an interview pass by. Now I’m glad I set a bit of time to watch this up before going to bed :) Good job, Michael. I really like this interview with Andrew. Gives people like me more insight on how to set up a more reasonable system in how to value and price domain names. Love these interviews. Keep it up!

    • Thanks, Ken. That’s quite a compliment that you’re sick and still watching an hour-long interview. Thanks for sharing by posting a comment. It’s motivating for me to deliver the best interviews possible.

  22. SDM says:

    Something doesn’t ad up on domainer “wholesale” pricing.

    Does a jeweler pay $150, wholesale, for an ounce of gold?

    Does a fuel refinery pay $10, wholesale, for a barrel of oil?

    Does an auto dealer pay $5,000, wholesale, for a new car with an MSRP of $50,000?

    Are there ANY industries in which STANDARD wholesale pricing is only 10% of the suggested retail price? Other than yearly renewal fees, domainers have no other significant costs associated with holding a domain name (i.e., storage, regulatory compliance, shelf life, shrinkage, breakage, etc.).

    10% sounds like a distressed (or liquidated) sales price – which would be understandable if the seller is in a bind and must raise cash ASAP, but why would the intrinsic, appraised value of any property, intellectual or otherwise, take a hit of 90% just because it’s being sold on a wholesale basis?

    Even in this depressed real estate market, I am unaware of distressed homes being unloaded at 10% of appraised value. Can you offer a little clarification on the 90% wholesale “discount” for domain names?

    • Mike says:

      @SDM: Here is one rule of thumb that I always use — NEVER sell to other domainers for that very 90% discount reason. If they believe its worth 90% more than their purchase then I can at least TRY to sell it for 50% more than their offer and be happy about that.

      And I am not sure why others are saying domain names are not “liquid”. They most certainly are. When someone offers me what I would like for a particular name, they can have that name as soon as they pay for it and the payment is secured. If you walked into my office with cash, you can have the domain name as fast as I can transfer it to you – thank you. :-)

      Domains are VERY liquid. What I cant stand is how there is a continual flow of deadbeat buyers out there. We need a central database of names, addresses, phone numbers, email addresses, IP addresses, aliases, etc where a domain seller can both register those who have screwed them over by not responding after making their offer to purchase and look up info on persons that do make offers to make sure they’re not on the list. Eventually, this domain buyer blacklist becomes large enough to be of great value to all domain sellers.

      No one would think of walking away after making an offer for a house or commercial property. They’d lose at least 10% which would be their down payment. So why is it a rampant epidemic in the domain world? I think its also time to start asking for 10% non-refundable down-payment before even considering an offer. We’d weed out a lot of people who were never interested in the first place!

  23. John says:

    Also I remembered last year I bought a domain for low $x,xxx because at that times adwords tool showed Low xx,xxx exact searches a month, that’s the same as Epik at that time, you know what, because at that time I didn’t use the new interface when google launched it! I keep using the old interface but later I came to know that new interface also with new data!!! I only know that google force to close the old interface, I am so regret, now it only show xxx exact searches a month, really got ripped off. I guess I lose about $10k to $20k because of this, but luckily some of them still very close to the search volume!

    Also some cpc is inaccurate as well, some of them shows $20+ of one of my keyword earily this year, but after the update, now it turns to be $4, it’s a more reasonable cpc though.

    • That’s terrible!

      I’m so sorry to hear about your experience, but thank you for being open and for sharing it so others can learn from your experience. We must always question the data. Google is fallible just like us.

  24. John says:

    Hi Michael, thanks for the great interview, for the previous comments about Epik, I would say Epik is using Google adwords old data, so its caculation is not correct, I remembered before the keywords tool’s update, I bought quite a lot domains last year, which seems to be useless because of the inaccurate data, the numbers is incorrect in the past, now adwords tool is more accurate.

    also, I have many keywords ranked on spot 1, spot 1 got only 20% of the US results, and if it’s a city type you will only get about 10% to 15%, that’s based on my rankings. :)

    • John, thanks for your comments and additional information on your click-through rates. The geo click-through rates are very interesting. Elliot provided a ballpark valuation formula for geo-domains in his interview that might be more accurate. You should check out that interview too.

