What Is Involved in Domain Valuation?

Domain names for websites are like telephone numbers because no two can be exactly the same. The main factors that determine domain valuation are the number of characters and brand association or marketing potential. The age of the domain's registration, existing traffic and competition also affect domain valuations.

The ideal length for domain names is less than 10 characters. A short domain name decreases the likelihood of typing errors because it requires fewer keystrokes. Domain names that have three to five characters often have higher valuation.

Existing company names, brands and trademarks are notable exceptions to this rule. It is better for a domain name to have the name that customers associate with that commercial venture. Often, business associates and customers assume that the company’s name and website’s name are the same. Changing even one or two characters can create confusion.

Fewer characters also make a domain name easier to remember. The characters do not even need to be an actual word. Some famous domain names became words in the dictionary after their websites gained popularity.

Domain names that could be useful for commercial branding and entrepreneurial activities receive higher domain valuation than odd, infrequently used words. Single-syllable domain names, words for popular topics, recreational pursuits and human foibles appeal to a wide cross-section of potential domain owners. Distinct acronyms that consumers recognize easily often have higher valuations.

The age of a domain and its content affect domain valuation assessments. Older domains receive more favorable valuations than newer domains. Parked domains have no active use except advertising. They often have lower valuation than similar domains with useful content.

The Internet has spawned an entire industry of companies that do little other than domain valuations. A complete domain valuation assessment tries to calculate the value of other factors that affect an existing web domain. The most important ones are traffic, search rankings and backlinks from other websites.

An existing domain name’s valuation is higher if it receives enough visitors to rank among the Internet’s top sites in its category. Search engine statistics that show a high number of queries for a domain name will increase its valuation. A domain valuation also looks at the number of sites that link to an existing domain and the quality of those sites.

When all other factors are equal, demand is a key force in domain name profitability. If the registration for a highly prized domain name expires, the competition to become the next owner can push prices into the millions of US Dollars. Sometimes the actual selling price is well above the domain valuation.