How do you figure out the value of a domain name?

My initial response is that domain names are a pure commodity, so that their value is based completely on what the market will bear. So ostensibly some domains might be worth millions, while others could barely command $50 from a seller. Supply and demand.

But there's more to ascertaining the value of a domain than just "whatever the seller wants to ask for it", and to get a few more of the factors, I asked my friend Adam Boettiger, who has been involved in a number of substantial domain transactions. Here's what he shared:

As you say, a domain is only worth what someone else is willing to pay for it. Especially in this economy prices are a bit lower than normal.

You can pay to get an estimate from any number of places. That often helps when buying, in the event you think their asking price is inflated.

If you're selling, generally the most success comes from making a list of potential buyers and approaching them one in one rather than listing it among thousands of others or waiting for a buyer to find you.

The valuation of a domain is generally estimated by a combination of several factors:

• Domain only or site and domain?
• If it was previously a site, do any backlinks still exist?
• If a site is on it, what is the traffic, pagerank and backlink count?
• Is it a .com, .net or .org?
• hyphenated or not?
• Pronouncable word?
• One word, two or three?
• If a word or phrase, what's the search volume look like? (potential for an adsense site)
• Is it a trademarked or brand name? Those are not worth much for resale purposes because the mark owner can force relinquishment at any time fairly easily. Can be valuable as a way of driving traffic until you're told to give it up though.
• Does the domain have type-in traffic potential?
• Is your goal to sell the domain within a month for quick cash or within a year, perhaps at a much higher price? It takes time to compose a good justification letter, identify big fish targets and approach them. It's far easier to buy a domain for $9 and resell for $50 to $150.

It's all very subjective. More an art and less a science...

Thanks for the tip, Adam. I hope this is helpful to my readers!