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You’ve just had a great idea for a new website and are in a hurry to register the domain name, only to discover that the price tag runs well into five figures. What happened? Why is it that some names are available for $10 or less per year whereas others are valued at millions of dollars?
The answer is that when you buy a domain name from a domain name registrar, you’re getting the right to use that web address for a set period of time. And for certain highly sought-after names, the privilege of ownership comes at an exorbitant price.
Once you understand the factors that contribute to the price of domain name, you’ll have a better sense of why some are sold for a nominal fee, while others are a serious investment. In this post, we’ll break down the factors that influence domain pricing and explain why commercially valuable or keyword-rich domain names are so expensive. Here’s how domain pricing works.
Supply and Demand of Domain Names
The domain registrar dashboard may look like a marketplace, but really it’s an auction. If a competitor is willing to outbid you for the domain name you want, they will win. It’s simple supply and demand, given that there is a finite number of premium, exclusive domain names available. An unassuming, low-profile domain name could suddenly become hot property if it shared the same name as a new movie, band or trend. The domain name woke.com, for example, is now worth almost half a million dollars since the word has passed into everyday speech.
What’s In a Name?
Short, memorable domain names that relate to popular keywords or brands have a strong, inherent value. They’re in high demand and short supply.
For example, a domain like cars.com (valued at $800m+) gets to represent a $2.8 trillion global industry in just four letters, while booking.com is now such a strong brand that it has effectively become priceless. In principle, any short, branded domain relating to major products (cars.com), services (insurance.com) or companies (apple.com) is going to command the very highest prices.
The opposite is true for domains that are long strings of random letters or numbers. The monetary value of these domains is as low as their recall value. The good news is that their supply is practically unlimited. There’s no bidding war for abcd1234.com, for example, so you can expect to buy it (and resell it) for pennies.
Key takeaway: If a domain name is short, memorable, and links directly to an established brand or product, it’s definitely going to be expensive, and almost certainly claimed already.
Does The Extension Affect the Cost?
How far does the domain name extension (top-level domain) influence the overall value? The simple answer is that there’s not much difference once you venture outside the ‘big three’ (.com, .net, .org). Of these, .com is by far the most valuable as it has always been the global default for websites and businesses. If you were launching a new business, you would want to secure the .com domain as a first option.
The .net and .org extensions can also be valuable, but .com reigns supreme for branding purposes. They may have a valuable status within their sector (eg. un.org or poker.net), but that doesn’t always translate into market value.
Since the introduction of generic top-level domains (gTLDs) in 2011, there’s been a rapid rise in alternative domain extensions such as .blog, .xyz, .nyc and so on. Are these valuable? On the one hand, they lack the prestige of legacy extensions, so prices tend to be low. On the other, they offer the potential that unclaimed .com and .org domains promised in the early days of the internet. In that sense, they’re a sound investment for savvy buyers looking to speculate.
Key takeaway: It’s hard to look beyond .com (and to a lesser extent .net/.org) when it comes to identifying the five- or six-figure domain names. Remember, it’s the perceived value of the name in a bidding war that matters, not the actual meaning or function of the word or phrase.
The Keyword Value of Domain Names
Domain names that feature a high-competition keyword will also be more valuable. It stands to reason that a domain name that includes the words people are using in search will be worth more than an abstract brand name. The value rises even further if the keyword is relevant to a popular industry or vertical because there will be buyer intent associated with that search.
In other words, a domain name that includes the keyword ‘flowerstore’ will be valuable, but not as much as a domain featuring the word ‘loans’. There are lots of reasons why a user might search for ‘flowers’ online (not all of them purchase-related), whereas a search for ‘loans’ suggests strong buying intent. If your business is loans, there is no better domain name you could own, so you would expect competition to be fierce.
Key takeaway: Domains that rank for money-making keywords in profitable niche markets will command the highest prices. The value correlates to the keyword relevancy, search volume and long-term monetization potential. Financial services, insurance and law are always strong contenders in this category.
The Brand Value of Domain Names
With a few notable exceptions (eg. Nissan and Peloton), it’s hard to think of any global brand whose domain name is not its .com brand name. The built-in traffic potential and recognition of a .com domain name are so valuable that most people will search for their brand’s website directly in the URL address bar.
It’s customary for even smaller businesses to buy up all the domain extensions and variations of their brand and redirect users to their .com site. It’s also very rare for a business to sell a brand-related domain that it owns, despite the elevated value. The potential cost of a new owner misrepresenting the business and damaging the brand with a lookalike site would be too high.
How Brandjackers Seize an Opportunity
Suppose you spotted that an exciting new start-up you’ve heard about had forgotten to buy its .com domain name and suite of related domains. Can you just sneak in, buy it, and sell it on to them for thousands (or even millions)?
This is the strategy of domain name investors, aka cybersquatters or brandjackers, who register domain names brands have yet to claim, along with the numerous variations (even deliberate misspellings) and extensions. Their goal is to resell them (back to the business) later at a huge profit, but the big winners are more likely to be the lawyers. That’s because you cannot infringe the trademark of a business even if you are the new owner of ‘their’ domain name. Established brands will usually trademark their domain name as well as their business name to block anyone from brandjacking.
Domain Age
You can expect to pay more for a domain that has been registered for a number of years (implying that the site has been regularly indexed by search engines) compared to a newly created domain. Older sites build intangible value through links, traffic, trust and domain authority. You can use a tool such as the Wayback Machine to roll back to previous versions of a website through the years.
Traffic Value
In a similar vein, established sites that have already accumulated a steady stream of organic traffic, social followers or monthly visitors will also be worth more than fresh-faced newcomers. Think of it as the equivalent to buying a turnkey business with a strong balance sheet, client list and goodwill.
Commercial Value
Finally, we can’t ignore the effect a domain’s monetizing potential has on its value. Consider affiliate marketing, for example, an online industry worth $17 billion in 2023. Affiliate marketers will pay a premium price for a site that has online business potential. Sites such as books.com or pets.com (although taken) are prime real estate for online marketers looking to monetize the elevated search ranking.
Conclusion
Domain pricing is no different to cryptocurrency, NFTs or even a vintage wine collection in that there’s no upper limit to value. Ultimately, the value of a domain is what the next owner is prepared to pay, and that will depend on the various factors explored above.
Want to know more? For more insights and actionable tips, visit the NameSilo blog today.