Domain value is the total worth of a domain name. It comprises various factors contributing to the workability and marketability of a domain name as an asset. By analyzing such factors, we can understand why certain domains sell for much more than others, even if they both have the same keyword in them.
Four main factors determine how much a premium domain costs: search volume, link equity, and growth potential. A quick estimate of a domain can be figured by assuming a 24 to 36 Multiplier as published in this article.
If your website earns $1000 per month in ad revenue, and you could get a 36 X multiplier, the value would be $1000 X 36 = $36,000.
Search Volume
When a domain name is typed into a search bar, the search engine tries to find that domain. The number of times it’s found is recorded as a search volume.
For example, if someone were to type in “shoes” into Google, Google would give them a list of results that have the terms “online shoes store” or “where can I find cheap shoes.”
Google displays only those websites which they think are most relevant for the term they searched for.
In our case, we would see some popular shoe stores along with Wikipedia and maybe even an article about how people used to wear shoes thousands of years ago. If you’ve ever wondered why people use phrases instead of full sentences when writing, this is why.
A shorter phrase with the same meaning as a longer one will give someone exactly what they’re looking for, and it takes up less space on the search engine results page (SERP).
Search volume shows how many people search for a specific term or phrase. It’s not just limited to words and phrases, though. Domains that match long-tail keywords also increase in value because there is more of an opportunity for users to find them.
But again… domains valued solely based on their search volume would rank pretty low unless they were attached to high-quality content sites like Wikipedia or IMDB, which already have high rankings.
I use SEMrush to measure the search volume for the keywords driving traffic to my website.
Link Equity
Looking at a list of paid backlinks, you’ll notice that most of them use a keyword in their anchor text. The more sites that link to yours with your target keyword(s) in the anchor text, the higher your search rankings will be for those keywords; therefore, you’ll receive greater value from your domain.
Purchasing domains with a backlink profile consisting of many premium links is a great way to prevent future SEO work because you’re getting started on page 1 instead of page 2 or 3, where it will take even longer to rank.
The value of links is not all equal. Some are worth more than others based on the site’s quality that links to you. For instance, it’s easier for a news blog to build links with general PR sites than industry-specific ones.
In this article by Moz.com, Â they explain that it would be foolish to make total links a raw number and not consider those links’ quality.
Growth Potential
This is one of the most important factors in determining domain value. Think about it… if there was an exact match keyword domain name with high search volumes without existing backlinks, would anyone really want to spend money on it?
Probably not- especially if their competitors already rank on page 1 for those keywords. It doesn’t do them any good because people won’t buy anything from their site unless they can outrank their competition first, and this requires lots of link-building work!
When someone purchases a premium domain, they want to know that they can do something with it. They want to ensure they’ve invested in a winner, which means there’s an opportunity for growth!
This is especially important if you’re trying to sell a high-value domain of your own. Building links isn’t the only factor determining its worth, but it certainly helps.
If you had two domains with equal backlinks and traffic, one would be worth more than the other because of its potential to earn revenue for whoever bought it.
Revenue
Although not always true, people generally spend their money on premium domains that have an existing income stream attached to them rather than ones that require lots of SEO work for them to start making money.
For example, someone who makes $5k/month off Adsense ads might purchase a monetized domain name, while another person might not be interested in spending money on a domain with Adsense ads because they don’t know how long those ads will last.
If you’re ever planning on selling a domain that’s already making money, try to show proof of the earnings by getting it verified. Highlights current earnings, which can help justify your asking price.
Summary
Domain Value can be estimated using the four main factors (search volume, link equity, growth potential, and revenue). Remember this: domains are assets just like stocks and real estate, meaning they have an inherent value.