  25. MarsDavis says:

    Michael,

    Do you know if or how domainers or big corporations value their domain names on their balance sheet?

    Thanks, Mars

  26. Gnanes says:

    I got a website that ranks 6 spot on first page and only gets 10% of the number of searches (this is based on the last 28 days). It’s still a good formula to get an idea to put a end user pricing on a domain.

    Great interview. Keep up the good work.

    • TJ says:

      Gnanes, are you saying that your position 6 of the Google organic search results produces a 10% click-through rate of the exact match type for local monthly searches (United States)? If so, great information! Thanks for clarifying.

  27. Dave Bhatia says:

    Thanks Andrew for your ideas.

    CPC and Exact match are very important factors to calculate enduser price.

    Another option could be the ad expense incurred by a company for keyword over 6 year period to stay on page 1 of a major search engine like google.com

    Let us say a company is spending $10,000 per month . In 6 years it would spend $ 720,000. That would be the optimum enduser price.

    It is like buying a house by paying only six years lease. Very cheap !!!

  28. Hey everyone, I appreciate the tremendous response to the interview and all of your feedback, particularly those of you who can add to the formula by critiquing what I’ve laid out and fine tuning it further.

    @ John – your numbers make more sense actually when I look at actual sales comparisons versus the valuation methodology. 35% of the traffic being in Position # 1 seems low, but it’s probably closer than 80%. That reals the values in a bit.

    Also, we all need to remember that much like other assets, domains are being sold for less than they are actually worth due to current market conditions. Not in all instances, and in fact I believe domains as an industry are probably doing far better than most others. But still under normal economic times, I would expect sales prices to be significantly higher.

  29. Jeff Edelman says:

    I don’t qualify as somebody who is good at estimating domain values. And no question that the main reason I love this interview is that the industry needs a really well qualified person like Andrew to help try and get some formula or formulas together to try and get some consistency in valuing domains. I love that Andrew has put together a great formula. That said, here would be my thoughts. Take them however you like.

    I think that the .8 is dramatically too high. And others have said that as well and think that a number like .3 makes more sense. I would agree with that. On the other hand, I feel that the 24 months number is dramatically too low. If I am going to earn 500k per year on my investment, that investment is worth way more than 1 million dollars to me – it’s not even close.

    • Osman Tas says:

      If you have a real business, getting traffic due to repeat traffic, type-ins, your brand, your products, social media, etc. I would agree that you can ask for more than 2X. However, if you make money for being in the top spot in Google rankings only, and only for a single phrase, I would hesitate to risk my money. Even 24 months is way too high… Who can guarantee that you would hold the top spot for 24 months for a single phrase? In this valuation formula, even it is not guaranteed that you can achieve it. I personally would not bet on it.

  30. Osman Tas says:

    By the way I am curious: Who is paying $5.07 for the term: student. I don’t see any advertiser when I search for student.

    • Osman Tas says:

      Nobody is bidding yet Google suggests $5+ for the term student. Google’s keyword and traffic tools have been reporting inaccurate values for years. Even some of the numbers mentioned in the interview seems to have changed already :)

      • I’m glad you made this point, Osman.

        No methodology will provide a valid result if you use bad assumptions or bad data. As is the case with anything, crap in, crap out. Check and double-check your inputs if you are taking risk, financial or otherwise.

        If Google has bad data in their keyword tool, no methodology will help you determine a value. One should always run a query directly at http://www.google.com to verify the results. For large ticket items, I’d also suggest creating an AdWords account (and Bing, while you’re at it) so you can actually create an advertisement to verify the CPC estimates if you were to actually buy the specified keyword or phrase.

