& the GII
This page considers the valuation and pricing of domain
It covers -
A supplementary note examines
claims that many dot-com names changed hands for million
dollar prices and considers commodification of names through
name-based lending and securities.
How much is a domain name worth? There is no consensus
about the nature of worth, about methodologies for determining
the price of individual names, and about implications.
Some people have claimed that names have an intrinsic
worth. Others, more persuasively, argue that value is
subjective, based on changing perceptions.
Some have argued for what is characterised as a "free
market". Others have commented that the absence of
restrictions may favour intermediaries such as registrars
but encourages cybersquatting and broader speculation
in domain names.
During the dotcom boom of
the 1990s some domain name holders or valuation services
asserted that particular names had an intrinsic value
of several million dollars, independent of any investment
in development of a site, establishment of e-commerce
fulfilment infrastructure or other tangibles.
The value of traditional brands is not inherent. It is
instead created by promotion and performance in the market
(eg quality control and after-sales service). Enthusiasts
for the inherent value of domain names claimed that names
had a different value: they were addresses for "real
estate" in cyberspace. Some were thus of innate value
because the particular location could be easily found
among the millions of
other addresses or possessed qualities (eg "funkiness")
attractive to web surfers.
Acceptance of those assertions is evident in reports of
figures that particular domain names have changed hands
for millions of dollars. We have discussed those reports
in a separate note.
resulted in explosive growth of domain name valuation
services. We counted 172 services at the height of the
1990s dot-com boom (although most have now ceased operation).
It attracted media coverage that echoed wider community
awareness of the value of intangibles, such as reports
in 1997 that the Coca-Cola trademark - embodying
around 100 years of promotion - was worth US$6 billion.
(In 2001 marketing specialist Interbrand valued Coke
as the world's "most valued brand" - worth US$68.9
billion at a time when the group's market capitalisation
was US$117.2 billion.)
Media coverage fed opportunism by vendors of 'pre-registered
domains' (some of which registered hundreds of thousands
of dot-com names), professional domain name speculators
and individuals having a punt by acquiring a handful of
names. As of June 1999 for example 43% of all four letter
dotcom domains were registered by entities that held ten
or more names and that supposedly all but 1,760 words
in Websters American Dictionary had been registered
It was echoed in the auction of 'generic' names within
the 'com' 2LD of dot-au. Those names had previously been
unavailable but, as highlighted in our profile
of Australian domain administrator auDA, were released
Prices paid in that auction ranged from a few hundred
dollars to several thousand, with attempts by some name
holders to on-sell them for over $130,00 and disappointment
when other supposed 'power' names attracted no interest
and accordingly were subsequently released on a first
come, first served basis.
There had been similar disappointment over the value of
'pre-registered' dot-com names following evaporation of
the 1990s dot-com bubble.
One entrepreneur bravely marketed his collection as "Domain
names = web real estate: rock solid",
spruiking that -
inventory of domain names alone is conservatively valued
at over $150,000. This web site network is normally
priced at $67,00, a great value. If you act now before
November 29th, you can walk away with the entire network
and all of the domain names for only $9,995, that's
85% off the normal price. I must be in love, or just
losing my mind. Grab this before I come to my senses.
how much are they worth?
are four schools of thought about the intrinsic value
of a domain name -
names have exactly the same value, ie the price charged
by the domain registry plus the registrar/reseller's
fee and any associated tax or compliance costs
names have an intrinsic value that is greater than that
of other names, can be readily identified and could/should
are no fundamental differences in the intrinsic value
of names; they are valuable because through effective
promotion or other activity they can embody a new/existing
brand such as Amazon.com, Nike or Microsoft
domain name is worth exactly what a buyer is willing
to pay for it, no more and no less
reason for caution is that, strictly speaking, domain
name holders (registrants) do not own the name and do
not have perpetual rights in that name. Instead they have
a licence to use that address for a finite period - generally
for two years. At the end of that time they are first
in line to renew that 'lease' of the name. In principle,
like trademark holders,
they can renew the domain registration indefinitely.
