[KevinG]

Here is part of a response I gave to a client that asked for my input in this area.

Domain Name Valuation:

Assessing the value of domain name is mostly subjective. It seems the general public usually believes domain names in general are worth much more than they really are. Their beliefs are based on inexperience and news headlines of domains that sold for millions of dollars.

There are appraisal services, but they can be quite flawed. You'll find many companies that are happy to assess the value of your domain name. Some offer this service free through an automated "valuation wizard" type approach, others charge a fee for a more customized, personal valuation. Fundamentally, all these appraisal services suffer from the same flaw: domain names are unique.

So while there is certainly some merit in looking at the current domain name market and trying to find "parallels" with recent sales, it's impossible to base the valuation of one domain name on the valuation placed on another, no matter how much some domain name valuation services would have you believe otherwise.

At the end of the day, a domain name is worth exactly what a buyer is willing to pay for it, no more and no less.

Keep in mind that 99% of domain names are essentially worthless, and very few are worth a million dollars.

Example: Cars.com may be worth enough to retire on. SportsCars.com may be worth enough to buy a second-hand car on. PerformanceSportsCars.com may be worth a few hundred dollars. ePerformanceSportsCars.com is worth nothing.

Essentially, what makes a domain name worth money are two or three things: 1) If it is a very popular word that will get "type-in" traffic, or 2) If there is an existing web site that has been marketed and receives a high amount of traffic already, and lastly, 3) a domain may hold value to a potential buyer if it relates well to their existing offline business and marketing efforts.