  31. Osman Tas says:

    I think trying a numeric methodology is awesome. However, I do have concerns about the methodology.

    First of all, the formula is based on only one criteria: one single phrase (exact match term) being on the first spot in Google. What if you cannot achieve it? Second spot gets significantly less traffic. If you valued domains based on the second spot the valuation would be about 20% of what you calculated. If Google tweaks its algorithm, if you targeted a single phrase, your traffic can decrease by 10 fold if you fall into spot 5 or 6. If you go to the second page, instantly, you will have zero traffic. This is a very dangerous way of setting a value to a domain.

    Having said that, traffic studies are already mentioned 80% as an inflated rate. Aaron Wall recently pointed how Google makes even the organic first spot in Google invisible. For such cases, I can hardly imagine claiming 30-40% of the search traffic: http://www.seobook.com/google-panda-algorithm-exploit

    On the other hand, Google keyword tool’s PPC values are also highly inflated. Having done excessive Adwords campaigning, I can tell you that if Google suggests $10 per click, you can get the ad spots 1 to 3 for $1-$5 by a well written ad.

    All in all, for a questionable methodology, this formula can inflate value of a domain name by 10-100 fold.

    Furthermore, you can target any phrase with any domain name. Andrew’s (and some SEO expert’s) assumption is that, having the exact match phrase as your domain name will rank you highly ofr the phrase. Matt Cutt’s recently publicized that Google will address this additional boost in rankings: http://www.seobook.com/googles-matt-cutts-talks-down-keyword-domain-names

  32. I always enjoy your interviews. This one was packed with a ton of useful information.

    Thank you, Michael!

  33. MarsDavis says:

    Michael,

    Great interview to establish a starting point for valuing generic domain names.

    Just to clarify my understanding of Andrew’s formula for valuing a generic domain name:
    1. Must be an exact match keyword
    2. Must be a (.com),
    3. Must be developed into a fully functioning website to take advantage of the #1 ranking
    4. Must have a CPC value
    * It appears the generic domain name values are based on a best case scenario… Great!

    So, as a DN investor, we are selling the “potential” of a domain name to an enduser or another investor, as if it was a fully developed & functioning website.

    Is there a formula for valuing a domain name in its CURRENT, undeveloped condition, similar to vacant land? How does some of these big corporations with hundreds of thousands of domain names value their domain names on their balance sheet?

    Thanks again for a great website resource. Cheers, Mars

  34. MarsDavis says:

    Michael,

    That Worked! You are Quick!

    Thanks for a great interview and the excel spreadsheet!

    Cheers, Mars

  35. MarsDavis says:

    Hi Michael,

    Is anyone else having problems with the excel spreadsheet? I can download it, however, when I open it up… the characters on the spreadsheet are unrecognizable.

    Any suggestions?? Thanks, Mars

    • DomainSherpa says:

      @Mars:

      No one else has indicated problems yet. I’ve added another option for download – Excel .xls format, 1997-2004. Refresh this page, try that download and let me know if it helps.

  36. Jeff Edelman says:

    I am just part of the way through, but this is a really great interview, guys. I am now confused regarding the “exact monthly search.” I’m sure that a lot of people have been using sites like Estibot and Epik’s appraisal tool to get data on monthly searches. But their numbers turn out to be dramatically higher than the Google Adwords Exact Search Tool that Andrew is using in his analyis. On our domain, Student.com, for example, Estibot shows 305,040 exact monthly searches. Epik shows 302,580 exact monthly searches. These are “exact,” not the much higher search number for whenever the word “student” is in the search, which is more like 17 million. But the Google Adwords Keyword Tool shows an exact search of only 14,800. I realize that the Google tool is only for US, but certainly the US percentage would be a significant percentage of the “exact” total. Is there a decent explanation for the discrepancy? In starting to play around with a few solid generic domains, I am seeing similar discrepancies.