Another is that search
patterns are evolving, with many consumers - experienced
and otherwise - relying on search engines,
links and offline pointers (eg URLS on the back of cabs,
on television or in newspapers) rather than intuiting
As we have highlighted in a discussion
of ICANN's UDRP, auDA's auDRP and the US ACPA, some people
recognised that although domain names might not have an
innate value - just a mnemonic for a string of digits
in cyberspace - they are made valuable through association
with an offline brand or other entity.
Businesses and other organisations are concerned not to
dilute their trademarks or otherwise lose control of their
brands. They've accordingly sought protection under domain
name dispute procedures and legislation such as the US
AntiCybersquatting Protection Act against use of
domain names that echo their offline names.
There are no authoritative global figures on the number
of companies that have simply bought out speculators or
blatant squatters; figures for the global value of such
transactions similarly are not available.
Domain name valuation is one of the murkier parts of the
domain name industry and the business of valuing intangibles.
There are no international accounting standards. Much
information is contentious, valuation methodologies are
often not publicly available and there have been no large-scale
attempts to map values by seeking an assessment of a particular
name's worth from a large number of valuation service
providers. The immaturity of the market is one reason
why there are few substantial independent studies of prices
One source of particular value is Domain Names: a Practical
Guide (London: Tolley 2002) by Simon Halberstam, Joanne
Brook & Jonathan Turner.
There is a broader treatment in Valuation of Intellectual
Property & Intangible Assets (New York: Wiley
2000) by Gordon Smith & Russell Parr. They suggest
that key issues in valuing domain names are -
Is the value of a domain name intrinsic to a parent
trademark, and therefore imbedded in the trademark value,
or does the domain name produce purely incremental value?
2. What are the most effective, sustainable, supportable
and defensible methods to value domain names?
3. When domain names exist without any underlying trademarks,
does their value increase, and if so, why and how?
4. Given fluctuations in the domain name market, how
frequently should a domain name be valued: semi-annually,
annually, every two years?
5. What is the effect of similar or confusing domain
name registrations, in terms of dilution of value of
the core trademark or brand, and in terms of the reduced
value of the domain name?
appears that most valuers rely on -
of the figures at which 'similar' names changed hands.
Those databases are based on media reports, vendor/acquirer
statements and figures from specialist domain name auction
services such as Afternic.com.
They're essentially restricted to the dot-com gTLD;
many appear insufficiently large for statistical validity
and may be out of date.
or manual methodologies, generally based on consideration
of the number of characters in the name, its 'musicality',
the particular industry and idiosyncratic prescriptions
about suffixes, plurals, hyphenation and so forth.
range from US$25 for fully automated submission (with
a valuation figure and cursory report by email) to several
thousand dollars for a detailed customised report that
includes a discussion of the methodology and comparable
One valuer says
know how you feel. Why spend a small fortune just to
have your domain names appraised? At Submerged Ideas,
we are dedicated to keeping our expert appraisals fair
and affordable. Just $1.99 per name plus a $5 processing
fee per order (max of 30 names). We know that's the
best deal on the Internet, so go ahead, shop it around.
It is uncertain whether some valuers do much more than
consult the tea-leaves, despite claims of matrices, artificial
intelligence and integration with large scale databases.
In identifying key attributes most methodologies emphasise
the 'memorability' of names, usually characterised as
the number of characters and ease of pronuciation, and
intuitive searching by users.
Length reflects academic research such as George Miller's
The Magical Number Seven, Plus or Minus Two: Some Limits
on Our Capacity for Processing Information which suggested
an inherent limit to how many numbers most people can
comfortably handle. It also reflects more anecdotal reports
in marketing literature about successful and unsuccessful
One pundit accordingly advises
long is the domain name? Generally, the shorter the
better when it comes to domain names - as long as this
shortness doesn't come through throwing away words or
letters, or substituting numbers for letters. GoForIt.com
is a nice little domain name, with some value. Go4It.com
is worth less than that. GoFrIt.com is essentially worthless.
wonder what the valuer would have said about 'amazon'
(longer and much less intuitive than books.com), 'google',
'altavista' or 'yahoo'. We note that some of the more
thoughtful studies of offline branding suggest that a
"strange" name such as xylopax, xerox, claritin
or mogadon may indeed be more memorable than standard
the "chronic obsession with one-word domains"
one-word domain, the theory goes, is worth a lot, just
because it is, well, a one-word domain. This theory
is locked into the vacuum of thinking which pays no
attention to commercial interest. There is no commercial
interest, for example, in the word "yet." But it is
a single word. So what. There is no commercial association.
