Review: Valuate.com and the Domain Industry

Recently a new tool was made available to buyers and sellers of domains, Valuate.com.  Valuate.com is trying to accomplish where many have failed by creating an automated domain valuation algorithm to produce a quality estimate of a domain’s worth.  Before we take a look at Valuate.com and it whether it succeeds or fails, lets discuss valuation in general.

Determining value usually refers to discovering a correct price in a market.  Some will debate that whatever price an item is sold for reflects its value at least at that moment.  Others will argue that there are inefficiencies in markets and price doesn’t reflect value.  In the domaining world we see this often with some camps saying that a domain is only worth what one will pay for and others clinging on to domains or asking exorbitant prices based on potential.  Stepping out of the theoretical and into the practical world, both sides have some merit and that is why valuing domains become so difficult.

Domaining is such a new industry that a base set of criteria has yet to be set for valuing domains.  Sure, everyone has their own methods and ideologies but a real consensus has yet to be established as it has in more mature markets like the real estate market.  What’s holding the young domain market back from finding better valuations is a lack of a significant number of  comps and relatively few examples of the fulfillment of domain potential, eg Bobbleheads.com or PalmSprings.com, etc.  Up to now, type in traffic has dictated much of the pricing model, but that is now changing and the move to development reflects this.

Although we are not privy to Valuate.com methodology, it’s apparent they’re using criterion such as Search Vol, CPC, Advertising competition, etc.  The proper domain has an advantage in gaining the traffic.  They are measuring how much and how valuable the traffic that the domain may be able to corral is worth.  That is the future of the domaining industry, capitalizing off of search traffic through the use of powerful domains.  Whether a domainer wants to capitalize off the traffic himself or sell the domain to a business owner who sees that traffic as a boon to their business, Valuate.com provides a tool that reflects the potential of a domain.

However, Valuate.com will only succeed if it is accepted by the people who deal in the domain market, domainers and end users alike.  I will say that we approached Valuate.com with a healthy skepticism, yet were surprised when test after test the Valuate price matched an intuitive price we had set in our minds.  Wise Owl Consulting will wholeheartedly endorse Valuate for what it is, an estimate based on the quality and quantity of traffic that the domain can capitalize off.  That being said, we see Valuate’s number as a launching point for negotiations, not a concrete set price. 

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