    • Jamie Zoch says:

      @Jeff,

      That is a bit odd but I am seeing the same numbers you are. I know Google recently did some kind of change so I’m not sure if that is the reason for the lower amount. It’s 90K for global exact.

      The one thing I would do on a generic term like Student is use Phrase, instead of exact. Using phrase displays a number of 24,900,000 for “student”

    • @Jeff: Estibot and Epik Appraise are a bit of black box, at least to me. I need to ask both of them to come on the show and see how they make their calculations. Without understanding them, it’s hard to know when adjustments are necessary and by how much.

      If I run student.com through Andrew’s methodology, I see:
      exact match phrase: student
      local monthly searches: 14,800 (assuming it’s mainly a US-based keyword, arguable)
      cpc: $5.07
      time period: 24 months
      multiplier: 80% (assuming original article specifications)
      (14,800 x .8 x 5.07 x 24) = $1.44 million maximum potential retail value
      Estibot’s value was at $1.51 million, pretty close. At least at the right order of magnitude.

      According to a few comments above when you want to determine the maximum potential retail value, the multiplier should be closer to 0.3 (30%) rather than .8 (80%) for click-through rate of being in position #1. Recalculating above using 0.3 instead of 0.8 provides a value of 540,000.

      Clearly there’s a factor of 2 between these numbers, which is still an issue. Which do you think is closer to the real value of Student.com?

  37. Some evaluation criteria is very controversial as “official” brokers and speculatores probably exchange domains with other domainers not selling to end users. End users need brandable domains, dictionary one or two words (or even more), something they need to build an web site, the first purpose for a firm or company when they decide to buy a domain. The richest domain brokers and other speculators are those who follow their insticts to get money easily and influence the market as they did with Wall Street.

    One of my generic domains is periodic.de (valuated $27000 on Estibot and $80000 on Epik). However who cares about “periodic” if speculators think they live forever?

    • I am by no means an expert in evaluating domain names, but I would venture to say that “periodic.com” (or any other extension) is more of a brandable domain name than a generic domain name. While it does have a good amount of exact match local (US) monthly searches at 5,400, it has no companies paying for AdWord advertisements. As such, this methodology can’t be used, and as Andrew commented in the interview, “there is no way to value a brandable domain name.” It’s what an end user will pay and/or the market will bear.

      I’d be interested to hear from Francois Carrillo (Estibot.com) and Rob Monster (Epik.com) how their valuation methods function for this type of domain name.

  38. I read the article and found it very helpful. The methodology proposed by Andrew can become a good standard because it looks at valuation from the point of view of a potential buyer who is attempting to control advertising costs by purchasing a domain name that has high search/click-thru value.

    In addition to advertising costs, a buyer also saves marketing/branding costs when purchasing a good, short generic domain name. However, these costs may be more difficult for a buyer to quantify (it would have to be done in conjunction with the marketing/branding department budget) though they are also very real.

    All in all, and excellent article which hopefully reflects real life domain transaction experiences.

  39. Chris says:

    Andrew – thanks for clarification, but am I understanding this right then…. that for a $100,000 domain an investor would only want to pay 10% (or $10,000) for it? That sounds very low. Can you apply this concept to a recent public domain name sale?

    If I pay $5 for something I think I can sell for $10 I’d be very happy (even if I only sell it for $7 that is still a 40% profit)

  40. Yury says:

    What tool do you use to find out the CPC for a keyword

    • @Yury, sorry about that. I should have highlighted it on-screen a little better at about 7-8 minutes intonthe video. Thanks for asking.

      Here’s how to display the CPC information: Sign into Google, visit the keywords tool link (above), run a search, then look just above the Local Monthly Searches and you’ll see a pull-down menu labeled “Columns”. Select that and then check the box next to “CPC” and it will add a column to view CPC in addition to Global and Local searches.

      • Yury says:

        Interesting, the “CPC” option does not appear for me there.