When you hear the word "yet," what type of commerce
do you immediately think of? ... There is no inherent
value in one-word domains. There is inherent value in
keywords with commercial associations, eg music.com,
autos.com, travel.com, etc.
inherent value has led some registrars and specialists
to build domain name portfolios.
One enthusiast proclaimed in 2006 that
in demand tend to be short words — especially
those that have anything to do with poker, real estate,
hotels and 'pod'. It's all about iPod and podcasts
valuers have proposed the 'Six S Model':
- is the name short enough to remember? does it fit
on a business card?
Sense - does it make sense (if meant to identify particular
goods/services) and "speak the nature of business"
Sound - does it "sound good" (aka 'musicality)
or have particular associations
Spelling - is it spelt correctly
Search - does it
feature or echo desirable search
Scope - and "have the scope for business"
the MULE model -
- market type (professional services versus youth/design
demographics that favour funky names such as fatbrain
or bluesskyfrog versus consumers inyent on finding vendors
of cars, homes, phones, perfumes and health products)
U - usefulness ("Will people buy
- Catchy, Clever, Concise")
L - length (Letters/Words/Numbers)
E - ease (How it sounds/Does it flow)
dictates that we have encountered include problematical
instructions that in choosing a name you should -
your domain name with a number" so as to "be
placed ahead of your competition in directories"
the scape for branding the domain name: is it memorable,
is it too similar to an existing brand or name ("Strong
branding requires distinction; how can there be a clear
distinction in the minds of potential clients if the
domains are essentially confusingly similar?")
mispellings - "If there are any misspellings in
the domain name, you can knock 99% or more off the price
of most domain names"
leverage mispellings - ie engage in typosquatting by
attracting traffic from three-thumbed typists
your domain name with 'about' - "an information
oriented word with high alphabetical priority"
suffixes and prefixes - "prefixes or suffixes can
REALLY hurt the value of a domain name. For example,
add an "e" or "i" or "my" in front of the domain, or
a "site" behind it and you've just destroyed most of
embrace suffixes and prefixes (eg e-Bay)
words that frequently appear on search engines/directories
plurals - "BuyTicket.com is most likely worth less
than BuyTickets.com, but Chat.com is most likely worth
more than Chats.com"
hyphens, as "longer domain names may actually be
more valuable with hyphens"
hyphenation the way vampires avoid garlic - "hyphens
help to preserve clarity, but generally they reduce
the value of a domain name. Sports-Cars.com will most
likely sell for less, even much less than SportsCars.com."
multiple-word names - "common two-word expressions
are worth more (sometimes MUCH more) than rare one-word
expressions. And common three-word expressions can be
worth more than rare one-word expressions ... SportsCars.com
is worth more than Semantics.com. FreeEmailAddress.com
is worth more than Superiority.com"
a generic (aka 'pre-branded') domain name"
a three-letter .com acronym domains (eg abc.com) - supposedly
the "gold standard of international business"
but unlikely to be available
the very helpful "use popular search words in your
domain name for Higher Search Engine Rank!"
One valuation service launched in 2006 offers a "fool
proof" appraisal based simply on the number of times
a site appears in the major search engines by the number
of letters in the domain name.
the dot-naming business
Particular branding concerns are highlighted in the Marketing
guide elsewhere on this site, which highlights works such
as David Aaker's Brand Equity & Advertising
(Hillsdale: Lawrence Erlbaum 1993).
It includes a page on
domain naming - theory and practice - and the name-generation
business, nicely captured in a wry 1999 Salon article.
A sense of the number of domain names registered - and
smaller number in active use - is provided in the Net
Metrics & Statistics