        • @Yury:

          Yes, you need an AdWords account to see that. It’s free and relatively easy to add an AdWords account to your Google accounts, just visit http://www.google.com/adwords. Then you can add CPC to the available columns.

          • I am following the same calculations as in your examples but the CPC’s don’t match. For example, Running Shoes you mentioned it had CPC over $2 where as Google Adwords tool is indicating it at $1.51. Please provide some guidance.

            • Hi Rafael,

              I also see [running shoes] (exact match local searches) having a estimated CPC of $1.51 now. I attribute this to Google updating their database of estimated CPC values periodically. I would assume that running shoe stores will pay more to be at the top of Google in some months more than others, and it is not clear what the lag is between the actual CPC in any given month and when they update their estimated CPC values on the GAKT.

              So, if I were you, I would use the most updated estimated CPC values that the GAKT is providing.

              Best,
              Michael

  41. John Lyotier says:

    Michael/Andrew,

    Thanks for the interview and sharing the formula. I have been valuing domains using a similar method for many years to identify where value lies. But I would like to correct your formula to reflect a more accurate happening of first position ranking. Rather than a multiple of .8 or 80% for position one ranking, studies have shown that position 1 is worth anywhere from 28-35% (e.g., http://www.seoresearcher.com/distribution-of-clicks-on-googles-serps-and-eye-tracking-analysis.htm).

    Re: Left of the Dot valuation for the name HomeStaging.com… I do believe that our model of creating value out of nothing (e.g., reselling sub-domains … http://Vancouver.HomeStaging.com, http://Condo.HomeStaging.com, etc.) changes the numbers even more. We are presently building out HomeStaging.com and will be re-launching it over the summer. Stay tuned.

    • @John, thanks for confirming the methodology and providing the additional link with the value of 28-35%, which is of the order of magnitude that is similar to what Chris suggested above.

      Nice to see your plans for Left of the Dot and HomeStaging.com. I hope that when you have your HomeStaging.com site up and running that you consider coming on DomainSherpa to share your story of how you add value to premium domain names by building out third levels.

  42. Chris, I think you misunderstood on the 10%. I am saying most domain investors want to buy at about 10% of the value.

    That leaves a lot of upside!

  43. Frank says:

    Great job, Andrew!

  44. Chris says:

    Some of the key takeaways don’t look right:

    “If in the top organic position in Google, one can estimate that a result might receive 80% of the clicks.”

    80% is not in the ballpark.

    34.4% http://www.free-seo-news.com/newsletter423.htm
    20-30% http://money.cnn.com/2011/03/08/technology/google_algorithm_change/index.htm
    34.4% http://searchenginewatch.com/article/2050861/How-Much-is-a-Google-Top-Spot-Worth

    “The appraised value listed above is the maximum retail value that might be paid by an end user. If you sell to another domain investor, you might expect 10% of the full retail value.”

    A domain investor is not going to leave himself a 10% markup only. Not sure how this % was arrived at but any domain investor will tell you that is not close. In my experience, they leave themselves at least 50% anticipated profit if not closer to 100%.

    • @Chris, thanks for sharing your data and the links. That adds a nice refinement to Andrew’s methodology. Well done.

      Also, thanks for your other comments. Andrew responded below regarding the 10%, but I’ve spoken to other domainers (see Elliot Silver’s interview, I believe, or maybe Justin Godfrey’s) that have confirmed that a wholesale-valued sale of a domain name, for a quick flip, may only be a markup of around 10%.

  45. Cheryl says:

    Awesome! Thanks for sharing, Andrew and Michael. It’s a great methodology and wonderful examples.

  46. Chuckie says:

    OMG. It works! It works! :)

    Well done, Andrew. Your system puts me in the right ballpark for all the domains I checked (about 20). Very cool spreadsheet – I’m totally using it going forward.

    Thanks, Michael. Awesome interview. I watched it cover to cover, and plan to listen to it during my workout tomorrow too. Nice polish on it.

  47. Thanks for the interview Michael – lot of fun.

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